Saturday, November 29, 2008

F8: TARGET HIGH RISKS QUESTIONS for DEC 08

- Relevant to F8 candidates. Call this F8 exam tips if you like, but they are important reminders i.e. avoiding pitfalls common to candidates of F8 Audit and Assurance paper in exam. I have incorporated Alan Lewin, 2008, article in Student Accountant journal of October issue.
- Relevant to all who want success but feel its eluding them. Well! Don't give up!

Earl Nightingale said 'You become what you think about'...

Napoleon Hill said ' What ever the mind of man can conceive and believe it can achieve'

C W Longenecker “… get our thinking processes working for us rather than against us.”


Pic 01: Every step you take, you are closer to your to victory.


Pic 02: You are your own worst enemy, if you let it.


Pic 03: Focus on the goal, you will achieve it.


Pic 04: Can you see yourself succeed? YES, YOU CAN!!

ARE YOU LIKE THIS? LIKE WHAT, YOU MAY ASK? READ ON:

If you think you are beaten, you are.
If you think you dare not, you don't.
If you like to win but think you cant,
It's almost a cinch you wont.

If you think you'll lose, you're lost.
For out in the world we find
Success begins with a fellow's will.
It's all in the state of mind.

If you think you're outclassed, you are.
You've got to think high to rise.
You've got to be sure of yourself before
You ever can win the prize.

Life's battles don't always go
To the stronger or faster man,
But sooner or later, the man who wins
Is the man who thinks he can!

So much for encouraging and motivating you, lets focus on technicals of F8. The following are carefully prepared in anticipation of upcoming exams. Helps you to focus, prioritise and same time I have inserted common pitfalls HIGHLIGHTED BY ALAN LEWIN in October 2008 newsletter. Apply and heed the warnings as this will distinguish you between getting a pass or otherwise.

Question 1
a) Substantive test – provisions for bad debts (company's management policy) and specific bad debts (clients actually unable
or refused to pay - gone bankrupt or court disputes).
b) “AT THE COMPLETION OF AUDIT” – advise what further Audit procedures on Non current assets in view of not complying with ISA and lack evidence on valuation and provision for depreciations.
- REQUIRED to obtain management representation letter, considering issuing a modified report if items are of materiality matter. Concerned with what is management’s stand on the accounting policies
- NOT REQUIRED to perform further audit test such as to obtain Sales & Puchase agreement to verify the valuation of Non-Current assets and compare the depreciation policy to similar rivals in the industry. You ALREADY have done that during audit work. The question is at the end or completion of audit work.
c) Control procedures – sales systems
d) Distinguishing tests data & CAAT
– tests data using dummy input on "client" computer system and
– obtaining data using "auditors" CAAT software to extract from client’s computer system

Question 2

a) What is Letter of weakness that auditors issue?
b) What is ISA 500 – valuation, allocation and completeness works as assertions.
c) Subsequent events, adjusting and non-adjusting events
Please see exam techniques below.

Question 3

a) Auditors’ independence and inserting safeguards. Case study : Engagement partner is twice divorced and has re-married for the 3rd time. His new wife receive a dowry prize of US$5million worth of shares in Pfizer Pharmaceutical Limited.
i. What is the ethical issue? Wife ownership is deemed as partner’s interests in client-Pfizer
ii. Why is this an ethical issue? Partner’s independence and professional due care is undermined as he has indirect personal interests in the client via his new wife.
iii. How to insert audit safeguards? Well, divorcing a third time is certainly out of question! Recommend to switch to other engagement partner for the job.
iv. IMPORTANT NOTE : candidates, you need to specifically mention to the case study! There are other ethics principles acronym as POCIP IOI. Review questions done in my tutorials.
b) Corporate governance and the benefits of iNEDs committee

Question 4
a) Explain importance of Audit Strategy. Further Audit Plan and Work required to manage audit risk deriving from Inherent Risk, Detection Risk and Control Risk. Don’t forget to insert Business Risk
b) Payroll tests of controls – authorization of payment to employees wages
c) Payroll substantive tests
i. SAY trace and calculate amount banked in to employee Mr. Smith account are reflected as deduction from bank statements.
ii. SAY sight Mr Smith’s contract to determine his total wages and then calculate net pay after employees’ deductions. Trace the figure if its input to the employees payroll account. Perform total pay made in a week/month and trace the figure to the management’s monthly income statement. This substantiate that the employees figure are actually recorded in the monthly income statement which is totaled up together with other 11 months in the year to make the final employees wages item in CIS.
iii. DON’T SAY check Mr. Smith pay if its in the final accounts. [vague and generalized statement -Alan will kill you, and so would I!]
d) External auditors rely on internal auditors
i. Benefits on reliance – efficiency, economical and effective
ii. Possible reliance – internal auditors have wide powers + could report to Audit Committees + well qualified + experienced + objectives are similar to external auditors
iii. Impossible for reliance – material items must be independently verified + narrow internal audit scope of work + poor corporate governance like having internal auditors to report only to Chief Accountant

Question 5
a) Adjusting and non-adjusting events
b) Auditors responsibilities and audit work needed following the post audit events
c) Different types of Auditors’ Report and its effectiveness toward shareholders-members modified report

Other critical topics
-Going concern – audit procedures that involves the future prospects of company
-Audit sampling
-Analytical procedures embedded in Substantive tests
-Fraud and negligence – External Auditors’ responsibilities
-Not for profit organizations – completeness, accuracy, cut-off tests on income/donations -and expenditures. Adequacy of internal controls
-Small businesses – poor internal controls highlighted

Other critical exams techniques
TYPE I Question: Lists, Briefly outline auditors responsibilities.
- only have 1/2 mark per point. So your answers are:
ß ISA 240 requires auditrs to recognize fraud and errors that could materially affect financial statements
ß Apply professional skeptism
ß Seek legal advise if directors refuse to cooperate
ß Report primarily to shareholders-members
ß If suspects fraud, highlight in report to Board of Directors
ß Reasonable assurance that financial statement is true and fair.

TYPE II Question: identify weaknesses giving reasons for your concern over the internal controls over the inventory management. Justify pertaining to the case study by recommending solutions to overcome the weaknesses.
- 1 mark for identifying weaknesses
- 1 mark fro recommending improvements

IMPORTANT EXAM TECHNIQUE : Type II is FOUR TIMES more marks than Type I. Don’t waste your time being "safe" and give lengthy explanation to Type I Questions – which are normally found in F8 Paper Question Number 2.

In other words…
You are better off spending 36 minutes writing for a 20 mark Type II question than spending the same amount of time for a 5 mark Type I question.

Disclaimer of liabilities: While its advantageous to focus on high risk questions i.e. its likelihood that its examined in the coming exam, but a total reliance on them is detrimental to users' mental and emotional health. Discretion is required.

REFERENCE:
Alan Lewin, 2008, Ready to sit Paper F8?, Student Accountant, http://www.accaglobal.com/students/publications/student_accountant/archive/2008/90/3150174, October 2008

ANNOUNCEMENT: ANSWERS PT 2 RELEASED

- relevant to P3 candidates

Dear all candidates,


Exam is coming, tension is buiding but whatever the case may be, you all do what is humanly possible. If you are in worse case scenario of not able to cover the entire syllabus, the only thing you can do now is prioritise topics based on the IRC question bank and Closed Book Exercise that was given. I have given out complete answers for both.

I have already sent out the Progress test 2 answers on Question 2 [case study on plant closures and redundancies in UK and the effect of managing change] and Question 3 [case study on investment strategy in South East Asia]

Sincere best wishes.

Saturday, November 22, 2008

Announcement F8: Answers to Westra (pilot paper)




In view of approaching exam I certainly hope that now you are only doing 3 things with your time - Practice! Practice! Practice!
The above answers are duly sent to you all via e-mail. Please note the simple structure of segregating Audit Principles, Audit Procedures and Audit Reasons which gives a clear appraoch on using substantive tests are in a table format.
A diagram which I use in lectures are also posted to show linkage as to where the audit work is perform. Then in exam you will have a systematic approach.

Please practice Alan Lewin's latest article on avoiding Top 10 most common mistakes published in October 2008. Please note that he said "independence" is not a fundamental ethics principle but still is a concern for auditors. Thus the need to insert audit safeguards.

Announcement P3: Answers on Lockheed-Martin



The answers on Lockheed-Martin are duly sent to you all via mail. Please analyse carefully the linkage between theories and application in what ACCA terms it as "synthesisation".
Strategic Intent: "Practice makes perfect"

Best regards.

Wednesday, November 19, 2008

The Power of Focus - Habits Determine Your Future (Part 1)

- Discover your natural brilliance! Strategy on the power of focus is habits determine your future.




Pic 02: I'm privilege have pictures with International Students (China) : Future Successful Chartered Accountants (Graduating soon)


Pic 02 : I'm privilege have pictures with International Students (Pakistan, India)- Future Finance Ministers, IMF Finance Director, Chief Executives (Graduating soon)

Its my pleasure to have you all as my students. We work so hard together attempting to encapsulate the many complex theories in simpler formats surely are winning strategies in ACCA exam. What a wonderful sight, if the above pictures are a regular, habitual activity. If you have good studying habits which of course include quantity of hours invested in a study room daily, surely success is within your reach.
Your Habits will Determine Your Future.
If your automatic behaviors or repetitive actions involve eating unhealthy food than your future will include struggling with staying in shape and staying healthy. If you regularly study, practice questions and even put mind maps to understand your syllabus, that has a high corelelations to success in ACCA.
No such thing as “Accidentally succeed”
What we see in movies, hear stories of get rich quick schemes and fantasizing about them are mere fiction. The truth is life doesn't just happen and success is not an accident. Your life and success is a result of your daily habits. Successful people have successful habits. That is why your success is waiting right there for you! There isn't a mystery to it. You don't have to admire the success of others with the result of disappointment in your lack of ability to create success. No. You can admire others to be inspired!
You can study the habits of successful role models and emulate them. Did you know that 90% of normal behavior is based on habit? Wow. That is quite amazing when you think about it. You can reprogram any aspect of your life at anytime if you choose to do so. No one drifts to success. It is the result of clear choice and success habits today that create the tomorrow you desire.
But what is habit?
Anatomy of a Habit
A habit is repeated behavior. It is something that you do so often that it becomes easy. It is behavior that is repeated enough that it becomes "automatic" behavior. This is a powerful concept to understand. Your actions are product of how you think as all actions flow from your mind and from thought.
Habits are those automatic behaviors that have their roots in your thought processes somewhere. Understanding the habits are a result of repeated behavior is powerful for you because therein lies your greatest hope and victory for positive change: Reprogram those automatic habits!
Your Habits Determine Your Quality of Life
You habits will give you predictable results. If you want to improve the quality of your life you must embrace habits that product quality results. Quality is not an act, but a habit. Negative habits result in negative consequences, successful habits in your life will produce a steady stream of positive rewards.
The foundation of success motivation is positive actions and habits otherwise you cannot generate positive momentum for change. You will increase your power, positivity and pursuit as your build your series of wins in life. Your series of wins are those little victories that lead to bigger victories and success. This is the result of positive habits and actions.

Tuesday, November 18, 2008

Jerry Yan Part B Answer

- 6 Sigma complemented by diagnostic tool - CMMI


Pic 01 : Infamous F4 - who couldn't afford RM7 hair cut
Pic 02: F4 with sure bad back ache due to poor posture
Pic 03: Barbie Doll of Taiwan
Pic 04: Guy- "I bet my hair is longer."

ANSWER B

1. 6 SIGMA is a statistical analytic system to ensure that defects remained only 3.4 defects per 1 million units. To improve the value added system, J Yan could use the DMAIC methodology.

2. Management tool to diagnose current capability is the use of CMMI technique. J Yan’s operation is in Level 2 of CMMI of a “managed process” in the distribution system where books delivery ranges from 48 hours to 4-5weeks according to book types ordered. Application on the web site processing of customers’ orders:

DEFINE CUSTOMERS’ NEEDS
3. allowing customers access to the information they require about the books of interests to them. Contents of book, chapters, editor’s reviews, critiques and other readers can also be viewed.
4. faster delivery for the rarer books as 4 weeks deemed too long compared to normal books order of within 48 hours.
5. cheaper pricing for books will appeal to wider market.

MEASURE THE CURRENT SATISFACTION LEVEL
6. Calculate number of web site hits per week.
7. Ascertain amount of time spent surfing the page contents
8. record number of books returned within 30 days where refunds are given. This will measure number of dissatisfied customers
8a.{additional point} server capacity is limited result in deletion every 6 months of clients order patterns


ANALYSE THE CURRENT SYSTEM
9. for point [6] above: dissatisfaction on web contents due to poor and inconsistent book reviews. This relates to the high labour turnover, disruption as individuals resigned and replaced by editors and reviewers result in inconsistent benchmark reviews. Customers may feel and suspicious of book review integrity.
10. for point [7] above: contents of web page is insufficient to retain surfers attention. To click away from web page is easy. Indicates the contents are poorly researched and inconsistent.
11. for point [8] above: Customers compliants due to poor reviews and critiques that are inconsistent, Inpart due to high labour turnover and poor control to ensure certain standard of performance reviews are adhered to.
11a. for point [8a] above: Poor HR planning to hire and retain an I/Tech expert to maintain the servers capacity and manage its traffic


IMPROVE THE CURRENT SYSTEM
12. SOLUTIONS TO POINT [6] : - have a panel of reviewers/ judge to arrrrive at a more consensus conclusion about the book. - have a profile or experience/backgrouind/qualification of individual panel of book reviewers so that users on internet could place their estimate of trust on such individuals. - re-look to job design offering flexible hours and variable rewards of measuring amount of hits on their book reviews site.
13.SOLUTIONS TO POINT [7] :- standardize at CMMI Level 3 on all processes across J Yan’s uploading information on websites. Have a central editing committee before information are posted.

14. SOLUTIONS TO POINT [8] :- returned damaged books : have in contract with courier services that they compensate for damges caused on products delivered. - returned books due to disappointment: offer feedback to editors if they need to re-draft the web page reviews. -returned books due to non-delivery
– install ERP (Enterprise Resource Planning) which tracks all orders and books on hand for better inventory management. -books never collected by courier service provider. Appoint 3 courier service providers and embed in the contract of termination clause if negligence evidence of poor services arise.
-Play SIMULTANEOUS Game Theory as instilling discipline amongst suppliers who don’t wish to lose their contracts.
15. SOLUTIONS TO POINT 8A- expand capacity during peak period- back up files for CRM purposes to study customers order trends- share resources with rivals,if necessary, if overloaded server happens-alternative channels, install IT internet routers, use wireless, use satellites so that interntet can be permanently connected.


CONTROL

16 MEASURE customers satisfaction through:o web page hitso number of internet saleso number of new customers
17MEASURE learning & growth through: - innovative rates of change on web design- ideas that translates to commercial success
18MEASURE organization perspective through:- number of employees complaints- number of resignation per month as a total- number of conflicts and disciplinary actions.
19 MEASURE financial perspectives- profit and revenue growth, ROI, dividends yield ensuring that it meets with shareholders’ expectations.

The Power of Focus - Habits Determine Your Future (Part 2)

- relevant to all who wants progress in life. I recommend and encourage you to spread this information to your juniors and friends.


Pic 01 : Highest paid athlete in USA. Was he simply taking a swing with the golf stick that puts him top of the game?




Pic 02 & Pic 03: Can you do the stunts above on first try? Take a week? a month? Hmmm... I think it takes a lifetime of good discipline and successful habits.

CHANGING HABITS TAKE TIME
You will turn your negatives into positives by changing your habits now. Change takes an instant to occur and time to mature. Your change goes into effect the moment you choose to change. That very instant! But it will take some time to see your changes mature to where you can enjoy the fruit of your improvements. Your change will take time because developing success habits takes time.
Of course, with ongoing exams currently, you may say that its bit too late to change. While I agree with you but don't forget you need this quality to succeed in career, higher ACCA paper levels (Professional Stage) and life.

How much time does it actually take to change a habit? The most common response is 21 days. Studies have shown that if you practice a new habit for an average of 21 days or longer in some cases, it actually becomes easier to do the new habit then it is NOT to do the new habit.
This is just a baseline. For any habit you want to change you must ask yourself how long you've owned that habit. Some habits will take longer to change depending on how long and how often they have been practiced. Give yourself reasonable time to adopt new belief systems and new success habits. If you have been dealing with low self esteem for 15 years, it may take you longer than 21 days to change that belief system (yes, belief systems are habits also). On the other hand you could break the bad habit of thinking poorly about yourself in an instant and create your brand new life overnight. There aren't any limits but you must be fair and objective about your rate of change.

NOT REGRESS
The important thing above all will be to remain committed to establishing new habits that build a better future and not falling back into old habits that will only produce the same unhappiness and failure that you may be trying to move away from.

A powerful quote says:
"If you keep on doing what you've always done, then you will keep on getting what you've always got."


This is awesome! By systematically changing one behavior at time you can dramatically improve your overall lifestyle! Once your new habit becomes well developed, it becomes your new normal behavior.
HABITS FORMING STRATEGY
Identify Bad Habits and Replace Them , so if success is based on successful habits you be asking, "How do I identify bad habits?". Bad habits on those actions that cause you to be unproductive and hold you back from realizing your best life now. Examine yourself and ask others about bad habits you have. Only ask people you respect and admire and know you well. You need to hear from people that are for you and not against you.

Your habits and beliefs systems are a product of your environment. Birds of a feather, flock together as the saying goes. This is true! Ever heard of the saying, "Tell me who your friends are and I will tell you who you are." You will pick up and practice those habits and beliefs that are common to your environment. But when you decide to change there is no stopping you. Reach out for and study the successful habits of those who've attained the success you desire. Practice what they do and elevate yourself. Read inspirations stories, visit this blog often to remind yourself what is your purpose in College, watch documentaries on success and the successful.
PRACTICE AND REPEAT
Develop the habit of changing your habits. Change will be you always. Adapt and implement habits that will continually reward with the life you desire. If a habit no longer yields success motivation and positive change, replace with a new habit. Just with thoughts, habits cannot be dropped. Habits are displaced through replacement.



Pic 04: Do you think his culinery skills were developed overnight?

Here is the three step successful habits formula :

1. Clearly identify your bad or unproductive habits.
You at your behavior for now and in the future to get a realistic and objective understanding of how a habit may be unproductive or bad for you. Some habits have a slow burn effect and the results aren't realized until years later. Smoking is a classic example. If you looking at a smoking habit one day at a time, it may not seem as damaging as it actually is. If you view this habit over a lifetime then you can begin to appreciate the the consequences for choosing to change this habit or not change this habit.

2. Define your new successful habit.
Identify your new habits and describe in vivid detail the "benetifs" of acquiring this new habit. You will boost your success motivation when you can clear envision the rewards for successful change. Remember that to obtain the success you desire you must be will to do things today that will create your desire changed for tomorrow. The clearer a vision you have of your rewards and benefits for change, the more likely you are to take action.



Pic 05: KPMG Tower in Sao Paolo, Brazil. Do you have successful habit to be there at the top (CAREER)?

3. Create a 3 Part Action Plan. Decide on 3 immediate actions that you will take to replace your old habit and establish your new successful habit. Start with one habit and take action. You must know exactly what actions you will take to create your new success. It could be reading a book, establishing an accountability partner, going to a support group, or joining a coaching club.
Conclusion
The bottom line is that nothing will change in your life until you do. To learn more about the how you obtain successful habits that will create a successful future for your life I recommend reading The Power of Focus by Jack Canfield, Mark Victor Hansen and Les Hewitt and Seven Highly Effective Habits by Steven Covey
Useful links:
  1. The Power of Focus - Habits Determine Your Future (Part 1), http://marcusong88.blogspot.com/2008/11/power-of-focus-habits-determine-your_19.html
  2. http://marcusong88.blogspot.com/2008/10/how-to-cope-with-stress.html
  3. http://marcusong88.blogspot.com/2008/09/bill-gates-bad-role-model.html
  4. http://marcusong88.blogspot.com/2008/08/life-as-student.html

Friday, November 14, 2008

BPR Answers to Jerry Yan

- relevant to P3 IRC (ACCA)
(note: Steve Skidmore dislikes the practice of BPR as opposed to re-designing process, so please remember to criticise the tool's risk - radical and risk of spectacular failure if system(s) is unacceptable to market.)


CASE STUDY ON BOOKS SALE (10 marks)
ANSWER (a)
Business Process Reengineering is a change to organization which is
‘fundamental’, ‘radical’, ‘processes are new’ and ‘dramatic’. JY can change its main processes replaced by new processes.

BPR principles and applications to JY business:

BPR RECOMMENDATION 1:
- customer-focused outcome : faster supplies for JY instead of weeks to deliver for rare books, less costly to customers and provide rich content information enable customers to better self-select books wanted.
- Customers can be made to ‘process’ the information where they perform a review of certain books. This promotes more perspective on books review to complement the existing critiques.
- Information gathering and information processing are the same process so that there is no distinction between the both category. Allows higher accuracy in information management.
- Centralized all information despite JY has to source from many suppliers. JY can increase its bargaining powers by concentrating orders as a single entity. Have a record on how many books it buys from a specific supplier over a time period. Greater bulk discount given if volume is large. - Warehouse can be eliminated. Use e-business tools to link directly between suppliers and customers.
- Offer greater autonomy for website managers to control quality content instead of allowing freelancers the powers (not allow them to direct the information content on website).
- Information should be captured at source.

BPR RECOMMENDATION 2:

- closures of warehouse

- ceased shipments of books

- ceased courier distribution of books

- convert classic books to e-books format. That way, its virtual delivery of instant download where customers pay per page or per chapter.

- compile books under copyright and negotiate to pay royalties to printers for every sale of e-books. Recommend 65-35 profit share arrange in favour of printers/authors.
- conduct a CRM program to research on popularity of different types of books to prioritise the types of book for conversion to e-books format in view that JY has 3 million titles.

BPR PROCESS:
Step 1: develop a vision. JY to have 0 stocks through direct link to suppliers.
Step 2: processes redesigned are:
- all web news contributors be based in JY’s office. This encourage interchange of information and innovation, safe costs on relocation of hardware between freelancers, in event that one quits and another joints.
- Direct link to suppliers so that orders placed are treated as ‘triggers’ to supply
- Manage haulage networks to have efficient distribution.

Step 3: measure existing processes:
- delivery time for rare books
- number of web visitors per day
- sales conversion rate per period

step 4: identify change levers: invest in IT hardware and software handle greater volume. Empower IT committee to effect change.
Step 5: design / build prototype or outsource the software engineering program.

RISKS:
- BPR is not a cost cutting initiatives but seek to add value and fulfilling customers expectations.
- BPR mistaken as a mere ‘scientific management’ approach where it improves or simplify exiistins system taken as a ‘hollowing out’ process
- BPR has tendency of top-down approach resulting in forcing employees to adopt approaches recommended and same time restricting their innovation cabability.
- BPR risk unwittingly destroy core competencies that top strategic apex is unaware of as this is a “causal ambiguity’

URGENT: SBL Exam Guidance for Dec 2018 Exams

EVERY SUCCESS IN YOUR DECEMBER 2018 EXAMS Change is the only constant. Kasturi Core lecturing team has now moved to 2 new locations. ...