A mixture of intelligence, hard work and dedication are needed to ensure success in the exams. No training company knows for sure what will actually be in the exams next month but our tips identify areas which we believe you should have covered particularly well.
For those of you sitting audit, ethics or law papers the following case shows an individual who clearly didn’t show intelligence, hard work and dedication.
Organic and free range eggs are becoming more popular in the UK with a premium being paid as a result of the expense of feeding the chickens with natural produce and letting them roam free.
An individual by the name of Keith Owen was recently jailed for 3 years as a result of mis-describing eggs as free range when they were in fact battery hen eggs. The judge also made Owen surrender the £3 million profit he made and stated that it was “a carefully planned and executed fraud by false accounting” (false accounting by altering records to hide the fact that the eggs weren’t free range).
The scale of the fraud was phenomenal. He defrauded all the major UK supermarkets, including Tesco and Sainsbury, as well as numerous small shops by selling them approximately 100 million (yes, one hundred million) battery eggs as free range eggs.
The fraud started to come to light when it was noticed that the number of free range eggs sold by his company was more than could be laid in all the farms in the UK.
There were also complaints from a number of lorry drivers that would drop off consignments of battery eggs at his factory, be told to wait a few hours and then pick up some free range eggs to be delivered elsewhere. The free range eggs were suspiciously of a similar quantity to the battery ones that had been dropped off a few hours earlier with the only difference being a new label on the packaging!
Now, I don’t know whether Mr. Owen ever considered attempting the ACCA exams but in terms of “intelligence, hard work and dedication” then somehow I just don’t think so.
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Stevehttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve2010-05-28 09:27:582010-05-28 09:27:58ACCA exam tips released today but this individual won’t be running free range over the exams…
The “little black dress” is an evening dress that is simple, classic and fashionable. Its origins date back to the 1920s with fashion historians claiming that the first design of the little black dress was made by the designer Coco Chanel back in the 1920s.
The design has been worn by numerous women over the years. The most famous “little black dress” was arguably the one worn by Audrey Hepburn in the film Breakfast at Tiffany’s.
This is all very interesting but what has it got to do with a blog for finance students and in particular what has it got to do with the ACCA exams that are taking place next month?
Well, if I’m honest it actually has very little to do with the exams as I can’t imagine there will be a lot of people wearing little black dresses to the exams! What should be happening though is that everyone should be attending the exams with a “little black pen”.
The June 2010 ACCA exams will for the first time see all the papers marked using scanning technology. The scripts will be completed as normal by students but instead of the scripts then being physically sent to the markers they will instead be scanned and then marked by markers “on screen”.
It is important therefore that you use a black ballpoint pen in your exams. If you use other colour pens, pencils, fountain pens or highlighter pens then these are unlikely to be picked up by the scanning technology and as a result the marker may not be able to see your answer.
Put simply, it doesn’t matter how good your answer is but if it is not picked up by the scanning technology then you may well find that you miss out on passing the exam.
In summary, forget about wearing a “little black dress” to the exam but don’t forget your “little black pen”.
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Stevehttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve2010-05-24 03:34:022010-05-24 03:34:02The “little black dress” is a fashion icon but when you’re sitting your exams don’t forget to…
The UK doesn’t officially use the euro, though there are a fair few shops that choose to accept it voluntarily, and normally at a rather unattractive rate of exchange.
This means that although not legal tender, euro bank notes are not an unusual sight on the streets and in the exchange booths of the UK.
One that you won’t find from now on, however, is the €500 note. This rare beast of considerable value is fairly commonly seen in Germany, where it’s culturally normal to pay for even large purchases in cash. The other place that it’s found is in the hands of criminals and money launderers.
Proceeds from serious crime (eg people trafficking) are not much use unless they can get into the banking system and from there used to buy nice things like expensive cars and villas in some nice, warm place. Getting dirty money into the apparently clean banking system often involves having a “friendly” bank somewhere that will turn a blind eye to where the funds are coming from. This does, however, give a logistical challenge to the UK based serious criminal. If one wishes to transport £500,000 from London to a “friendly” bank abroad, it’s necessary to fly and go through pesky things like X-ray machines and customs declarations. Airport security staff are trained to spot the metal strips in bank notes in X-ray machines and alert police to what is likely to be proceeds of crime being moved. The logic is that if the flow of money out can be stopped, the flow of illicit activity in will also dry up.
Enter the 500 euro note. This wee beast is compact enough that €20,000 can be rolled into the inside of a cigarette packet, which conveniently is wrapped in metal, thus becoming invisible on X-ray machines. It’s about 20 times more compact than the £20 bank note.
The UK government estimates that a full 90% of €500 notes in the UK are used to service serious crime. Thus they can no longer legally be sold in Britain.
If Britain ever adopts the euro as its official currency, this may require something of a rethink!
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Stevehttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve2010-05-21 02:59:512010-05-21 02:59:51Do you have a €500 note on you? If you do then there’s a 90% chance you…
It seems that a certain volcano in Iceland is going off again.
At the time of writing, a number of UK airports have had to close because of drifting volcanic ash. This, it seems, is likely to be an ongoing problem, especially for more northern European countries.
I have a flight booked in a couple of weeks’ time. I am innately cost conscious and so booked a non-refundable, non-changeable ticket.
Under the Framework definition of an asset and a liability, the airline has received my money and the only obligation that they have is to incur the marginal costs of flying me there, which are likely to be fairly small. Using the logic of the Framework therefore (and the probable logic of the new accounting standard on revenue recognition that is likely to come through in a couple of years’ time), they would be able to book revenue at the time that the sale was made.
Under the approach of the extant accounting standard IAS 18, however, revenue can only be recognised when the service is provided. This means that none of my cash is currently in the airline’s profit or loss.
That approach has always seemed excessively prudent to me, as the chances of having to refund the money to the customer has always seemed remote. I’ve long believed that IAS 18 is in need of replacement with something that focuses more accurately on assets and liabilities.
Mount Eyjafjallajokull has made me wonder whether perhaps holding all revenue in deferred revenue as a liability until it’s sure that it’s no longer a liability might not be such a bad idea after all….
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Stevehttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve2010-05-19 02:45:252010-05-19 02:45:25You may recognise this volcano but what about recognising the revenue?
A UK director of one of the Big 4 firms pleads guilty to false accounting and fraud, having fraudulently claimed more than £500,000 in expenses in order to finance his wife’s extravagant lifestyle!
The director told police that he had stolen the money because “he did not want her lifestyle to suffer”, being afraid that she would divorce him. Apparently his fraudulent claims were kept below £5,000, meaning that they did not require further authorisation!
A spokesman for the firm said:
“Mr Wetherall’s frauds were detected via our own internal checks and he was dismissed in 2008. A thorough internal investigation was carried out and the case was then handed over to the police.”
The firm also stated that they had changed their internal procedures to prevent such fraud being committed again.
That could be useful I guess when advising client’s on their internal control systems in relation to expense claims!
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Stevehttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve2009-11-29 18:28:032009-11-29 18:28:03Shutting the stable door
It was announced recently in the UK media that Britain’s Big 4 auditing firms have been left exposed to a surge in negligence claims, after the Government refused to limit further the damages they could face.
The Big 4 have been lobbying hard for a cap on payouts, but although Lord Mandelson, the Business Secretary, appeared sympathetic to their concerns, he indicated that he was not prepared to change the law at this stage.
This decision has come as a great blow to the accounting firms, believing that there may not be another opportunity for a change in the law for some time. There fear is that they will be targeted by investors and liquidators looking to recover losses from big company failures and Madoff-type frauds.
Under existing company law, directors can agree, with shareholder approval, to restrict their auditors liability, but to date, no leading companies have done so.
Three of the Big 4 face litigation in relation to Bernard Madoff’s $65 billion fraud.
In 2005 Ernst & Young was sued for £700 million by Equitable Life, the claim was eventually dropped, but would have bankrupted the firm in the UK if successful.
Earlier this year KPMG were sued for $1 billion by creditors of New Century, a failed sub-prime lender.
Big 5 became Big 4 of course following the collapse of Arthur Andersen in the wake of the Enron scandal.
Some fear that Big 4 dominance of the audit market is such that British business would be subject to a state of disarray if a massive court action were to reduce Big 4 to Big 3! It was announced in the UK media that Britain’s Big 4 auditing firms have been left exposed to a surge in negligence claims, after the Government refused to limit further the damages they could face.
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Stevehttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve2009-10-21 19:39:392009-10-21 19:39:39Audit firms in the UK left unprotected against claims of negligence
This was one of the headlines that recently caught my eye, remembering that auditor’s liability is one of the few ‘new topics’ in ACCA P7.
In August 2009, the UK Law Lords on a split decision (3:2) upheld an earlier ruling by the Court of Appeal in a multi-million pound action brought by the liquidator of Stone & Rolls (a commodity trader) against their auditors Moore Stephens.
The Law Lords ruled that the auditors were not liable for failing to detect a £58 million fraud perpetrated over a number of years.
The fraud involved the CEO of Stone & Rolls, a Croatian businessman called Zvonko Stojevic, using the firm as a means of defrauding banks by means of a letter of credit scam.
The split decision perhaps provides less clarity than the auditing profession might have wished for in relation to the court’s view on an auditor’s liability for the detection of fraud.
The senior Law Lord, Lord Phillips, said “It does not seem just that in these circumstances, Stone & Rolls should be able to bring about a claim that it had set about inducing.”
Lord Manse, dissenting said “the world has sufficient experience of Ponzi schemes ….. for it to be questionable policy to relieve from all responsibility auditors negligently failing in their duty to report on such companies’ activities.”
We could be seeing a whole number of new claims against auditing firms worldwide as companies go into liquidation in the current economic crisis.
What’s your view on this case? Who knows the examiner might ask you!
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Stevehttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve2009-10-18 19:38:162009-10-18 19:38:16Auditors cleared in landmark negligence case
Way back in 1896 in the famous Kingston Cotton Mill Case, was Lord Justice Lopes suggesting that auditors need a dog licence?
The facts of this case were basically that an action was brought against the auditors of the company for negligence, in failing to detect a fraud which involved the management of the company wilfully overstating the value of the company’s inventory.
In finding that the auditors were not guilty of negligence, the Judge famously said the following:
“An auditor is not bound to be a detective, or … to approach his work with suspicion, or with a foregone conclusion that there is something wrong. He is a watchdog, not a bloodhound.”
The Oxford English Dictionary provides us with the following definitions:
Watchdog: ‘A dog kept to guard private property.’
Bloodhound: ‘A large hound with a very keen sense of smell, used in tracking.’
It’s a long time since 1896 and nowadays, there is perhaps more a way of thinking that auditors should be a little bit less of a sleepy old watchdog, and rather more of an active bloodhound.
Make sure that you are up to date on an auditor’s responsibility for detection of fraud.
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Stevehttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve2009-09-05 18:23:292009-09-05 18:23:29What kind of dog are you?
If you want to improve your marks in the real exam, that seems to be the message from your ACCA F8 examiner Alan Lewin.
Requirement (a) of Question 1 of the June 2009 F8 exam required candidates to ‘list and explain the purpose of the main sections of an audit strategy document’.
You are reminded that the examination consists of 5 compulsory questions, with total marks allocated to each question being as follows:
Q1 – 30 marks
Q2 – 10 marks
Q3 – 20 marks
Q4 – 20 marks
Q5 20 marks
In his specific comments on the performance of candidates on Q1(a) the examiner stated “A significant number of candidates did not appear to be aware of what an audit strategy is.”
This comment is in itself quite worrying, but perhaps of even more concern is that it would appear that many candidates do not have any strategy for tackling the paper as a whole!
If we look at the examiner’s general comments he has this to say:
“Many candidates presented their answer to question 1 first, indicating appropriate use of reading time to prepare for the main scenario. A significant number of candidates answered questions in reverse order in this sitting (i.e. 5,4,3,2 and finally 1) or attempted question 2 first, leaving question 1 to the end of the examination, with question 1 rarely being completed. The pass rate for these candidates was also lower than those where question 1 was attempted first.”
The format of the paper on all subjects is known in advance and as part of developing a successful exam technique, it is clearly vital that you have a clear strategy (which you have practised beforehand) on what your approach to the paper is going to be.
Proper planning is vital to quality control of an audit engagement.
Proper planning is vital to quality control of your examination answers!
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Stevehttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve2009-08-12 18:22:192009-08-12 18:22:19Count UP 12345 NOT down 54321
Reporter Norman C. Miller won a Pulitzer Prize in 1964 for his reporting on the De Angelis story.
Tino De Angelis was the ‘brains’ behind ‘The Great Salad Oil Swindle’ (the name of the book).
This case showed quite clearly that attendance at stocktaking by an auditor, will not provide, in itself, sufficient appropriate audit evidence on which to base the audit opinion.
I have always found one of the most interesting ways of studying internal control systems and auditing procedures is by looking at reports on frauds, indicating where things have gone wrong in real life.
Last time I looked on Amazon there were some copies of one of my favourite books available, alternatively perhaps try your local library.
Happy bedtime reading!
https://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.png00Stevehttps://www.theexpgroup.com/wp-content/uploads/2018/06/styleguide-EXP-4.pngSteve2009-08-05 18:26:332009-08-05 18:26:33Looking for a good bedtime read?
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