p1 Exam Notes

8/13/2019 p1 Exam Notes

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ACCA P1 EXAM NOTES

Part 1: Framework

Chapter 1: Introduction of C !Corporate o"ernance#

$e% point&:

1. Definition of CG- B 49&F 4

2. Underlying concepts of CG- B 49&F 7

3. M !or re s of CG- B "7-7# & F1#-11

1

Se're'ation of the owner&hip and contro(-$% re%olders re t%e o ner of t%e co'p ny-Control (s( lly deleg ted to director -)nterest of s% re%olders nd directors ' y conflict-Directors ' y not ct in t%e *est interest of t%es% re%older

)efinition:+ syste' *y %ic% org ni, tions

re directed nd controlled

Impact on or'ani*ation:-D(ties of directors ndf(nction of t%e *o rd-Co'position nd * l nceof t%e *o rd nd *o rdco''ittee

- eli *ility of fin nci lreporting nd e tern l(diting

-Directors/ re'(ner tionnd re rds

- is0 ' n ge'ent ndintern l control syste'- ig%t nd responsi*ilitiesof s% re%olders

Stakeho(der+Interna(:-Directors-Co'p ny secret ry-M n gers- 'ployee

- 'ployeerepresent ti eE,terna(:-+(ditor - eg(l tor -$% re%older -$toc0 e c% nge-Go ern'ent

Corporate o"ernancergely concerned it% go erning t%e rel tions%ip

*et een s% re%olders nd directors

Purpo&e and o-.ecti"e&:-Monitor t%ose %o control t%e

ssets o ned *y in estors-Contri*(te to i'pro edcorpor te perfor' nce nd

cco(nt *ility in cre ting longter' s% re%older l(e

I&&ue& and &cope of'o"ernance on pu-(ic/pri"ate and N O&ector&-)nfl(enced *y t%e si,eo ners%ip 'odel nd

o*!ecti es oforg ni, tion


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Chapter 0: A'enc% re(ation&hip and theorie&

$e% point&:

1. +gency t%eory5 B 62&F 26 F27-F29

2. r ns ction t%eory5 B66&F3# F31

3. $t 0e%older t%eory5 B66&F32

2

+gency rel tions%ip nd t%eories

+gency t%eoryr ns ction costs nd st 0e%older

t%eories nd econo'ic t%eory

)efinition:'ine d(ties nd

conflict t% t occ(r *et een p rties %o% e n gency

$e% concept:+gent8rincip l+gency+gency cost+cco(nt *ilityFid(ci ry

esponsi*ility$% re%older

e(ation&hip withC :

ey f(nction of CGto protect t%e princip l gentrel tions%ip *et eens% re%older nddirector

A'ent Accounta-i(it%: *y (ndert 0ing to

perfor' t s0 on t%eir *e% lf gents *eco'ecco(nt *le to t%e

princip l


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Chapter 2: 3oard of director&/ 3oard of Committee 4 emuneration

3oard of director&:

3

Bo rd of directors

Unit ry Bo rd str(ct(re

$ingle *o rd

D

o *o rds

M n ge'ent *o rd

$(per isory *o rd

D : D

: D

o(e& and re&pon&i-i(itie&:-+ct in good f it% in t%e interests of t%eco'p ny s %ole-Displ y cert in 'o(nt of s0ills nde ercise re son *le c re- ns(re co'p ny ' int ins f(ll nd

cc(r te cco(nting records-8rod(ce nd present nn( l cco(nts

Characteri&tic and compo&ition:-B l nce of D nd : D-:ot *e do'in ted *y single

po erf(l indi id( l- ole of c% ir' n nd t%e C ;s%o(ld *e sep r ted

5e'a( and re'u(ator% framework:- +ppoint'ent nd retire'ent- $er ice contr ct- e'o l- Dis


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$e% point&:

1. ole of *o rd5 81#4 &F 6=

2. Bo rd str(ct(re5

+d nt ges nd dis d nt ges of (nit ry *o rd nd t o-tier *o rd B119-12# & F "#-"1

3. Co'position of t%e *o rd

Com-ined code re6uirement: F72

-Bo rd s%o(ld 'eet reg(l rly nd t%e res(lts of t%e 'eeting incl(ded in t%e nn( l report s %ig% le el st te'ent

of t%e oper tion.

- %e nn( l report s%o(ld identify ttend nce nd n 'e of c% ir' n C ; senior independent ot%ers nd

co''ittee n t(re nd 'e'*ers%ip.

- %e c% ir' n s%o(ld %old sep r te 'eeting it% : D nd : D s%o(ld 'eet to disc(ss c% ir' n/s perfor' nce.

-+ny (nresol ed 'eeting concerns s%o(ld *e recorded in *o rd 'eetings. )f : D resigns t%ey '(st notify

c% ir' n of concerns.

- %e co'p ny s%o(ld rr nge ppropri te ins(r nce co er in respect of leg l ction g inst directors.

4. F(nctions of : D B 116-117&F "6-""

6. %re ts to independence of t%e : D B 117-B11= &F "7

)ndependence c n *e !(dged s5-:ot *eing n e'ployee of t%e co'p ny it%in l st 6 ye rs

-:ot % ing ' teri l *(siness rel tions%ip it% t%e co'p ny in l st 3 ye rs

-:ot recei ing ny re'(ner tion e cept director/s fee >incl(ding s% re option?

-:ot % ing ny f 'ily ties it% t%e fir'

-:ot %olding cross directors%ips it% ot%er director

-:ot *eing n signific nt s% re%older

-:ot % ing ser ed on t%e *o rd for o er nine ye rs

- %e *o rd s%o(ld consist of % lf independent e cl(ding t%e c% ir

-;ne : D s%o(ld *e t%e senior independent director %o is directly il *le to s% re%olders if t%ey % e

concerns %ic% c nnot *e de lt it% t%ro(g% t%e ppropri te c% nnel of c% ir' n C ; or fin nce director.

". ole of c% ir' n nd C ; B112-114F "9-7#

7. Directors ind(ction nd C8D B1#"& F73-76

=. eg l d(ty B1#9-111& F 7=-=3

- etire'ent

-$er ice contr ct- e'o l

4

Independence:- e


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-Dis


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$e% point&:

1. De elop'ent of t%e code5 B =1-=6 & F4#-42

2. $; 5 B==-=9 & F46

Chapter : Corporate 'o"ernance/ &ocia( re&pon&i-i(it% and di&c(o&ure

$e% point&:

1. C$ 5 B9#-91 & F116-11"

2. M nd tory nd ol(nt ry disclos(re5 B127-129 & F12=-13#3. Gener l 'eeting5 B126 & F134

"

C is %o n org ni, tion is go erned in p(rs(itof its o*!ecti e nd incl(des5-%o it *e% es in rel tion to its en iron'ent-%o it interests its s% re%older

CS !Corporate &ocia( re&pon&i-i(it%#)s %o n org ni, tion ' n ges t%e i'p ct oft%eir oper tions on t%e ider en iron'entincl(ding consider tion for st 0e%older gro(p

Stakeho(der&;f n org ni, tion % e different o*!ecti es %ic%need to *e ' n ged in ter's of org ni, tion l str tegy.$% re%olders re p rtic(l rly i'port nt st 0e%olders tot%e co'p ny.

Shareho(der+re co'p ny o ners nd entitled to infor' tionfro' t%e directors. Us( lly in t%e for' of -+nn( l report-Gener l 'eeting

eportin' and di&c(o&ure- ol(nt ry-M nd tory

3e&t practiceG(id nce pro ided *y t%eco'*ined code

enera( meetin'

Pro,% "otin'


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4. 8ro y oting5 B12" & F136

Chapter 7: Mana'ement contro( &%&tem& in corporate 'o"ernance

$e% point&:

1. Definition of )C5 B13"&F14#

2. ;*!ecti e of )C5 BF146

3. le'ents of )C5 B13"&F166

Interna( contro( Method F16=-1"1

$ $egreg tion of d(ties

8 8%ysic l

+ +(t%ori, tion nd ppro l; ;rg ni, tion

7

Interna( mana'ement contro(ey process concerned it% ' n ge'ent of

ris0s nd c%ie e'ent of o*!ecti e

o(e& and re&pon&i-i(it%-Bo rd of directors- ec(ti e ' n ge'ent

Interna( contro( &%&tem e(e"ance to corporate 'o"ernance-)ntern l control nd ris0 ' n ge'ent

re f(nd 'ent l co'ponents of goodcorpor te go ern nce-CG % s 0ey lin0s to ris0s nd intern lcontrol

O-.ecti"e& and function&- ns(re go ls nd o*!ecti es of t%eorg ni, tion re 'et- ns(re reli *le fin nci l nd' n ge'ent reporting- ns(re co'pli nce it% l s-8rotect org ni, tion/s rep(t tion

Interna( contro()ndi id( l co'ponents of

n intern l control syste'

E(ement&:; is0 ssess'ent-Control en iron'ent-)nfor' tion nd co''(nic tion-Monitoring-Control cti ities


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+ +rit%'etic nd cc(r cy

8 8ersonnel

$ $egreg tion of d(ties

Most tr ns ctions c n *e *ro0en do n into t%ree sep r te d(ties51. +(t%ori, tion

2. A ndling of t%e sset

3. ecording of t%e tr ns ction

For e 'ple5 ' 0ing t%e p(rc% se ' 0ing t%e p y'ent nd recoding t%e p(rc% se nd p y'ent in t%e cco(nts

8 8%ysic l

)t i's to protect p%ysic l ssets g inst t%eft nd (n (t%ori,ed ccess nd (se. %ey incl(de5

1. (sing s fe to %old c s% nd l( *le doc('ent

2. (sing sec(re entry syste' to *(ildings nd re s of *(ilding

3. d( l c(stody of l( *le ssets

4. periodic in entory c%ec0s

6. %iring sec(rity g( rds nd (sing closed circ(it >CC ?

+ +(t%ori, tion nd ppro l

For spending ite's n org ni, tion needs est *lis% (t%ori, tion li'its.

; ;rg ni, tion

)t refers to t%e controls pro ided *y t%e org ni, tion/s str(ct(re s(c% s5

1. t%e sep r tion of n org ni, tion/s cti ities nd oper tions into dep rt'ent or responsi*ility center it% cle r di ision responsi*ility

2. deleg ting t%e (t%ority

3. est *lis%ing t%e reporting line

4. coordin ting t%e cti ities of different dep rt'ents

+ +rit%'etic nd cc(r cy

Controls re pro ided *y5

1. ecording tr ns ctions properly in t%e cco(nting syste'

2. Being *le to tr ce e c% tr ns ction t%ro(g% t%e cco(nting records

3. Do(*le c%ec0ing

8 8ersonnel

1. $(it *le indi id( ls re ppointed

2. $(it *le ind(ction nd tr ining

=


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Chapter


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Chapter =: i&k mana'ement/ a&&e&&ment and ri&k mana'ement

$e% point&:

1. is0 c tegory5 B177-1=7 & F22#-222 F22"-227

2. is0 n lysis5 B192-196 F217

3. )'p ct on t%e st 0e%olders5 B19"-297&F22=-229

4. ole of *o rd5 B19= B224 & F234

6. ole of ris0 ' n ge'ent co''ittee B224-226&F26#

". ole of ris0 ' n ger B22=

7. ed(ction of ris05 B231-234& F269-2"2

Chapter > Ethic theorie& and profe&&iona( ethic

1#

i&k

Mana'ementperception of ri&k

Cate'ori*ation ofri&k

Mea&urement ofri&k

Contro((in' ri&k

Code& of ethic&

Ethic theor%- o%l*erg t%eory- (c0er/s 'odel

Corporate ethic+pplic tion of l(es to

*(siness *e% iors

Profe&&iona( EthicCode&

ACCA Code-)ntegrity

-;*!ecti ity-8rofession l co'petence-Confidenti lity-8rofession l *e% ior

Threat& to the auditor?&independence

-$elf interest-$elf re ie-F 'ili rity-)nti'id tion


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1. o%l*erg t%eory5 B2"3-2"4&F2=#-2=3

2. (c0er/s 'odel5 B292-8rofit *le

- eg l

-F ir

- ig%t

-$(st in *le

3. +CC+ codes5 B29#&F331-332

4. Conflicts of interest5 B3#2-3#3 & F334-336

6. %re ts to independence5 B294-3#2 & F337-343

II@ ow to or'ani*e %our an&wer

Ade6uac% of an&wer p(an

Structured an&wer

Inc(u&ion of &i'nificant fact&

Information 'i"en not repeated

e(e"ant content

Inference& made

Commercia( awarene&&

i'her &ki((& demon&trated Profe&&iona( commentar%

III Samp(e 6ue&tion and an&wer:

3u&ine&& ri&k and ri&k mana'ement

1. +,(re li'ited li *ility co'p ny s incorpor ted in $epi n on 1 +pril 2##4. )n M y t%e co'p ny e ercised

n e cl(si e rig%t gr nted *y t%e go ern'ent of 8e t to pro ide t ice ee0ly direct flig%ts *et een y'e t%e

c pit l of 8e t nd D r0e t%e c pit l of $epi n .

%e introd(ction of t%is ser ice % s *een ell d ertised s efficient nd ti'ely/ in n tion l ne sp pers. %e

!o(rney ti'e *et een $epi n nd 8e t is e pected to *e signific ntly red(ced so enco(r ging to(ris' nd

*(siness de elop'ent opport(nities in $epi n .

+,(re oper tes ref(r*is%ed 36-ye r-old ircr ft %ic% is le sed fro' n intern tion l irline nd registered it%

t%e 8e t n + i tion +d'inistr tion >t%e 8++?. %e 8++ re


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ircr ft % s genero(s %old c p city for $epi n /s n('ero(s %ortic(lt(r l gro ers >e.g. of coco te nd fr(it? nd

gener l c rgo.

%e si %o(r !o(rney offers n in-flig%t 'o ie 'e l %ot nd cold drin0s nd t -free s%opping. +ll 'e ls re

prep red in y'e (nder contr ct it% n irport c tering co'p ny. 8 ssengers re in ited to co'plete s tisf ction/ t%e c pt in nd co-pilots? re pro ided (nder contr ct it% t%e

intern tion l irline fro' %ic% t%e ircr ft is le sed. +t t%e end of e c% flig%t t%e c pt in co'pletes ti'es%eet

det iling t%e cre nd ct( l flig%t ti'e.

ic0et s les re ' de *y +,(re nd tr el gents in $epi n nd 8e t . ;n n('*er of occ sions cono'y

se ting % s *een o er-*oo0ed. C(sto'ers %o % e *een ffected *y t%is % e *een cco''od ted in B(siness

Cl ss s t%ere is '(c% less de' nd for t%is nd e en less for First Cl ss. ic0et prices for e c% cl ss depend on

' ny f ctors for e 'ple %et%er t%e tic0ets re ref(nd *le non-ref(nd *le e c% nge *le non-e c% nge *le

single or ret(rn 'id- ee0 or ee0end nd t%e ti'e of *oo0ing.

+,(re/s ins(r nce co er incl(des p ssenger li *ility freig%t * gg ge nd co'pens tion ins(r nce. 8re'i('s for

p ssenger li *ility ins(r nce re deter'ined on t%e * sis of p ssenger 'iles flo n.

e ? )dentify nd e pl in t%e *(siness ris0s f cing +,(re.

>*? Descri*e %o t%e ris0s identified in > ? co(ld *e ' n ged nd ' int ined t n ccept *le le el *y +,(re.

!a# 3u&ine&& ri&k& !-# Proce&&e& for mana'in'

ig%ts to oper te

M y *e g(r nteed 'ini'('

+ccept t t%e present le el > s one t% t % s to *e

*orne? *(t *e r in 'ind >e.g. %en ' 0ing str tegic

decisions? t%e i'p ct t% t ' n ge'ent/s ctions co(ld

% e on ny rene l of t%e rig%ts.

er's nd conditions tt c%ed to t%e rig%ts ' y

t%re ten +,(re/s oper tion l e istence if for

e 'ple t%ere re ny circ('st nces (nder

%ic% t%e rig%ts co(ld *e it%dr n. For

e 'ple if t%e st nd rd of ser ice f lls *elo

'ini'(' specified le el.

ele nt ter's nd conditions s%o(ld *e

co''(nic ted to ll st ff so t%ey re cle r *o(t t%e

i'port nce of t%eir re s of responsi*ility.

Co'petition

+lt%o(g% t t%e 'o'ent t%ere ppe rs to *e none > s -Monitor t%e progress of pplic tions for flig%ts to

12


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t%e rig%ts re e cl(si e? ny co'petition in t%e f(t(re

co(ld red(ce profit *ility >e.g. if t%e rig%t s to

*eco'e non-e cl(si e or n indirect ser ice *et een

$epi n nd y'e s%o(ld *e est *lis%ed?.

destin tions %ic% co(ld pro ide tr nsit to y'e.

- ed(ce t%e ris0 *y incre sing t%e reli *ility nd

rep(t tion of +,(re/s ser ice i'pro ing co'fort etc

>e.g. *y incre sing leg roo' nd

pro iding ir-conditioned lo(nges?.

+ge of ircr ft

%e ge of t%e ircr ft >36 ye rs? is li0ely to % e

*e ring on f(el cons('ption nd ot%er costs >e.g.

rep irs nd ' inten nce?.

+,(re s%o(ld ' n ge its c s% flo s nd

*orro ing c p *ility >e.g. * n0 lo n f cility? to c rry

o(t ongoing oper ting rep irs s nd %en needed.

ngine o er% (l

)f t%e le se is fin nce le se it is li0ely t% t +,(re ill

% e to *e r t%e costs of t%e o er% (l E %ic% ' y

% e detri'ent l effect on c s% flo s.

+s *o e +,(re s%o(ld *(dget its fin nci l

reso(rces to 'eet t%e costs of t%e o er% (l t%e ti'ing

of %ic% c n *e pl nned for.

%e ser ice o(ld need to *e s(spended %ile t%e

engine is *eing o er% (led (nless n ltern ti e is

pl nned for.

%e le se gree'ent it% t%e irline s%o(ld

pro ide t% t n ee.g. in t%e e ent

of 'ec% nic l f il(re?

for ' !or o er% (l

if +,(re def (lts on t%e le se p y'ents.

-+,(re s%o(ld enter into contr ct( l rr nge'ent

>e.g. ' y *e incl(ded it%in t%e ter's of n oper ting

le se? for repl ce'ent ircr ft in t%e e ent t% t t%e

ircr ft *e gro(nded.

-+,(re s%o(ld c rry dee.g. d(e to t%e ris0 of spre d of dise se?.

-Contr cts it% gro ers s%o(ld cle rly st te ite's

-+,(re s oper tion l controls s%o(ld incl(de

13


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erific tion c%ec0s on prod(ce c rried.

Gro ers ' y see0 to %old +,(re li *le for5

prod(ce %ic% peris%es >e.g. if s(ccessi e

flig%ts re c ncelled? i'po(nded goods.

+,(re s%o(ld % e deecono'y is

only 64@ of se ting c p city?

eep de' nd for t%e cl sses of tic0ets (nder re ie

nd respond to t%e e cess of s(pply o er de' nd for

cono'y se ting. For e 'ple5

c% rge %ig%er prices for econo'y on pe 0

flig%ts

offer l rger disco(nts for d nce *oo0ings on First

nd B(siness Cl ss se ts

introd(ce loy lty sc%e'e for free.g. of c%ef? on preser ing

8 ssengers ' y *e deterred fro' (sing t%is flig%t t%e

e.g. ' inten nce c%ec0s on life s fety drill proced(res

>e.g. in e c( tion

! c0ets etc? ' y *e inc(rred if inspection logs re not

0ept.

$t ff tr ining s%o(ld *e on-going it% reg(l r s fety

drill proced(res.

+,(re ' y f ce l s(it for person l in!(ry nd illness $ fety proced(res '(st *e de'onstr ted *efore +,(re

' y f ce l s(its for person l in!(ry or t 0e-off on

e ery flig%t nd p ssengers referred to illness >e.g.

deep ein t%ro'*osis E d t/? s fety infor' tion

14


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incl(ding %o to red(ce t%e ris0 pro ided it% e c%

se t.

+ir ste rds C *in cre s fety

+,(re ill % e diffic(lty recr(iting nd ' int iningt%e ser ices of ppropri tely e.g. fire? collision or *re 0do n

' y t%re ten oper tions in *ot% s%ort nd longer-ter'.

+ccept t t%e present le el *(t t 0ing ll pr ctic *le

s fety c%ec0s no i'ple'ented in t%e irline ind(stry

to ens(re t% t +,(re is not e posed to pre ent *le

ris0s. For e 'ple5

-r y screening of c%ec0ed-in * gg ge

sec(rity screening of c *in * gg ge nd

p ssengers etc.

Flig%t personnel

+,(re ' y not *e *le to ser ice t%e flig%t in t%e e ent

of non-s(pply of flig%t personnel *y t%e intern tion l

irline >e.g. d(e to stri0e ction?.

%e gree'ent it% t%e irline s%o(ld inde'nify

+,(re for ll costs nd losses inc(rred if flig%ts re

c ncelled or disr(pted d(e to non- il *ility of flig%t

personnel.

Flig%t tic0ets

ic0ets re sold *y 'ore t% n one p rty >+,(re nd

tr el gents? nd t 'ore t% n one loc tion. lso

pricing is co'ple it% r nge of t riffs depending on

' ny f ctors. %is incre ses t%e ris0 t% t

re en(e ' y *e lost if p ssengers re (nderc% rged

or tic0et s les (nrecorded nd

flig%ts ' y *e o er-*oo0ed it% conse


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2. Aydr sports li'ited li *ility co'p ny nd n tion l leis(re gro(p % s si teen centres ro(nd t%e co(ntry nd

%e d office. F cilities t e c% centre re of st nd rd design %ic% incorpor tes %e ted s i''ing pool s (n

ir-conditioned gy' nd fitness st(dio it% s(per ised c%ildc re. c% centre is ' n ged on d y-to-d y * sis *y

centre ' n ger in ccord nce it% co'p ny policies. %e centre ' n ger is lso responsi*le for prep ring nd

s(*'itting 'ont%ly cco(nting ret(rns to %e d office.

c% centre is re


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ei? )dentify nd e pl in t%e *(siness ris0s %ic% s%o(ld *e ssessed *y t%e ' n ge 'ent of Aydr sports.

>ii? pl in %o e c% of t%e *(siness ris0s identified in >i? ' y *e lin0ed to fin nci l st te'ent ris0.

An&wer:

>i? B(siness ris0s >ii? Fin nci l st te'ent ris0

%e st nd rd design of f cilities incre ses oper tion l

ris0 s ny diffic(lties enco(ntered in one f cility ill

*e co'po(nded *y t%e n('*er of ot%er f cilities

>potenti lly ll? %ic% re si'il rly ffected. %is is

ill(str ted *y t%e in (se clos(re of t%e s (n s.

%e c rrying 'o(nt of t%e ssoci ted non-c(rrent

ssets >i.e. ee.g.rel ting centre ' n gers. to c(sto'er s tisf ction

%(' n reso(rces %e lt% nd s fety?.

-)nfor' tion processing ris0 is incre sed s cco(nting

infor' tion flo ing into t%e fin nci l st te'ents ' y

not *e properly c pt(red inp(t processed or o(tp(t *y

t%e centre ' n gers.- )n%erent ris0 of errors rising in 'ont%ly *r nc%

ret(rns is %ig%.

+d nced p y'ents contri*(te to *(siness reporting

nd fin nci l >c s% flo ? ris0. C s% recei ed '(st *e

il *le to 'eet t%e costs of pro iding f(t(re

ser ices.

- e en(e ' y *e o erst ted if n cc(r te c(toff is not

c%ie ed. )n p rtic(l r t%ere is n esti' te ris0 in

deter'ining t%e 'o(nt of deferred inco'e t t%e

* l nce s%eet d te.

- +n error of principle ' y lso rise if Aydr sports

re en(e recognition policy does not co'ply it% )+$

1= e en(e/.

Aydr sports c nnot oper te centre if licence is

s(spended it%dr n or not rene ed >e.g. t%ro(g%

f iling loc l (t%ority inspection or f iling to pply

for rene l?.

+n error of principle rises if licences re not

c pit lised s int ngi*le ssets >*(t inste d ritten off

s e penses %en inc(rred?.

Clos(re ' y res(lt in c(sto'ers finding ltern ti e

f cilities it% per' nent loss of fee re en(e.

F il(re ris0 >i.e. t% t Aydr sports ill not contin(e to

oper te s going concern? is incre sed.

rly *ird c(sto'ers dis tisf ction si'il rly

incre ses oper tion l ris0.

%is cre tes disclos(re ris0 if t%e disclos(res rel ting

to going concern s t%e * sis of cco(nting do not

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'eet t%e re 'o(nts prep id? s%o(ld *e ritten off to t%e e tent

t% t 'onies re not ref(nd *le.- %e li0eli%ood of contingent >if not ct( l? li *ilities

incre ses disclos(re ris0.

+lt%o(g% fees re non-ref(nd *le s(spension of

f cility >e.g. s (n ? ' y res(lt in c(sto'ers s0ing for

p rti l ref(nd. )n p rtic(l r Aydr sports ' y % e n

o*lig tion to ref(nd fees p id in d nce %en centres

re closed >e.g. t%e erne centre fro' J(lyE$epte'*er

2##3?.

8ro isions ' y *e (nderst ted t 31 Dece'*er 2##3 if

Aydr sports % s leg l o*lig tion to ref(nd fees %ere

it % s f iled to pro ide ser ices.

8er' nent loss of c(sto'ers re g in? incre sed if fines pen lties

rising re ' teri l nd not disclosed.

$i'il rly in *ility to ret in lifeg( rds incre ses

oper tion l ris0 t% t pools c nnot open >d(e to %e lt%

nd s fety reg(l tions?. Co'pli nce ris0 is incre sed

*y t%e possi*ility t% t pools ' y *e oper ted it%o(t

lifeg( rd *eing on d(ty.

Aig% st ff t(rno er indic tes incre sed oper tion l ris0

>poor %(' n reso(rce ' n ge'ent inefficiency in

or0ing pr ctices red(ced c p city etc?.

$t ff costs ' y *e o erst ted s t%e ris0 t% t p y'ents

' y *e ' de to le ers is incre sed.

i'it tions on centre ' n gers le els of (t%ority

' y not *e co''ens(r te it% t%eir responsi*ilities.

'po er'ent ris0 rises if ' n gers re not properly

led > nd if t%ey in t(rn do not properly le d t%eir

centre st ff?.

+ny l c0 of integrity ' y incre se t%e ris0 of

' n ge'ent nd or e'ployee fr (d illeg l cts nd

(n (t%orised (se of co'p ny ssets. )n p rtic(l r t%e

ssertion of e istence of ssets ' y *e t ris0

>res(lting in o erst te'ent?.

More centres ' y *eco'e loss-' 0ing if t%e re sons

for f lling 'e'*ers%ip re not ddressed.

oss-' 0ing centres s%o(ld *e tested for i'p ir'ent

s c s%-gener ting (nits.

%e %ydrot%er py pool c nnot oper te (ntil

constr(ction is co'pleted nd co'pletion ' y *e

t%re tened *y c s% flo diffic(lties.

%e l(e of t%e sset in constr(ction s%o(ld *e ritten

do n if it is i'p ired >e en t%o(g% it % s not yet *een

*ro(g%t into (se?.

C s% flo diffic(lties incre se li


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- $ee *o e reference to going concern nd disclos(re

ris0.

%e red(ction in ins(r nce co er red(ces t%e

reco er *le 'o(nt of ssets in t%e e ent of losst%ro(g% fire >for e 'ple?. )n *ility to repl ce

lost d ' ged ssets incre ses oper tion l ris0 >see

o*solete gy' e g te/? nd nn( l 'e'*ers%ip fees. D y tic0ets ' y *e pre-

*oo0ed *y credit c rd (sing telep%one *oo0ing %otline/ nd i t%e ,oo/s e*site. ed(ced fees re il *le

>e.g. to st(dents senior citi,ens nd f 'ilies?.

+ni' l sponsors%ips %ic% l st for one ye r ' 0e signific nt contri*(tion to t%e cost of speci list diets

enclos(re ' inten nce nd eterin ry c re. +ni' l sponsors *enefit fro' t%e d ertise'ent of t%eir n 'es t t%e

sponsored ni' l/s enclos(re.

BKG/s ' n ge'ent % s identified t%e follo ing pplic *le ris0s t% t reii? +ni' l sponsors%ips ' y not *e in oiced d(e to inco'plete d t tr nsfer *et een t%e sponsoring nd

in oicing dep rt'ents

>iii? Corpor te sponsors%ips ' y not *e c% rged for t ppro ed r tes E eit%er in error or d(e to rr nge'ents it%

t%e co'p nies. )n p rtic(l r t%e sponsoring dep rt'ent ' y not notify t%e in oicing dep rt'ent of reciproc l

rr nge'ents %ere*y sponsoring co'p nies pro ide BKG it% d ertising >e.g. in co'p ny ' g ,ines nd

nn( l reports?

>i ? C s% recei ed t t%e entr nce g te tic0et offices > 0ios0s/? ' y not *e p ssed to c s%iers in t%e cco(nts

dep rt'ent >e.g. t%ro(g% t%eft?

> ? %e tic0et *oo0ing nd iss(ing syste' ' y not *e il *le

> i? Don tions of ni' ls to t%e collection >e.g. fro' C(sto's nd cise sei,(res nd r re *reeds ent%(si sts?

' y not *e recorded.

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> ? Descri*e s(it *le intern l controls to ' n ge e c% of t%e pplic *le ris0s identified.

>*? pl in t%e fin nci l st te'ent ris0s rising fro' t%e pplic *le ris0s.

An&wer:

>i? c0 of in est'ent

Mont%ly re ie nd 'onitoring of5

d'ission fees

n('*er of d y isitors

nn( l 'e'*ers%ips t 0en o(t > n lysed *et een ne nd rene ed?

l psed 'e'*ers%ip

sponsors%ip iting lists > ni' ls it%o(t sponsors nd sponsors iting for s(it *le ni' ls?.

+ppro l of nn( l *(dgets %ic% pl n for deii? )nco'plete d t tr nsfer

Mont%ly reconcili tions of ct( l >in oiced? sponsors%ip inco'e to t% t e pected >* sed on n('*er ofsponsors%ips *y type per sponsor dep rt'ent records? nd in estig tion of s%ortf lls.

Monitoring of inst nces of inco'plete in cc(r te d t tr nsfer E %o identified re son for occ(rrence 'o(nts

in ol ed %o rectified.

>iii? :on-c% rges

Monitoring of sponsors%ip inco'e gener ted >i.e. ct( l? to t% t il *le >e.g. pro!ected? *y cl ss of ni' l

nd in estig tion of s%ortf lls.

Co'p rison of BKG/s d ertising e pendit(re g inst *(dget >to identify potenti l for (nrecorded costs?.

>i ? Mis ppropri ted c s%

o people co(ld ' n/ e c% tic0et 0ios0 t ll ti'es. + d(ty log s%o(ld *e 0ept >d te ti'e st ff 'e'*er?.

%e 0ios0s '(st not *e left (n ttended %ile c s% is %eld t%ere.

+ll c s% recei ed fro' isitors s%o(ld *e co(nted nd recorded nd receipt gi en.

C s% nd copy of t%e receipts s%o(ld *e tr nsferred sec(rely to c s%iers.

%e e istence of CC t t%e 0ios0s s%o(ld *e ' de e ident to ct s deterrent.

D ily reconcili tion of c s% t 0ings to g te/ >i.e. n('*er of d y isitors? nd in estig tion of ny pp rent

s%ortf ll.

+ sep r te d'ission g te fter t%e 0ios0 c%ec0s t% t entr nts % e *een iss(ed tic0et.

+n (dit *le c s% register syste' to control c s% dr ers t tic0et *oot%s. r ns ctions '(st *e tr ce *le in

'(ltiple for's of tender >c s% credit c rd?.

M(ltiple c s% dr er inserts en *ling


21/26

> ? $yste's not il *le

B c0 (p reco ery contingency pl ns '(st *e in pl ce to ens(re t% t BKG c n t 0e *oo0ings nd iss(e tic0ets

e en %en t%e electronic syste' is not il *le.

)n p rtic(l r t%e * c0 (p syste' s%o(ld *e tested periodic lly to ens(re t% t credit c rd *oo0ings c n *e t 0en

nd correct disco(nts processed for concession ry tic0ets nd gro(p *oo0ings. 8re enti e rr nge'ents to ens(re t% t ny do n ti'e/ is 0ept to 'ini'('. For e 'ple cor sset register?.

>*? Fin nci l st te'ent ris0s

>i? + going concern > f il(re/? ris0 rises fro' l c0 of in est'ent. +ny signific nt do(*ts *o(t going concern

'(st *e s(it *ly disclosed in t%e notes to t%e fin nci l st te'ents. Disclos(re ris0 rises if t%e re


22/26

> ?Cold c lling/ >i.e. ppro c%ing directly to see0 ne *(siness? t%e c%ief e ec(ti e officers of loc l *(sinesses

nd offering t%e' free second opinions.

>*? 8l cing n d ertise'ent in n tion l cco(nt ncy ' g ,ine t% t incl(des t%e follo ing5

)f yo( % e n sset on %ic% l rge c% rge *le g in is e pected to rise %en yo( dispose of it yo( s%o(ld *e

interested in t%e *est t pl nning d ice. Ao e er yo(r g ins 'ig%t rise t%ere re tec%nic? Displ ying *(siness c rds longside t%ose of loc l tr des'en nd ser ice pro iders in s(per' r0ets nd

li*r ries. %e c rds o(ld re d5

A 0 +CC+ +ssoci tes For 8 ;F $$);:+ +cco(nt ncy +(dit B(siness Cons(lt ncy nd tion $er ices

Co'petiti e r tes. Money * c0 g( r ntees./

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+d ertising is gener lly llo ed s(*!ect to t%e o*ser nce of t%e f(nd 'ent l principles of et%ic l codes >e.g.

)F+C/s Code of t%ics for 8rofession l +cco(nt nts/ +CC+/s (les of 8rofession l Cond(ct/?.

+lt%o(g% direct d ertising >i.e. on tele ision r dio cine' ? is pro%i*ited in ' ny !(risdictions >e.g. Aong

ong? n d ertise'ent in n tion l cco(nt ncy ' g ,ine is gener lly per'itted.

H%ere d ertising is per'itted t%e 'ini'(' reor cre ted decepti ely?

tec%nic? B(siness c rds

B(siness c rds ' y *e considered for' of st tionery nd s%o(ld *e of n ccept *le profession l st nd rd ndco'ply it% leg l nd 'e'*er *ody ree.g. in n

)nstit(te of Directors or B(siness Men/s Cl(*? displ ying it longside loc l tr des'en/ ' y ppe r to *elittle t%e

st t(s of profession l cco(nt nts.

+n d ertise'ent t%e si,e of *(siness c rd o(ld *e s(fficient to pro ide n 'e nd cont ct det ils nd in

t%is respect is s(it *le. Ao e er t%e d nger of gi ing 'isle ding i'pression is prono(nced %en t%ere is s(c%

li'ited sp ce for infor' tion.

Ao e er t%e tone of t%e d ertise'ent ' y discredit t%e +CC+ n 'e. )t is lso (ns(it *le t% t it see0s to t 0e

(nf ir d nt ge of t%e +CC+ n 'e. +lt%o(g% t%e +CC+ ' r0 c n *e (sed *y A 0 +ssoci tes on letter%e ds

nd st tionery >for e 'ple? it c nnot *e (sed in ny y %ic% conf(ses it it% t%e fir'.

%e e'p% sis on profession l/ ' y *e (ns(it *le s it co(ld s(ggest t% t t%ere re ot%er t% n profession l

cco(nting (dit >etc? ser ices to *e % d.

;ffering r nge of non- (dit ser ices in t%e s 'e sentence s (dit/ ' y 'isle d interested persons pic0ing (p

t%e c rd into t%in0ing t% t A 0 c n pro ide t%e' toget%er. %is conflicts it% t%e f ct t% t A 0 is restricted in

pro iding non- (dit ser ices to (dit clients.

%ere is no * sis for sserting co'petiti e r tes/.

)t is (nli0ely t% t ny profession l o(ld offer 'oney * c0/. )n t%e e ent of disp(te >e.g. o er fees? t%e ' tter

o(ld *e t 0en to r*itr tion > it% t%eir 'e'*er *ody? if s tisf ctory rr nge'ent co(ld not *e re c%ed it% t%eclient.

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+ tr des' n ' y g( r ntee t%e 1? )st%'(s % s recently iss(ed profits rning. %e co'p ny % s nno(nced t% t t%e signific nt synergies

e pected fro' t%e c3? +nt%ony n (dit senior % s *een ssigned to t%e (dits of )st%'(s since !oining t%e fir' ne rly t%ree ye rsgo. Ae % s confided to yo( t% t %is f t%er o ned 1 ##1 s% res in )st%'(s *(t sold t%e' only d ys *efore t%e

profits rning t s% re price of I7O96. Lo( re ss(red t% t +nt%ony did not pre io(sly 0no t% t %is f t%er % d

t%e s% res.

e1? 8rofits rning

t%ic l nd profession l iss(es

%e profit rning incre ses t%e in%erent ris0 of t%is ssign'ent. +s 'ore or0 ' y *e needed t% n for t%e

prior ye r >e.g. on n 0 /s i'p ired ssets? ddition l st ff ' y need to *e ssigned to t%e (dit.

+n d oc cy t%re t/ ' y occ(r if disp(te >potenti l leg l ction? rises *et een )st%'(s nd loser. For

e 'ple if t%e d(e diligence or0 s%o(ld % e recognised t%e signific nt i'p ir'ents.

loser s%o(ld (ndert 0e re ie of t%e d(e diligence or0 nd (dit for t%e ye r-ended 31 Dece'*er 2##1 to

ens(re t%ere ere no findings %ic% s%o(ld % e lerted t%e' to t%e pro*le's in n 0 %ic% precipit ted t%e

profit rning.

+ self-re ie t%re t/ ' y rise in t% t t%e prior ye r-end (dit %ic% follo ed t%e p(rc% se ' y % e l c0edo*!ecti ity. For e 'ple t%e in ol e'ent of t%e corpor te fin nce dep rt'ent in d(e diligence ' y % e res(lted

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in less (dit or0

*eing c rried o(t on n 0 /s ssets nd oper ting res(lts t% n o(ld ot%er ise % e *een perfor'ed.

)f loser s negligent in (ndert 0ing t%e d(e diligence or0 >e.g. *ec (se ssets ere i'p ired t t%e ti'e of

cto loser nd or

)st%'(s?.

)'plic tions for st ffing

+s s feg( rd for t%e pro ision of t%e ot%er ser ice >d(e diligence? t%e (dit personnel seconded to t%e corpor te

fin nce dep rt'ent ' y not % e p rticip ted in t%e (dit for t%e ye r ended 31 Dece'*er 2##1. +ny s(c% * r/

s%o(ld contin(e.

)f t%e secondees re in ol ed in t%e (dit ppropri te s feg( rds o(ld incl(de not ssigningt%e' to t%e (dit

re s 'ost closely ssoci ted it% d(e diligence nd close 'onitoring nd re ie of t%eir or0.

More senior *etter t% n o(ld % e *een necess ry % d

t%e profit rning not *een iss(ed?.

>2? $% res in%eritedt%ic l nd profession l iss(es

+ self-interest t%re t/ % s risen s Mercedes % s direct fin nci l interest in )st%'(s >i.e. s%e controls t%e

s% res?. )n p rtic(l r in is%ing t%e s% re price to incre se Mercedes 'ig%t *e in position to o erloo0

(nrecorded li *ilities nd losses disco ered d(ring t%e cond(ct of t%e (dit >s y?.

en t%o(g% Mercedes ' y % e independence of 'ind nd *e 0no n to ct it% t%e (t'ost integrity s%e

c nnot % e independence in ppe r nce.

%is in d ertent iol tion >i.e. t%ro(g% in%erit nce? of n independence principle does not i'p ir t%e

independence of loser or t%e (dit te ' pro iding5

loser/s est *lis%ed policies nd proced(res % e res(lted in Mercedes % ing reported pro'ptly %er in%erit nce

of t%e s% res

loser pro'ptly d ises Mercedes t% t t%e s% res s%o(ld *e disposed of nd

t%e dispos l occ(rs t t%e e rliest pr ctic l d te or s%e is re'o ed.

Mercedes does not intend to dispose of t%e s% res e.g. in re ie inginteri' (dit or0 or pl nning t%e ye r-end or fin l (dit isits? t% t or0 s%o(ld *e re-re ie ed *y not%er

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profession l cco(nt nt.


%is t%re t is so signific nt t% t Mercedes s%o(ld *e re'o ed fro' t%e (dit te ' (nless s%e disposes of t%e s% res

*efore s%e (ndert 0es ny f(rt%er t s0s rel ting to t%e (dit of )st%'(s.

3? De ling in s% res

t%ic l nd profession l iss(es

+ self-interest t%re t o(ld % e risen only if +nt%ony % d 0no n t% t close f 'ily 'e'*er > p rent? % d

s% res in )st%'(s >*(t %e did not?. + self-interest t%re t c nnot no rise s %is f t%er % s disposed of t%e s% res.

8ro iding +nt%ony did not 0no ingly pro'pt %is f t%er to sell t%e s% res %e % s not co''itted cri'in l ct

>e.g. of insider de ling?.

(tori l note5 )f %e co''itted s(c% n ct %e s%o(ld *e inst ntly dis'issed *y t%e fir' nd ny profession l *ody

(nder %ic% %e is registered >e.g. +CC+? notified for disciplin ry ction.

Ao e er if %e in so'e y co''(nic ted >e.g. in c reless re' r0? so'et%ing t% t pro'pted %is f t%er to sell

t%e s% res %e ' y *e in *re c% of %is d(ty of confidenti lity. %is s%o(ld *e in estig ted nd ppropri te ction

t 0en >e.g. %e ' y *e c (tioned or gi en ritten rning?.

)f %e (n0no ingly g e %is f t%er price sensiti e infor' tion t%en %is f t%er ' y *e g(ilty of insider de ling

>or si'il r? for % ing cted on it.


Unless t%ere is ny re son to s(ppose t% t +nt%ony % s cted i'properly >e.g. if %e % s del yed disclosing t%e

' tter? t%ere is no re son %y %e s%o(ld not contin(e %is position in t%e (dit te '.

Ao e er if %is f t%er ere to co'e (nder s(spicion of insider de ling t%en +nt%ony s%o(ld *e it%dr n fro'

t%is ssign'ent.; er ll

Gi en t%e %ig% profile tt c%ing to t%is listed client it o(ld *e ti'ely to % e ll 'e'*ers ssigned to t%e (dit

te ' rene t%eir ritten decl r tions of independence nd confidenti lity.

p1 Exam Notes

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