P1 DEC 2008 Pitfalls Warning and Exam Tips

DISCLAIMER OF LIABILITY: while it is good to focus on Hot Topics but to rely on them exclusively is both detrimental to your mental + emotional health & performance in exam.

Paper P1 ‘The Professional Accountant’ DECEMBER 2008 Exam Tips and Pitfalls Warning. Avoid David Campbell's traps.

- RELEVANT TO ALL P1 candidates
A. QUESTION VERBS USED
It is very important to correctly interpret the verb in the question and use that as the basis for their answers.
Question Type A: 0.5 mark per point
‘explain’ or ‘describe’ and the answer just contained (say) a list of points, few marks were awarded.

Question Type B: 1.0-1.5 marks per point
a higher level skill such as ‘evaluate’, ‘assess’,’ construct’ or ‘criticise’, answers that did not address the content at the level required were poorly rewarded.
Candidates must not ‘explain’ when they are meant to ‘construct’ or ‘criticise’, and they must not ‘identify’ when they are meant to ‘describe’.
ü Question . and identify from the case...
ü Question .using information from the case...
ü Question .and describe three threats to auditor independence in the case(Other types of wording are used to mean the same thing).

When Question insert “evaluate”, please remember that it is asking for BOTH advantages and disadvantages. Example: Evaluate the usefulness of forming committee comprising of iNEDs as majority.

B. IMPORTANCE OF QUESITON INTERPRETATIONS
It is very important that the verb used in the question is used as the basis for the answer.
some candidates failing to interpret the evidence in the case scenario correctly.

A description of roles is DIFFERENT from explaining the impact or tensions of say what a NED might bring to the Board. Avoid mere rote text book leaning but apply in the case study context.

C. DON’T SQUANDER OFF YOUR 4 PROFESSIONAL MARKS
• ensure the answer reads like a letter or a memo
• ensure if its a formal letter to shareholders - have an explanatory introduction and a conclusion with a logical flow of content in the ‘middle’.
• ensure its addressed to the right audience (Dear Ms Wang)
• ensure no abstract bullet points and short, unconnected paragraphs with no sense of ‘flow’ between them.

Marks allocation,
1 mark for the basic form of a letter meaning it was correctly headed, finished, addressed and physically laid out.
1 mark for composition,
1 mark for flow of arguments like segregate FOR PROPOSAL and AGAINST PROPOSAL headings
1 mark for persuasiveness of the narrative itself.

In other words: The letter was from a company chairman to the company’s shareholders and those gaining all four professional marks were those that read most like a letter of its type would read in ‘real life’.

P1 papers will ask candidates to ‘draft’ or ‘write’ content in the form of various types of written communication. You are advised to pay attention to the professional marks as the four marks available could make the difference between a pass and a fail. Four marks are worth approximately seven minutes in time (4% of 180 minutes), which should give candidates some idea of how much investment to make in the professional marks.

D. BOOBY TRAPS – AVOID AT ALL COSTS!
Pic 01: Should've listened to my lecturer. Now I am trapped.
COMMON PITFALL 01:
“explain the imporatance of corporate governance adopting the Anglo-Saxon model.”

Please note it DIDN’T ask you what is the corporate governance components? But instead the “IMPORTANCE” of corporate governance!



Pic 02: Don't follow the crowd falling for the same mistake
COMMON PITFALL 02:
Explain the meaning of Stephanie’s comment: ‘I would like to get risk awareness embedded in the culture at the factory.’

How do you interpret the question?
a) You make recommendations of how to manage its risk with phrases such as ‘factory should…’ or ‘perhaps SCC might consider…’.
b) You explain ‘risk awareness’ what it meant.
c) You explain the policies and process on trying to embed risk to culture
d) You explain what embedding risk in culture meant (and nothing else).

Correct answer is (d). the above illustrates that you may know what is risk awareness, but you may errorneously prefer to write explain and even suggests ways to embed risk awareness to culture. [For further illustation, please see P1 December 2007 Question 2(b) answers]



Pic 03: I gotcha...
COMMON PITFALL 03:
A question may require you explain the roles of a chairman in corporate governance. Please pay special attention to the cognitive level of the verb in the question. The question specifically asked candidates to ‘explain’ the roles that it offers some evidence of understanding of the role over and above a mere identification.. Accordingly, answers that merely ‘identified’ the roles did not receive good marks. Short bullet lists of ‘identified’ roles will fail. An ‘explanation’ differs from an ‘identification’.

Which of the following answer is an “explain” type question?

TYPE X ANSWER: Chairman’s role is to set an effective board unit.

TYPE Y ANSWER: Chariman’s role is to set an effective board unit where he sets the agenda and ensure a regular Board meeting. This enables a communication to Baord if they are meeting the shareholders’ objectives.

ANSWER : TYPE Y



Pic 04: Hi, I work for David Campbell. Catching victims alive is my job.
COMMON PITFALL 04:

Question ask to ‘explain the importance of identifying stakeholders…’.

What should you NOT DO?
a) Identify the stakeholders (so lists of stakeholders did not attract marks)
b) Describe the Mendelow framework
c) Describe each stakeholder’s position on the Mendelow matrix
d) Explain each stakeholder’s interests and powers on company
e) state main purposes of identifying all stakeholders

ANSWERS: DON’T TRY a,b,c and d.

The correct approach to question requires candidates to ‘take a step back’ and place themselves in the position of the board, considering all the benefits of knowing who the stakeholders and their different claims were.

Example :
IMPORTANCE :
Surveying stakeholders powers assist Board of Directors as to who are most likely will disrupt or object to company’s proposal to build a hospital next to the grave yard. [Notice you don’t need to prioritise which stakeholders are more powerful than another]



Pic 05: Who will save me now? Why did I fall asleep in class? Why did I miss classes?
COMMON PITFALL 05:
Time pressure of spending lenghty time on lower level questions like “List” , “briefly explain”
Insufficient time spent to develop coherent argument and logical order to earn 4 professional marks.

EXAM TIPS P1:
Now, for the part that you are looking for - Exam Tips. Please note the verbs used in the question. Go through in your mind as to what and how you would intepret the question and relate to the common pitfalls mentioned above.

• Evaluate the weaknesses of current corporate governance system and recommend improvements
• Explain the importance of risk management clearly distinguisihing your answer between Strategic Risk and Operational Risk
• Evaluate the usefulness of committees comprising of iNEDs
• Advise and explain work ethics. (Note: you are required to explain AAA model and Tuckman’s 5 question model)
• Distinguish pragmatic and dogmatic approach that management could possibly take in the matter of labour redundancies
• Recommend ways to align directors’ interests with shareholders’interests. (Note: Apply fixed salaries, variable salaries like bonus, commissiions, share options, pension benefits so as to make the director think more for the benefit of shareholders)
• List out the recommendation of Turnbull’s Report on effective internal controls
• Advise management to risk management efforts in case study
• Marks & Spencer, a retail giant in UK, has its CEO who is also the chairman has refused to appoint any iNEDs. He said, “All I have to do is explain to shareholders my actions.” Critically explain the “principle-based” approach. Does “comply and explain” approach means that Marks & Spencer have freedom to not comply corporate governance best practice?
• SOX appraoch and impact on commercial flexibility balanced with corporate governance requirements

Other topics you shouldn’t neglect:

• Agency Theory, Transaction Theory, Bounded Rationality
• Cinderella Effect
• Corporate Social Responsibility

PS: My focus is “specific” to a sub-question instead of genrealisation. This way you will be better prepared and focus on how to do a particular question-problem.

CONCLUSION
You can spend time to systematically go through the topics and related questions. Just do what you can. If you feel a temporary ‘black-out’, well, go to the next question-topic. I strongly feel you shouldn’t be rote learning now but primarily focus on exam techniques paying attention to pitfalls avoidance.

DISCLAIMER OF LIABILITY: while it is good to focus on Hot Topics but to rely on them exclusively is both detrimental to your mental + emotional health & performance in exam.