Exams

Exams

The new FAE Core subject, Risk Management and Sustainability, might intimidate candidates at first, but they will soon realise that the learning about risk, ethics and strategy comes with many training and career benefits. WORDS BY JOHN MUNNELLY There has been significant change in the FAE Core syllabus, most notably the addition of this new subject, Risk Management and Sustainability. Hearing this title might at first lead to some trepidation; however, on learning more, candidates will soon recognise the benefit of having this knowledge and its practical implications for companies. Let us look at what it includes and how it might be examined. Striking a balance The current business environment presents many challenges for companies, and with those challenges comes significant risk. Think about any large, successful company. Does it take chances or is it risk-averse? Striking a balance on risk appetite is difficult – one big risk could lead to the ultimate downfall of the company. If you pick up any of the business newspapers, you will see corporate failures and, with that, headlines speculating about the effectiveness of the board and scrutiny over the corporate governance practices in place.  The Code In this subject, you will learn about the importance of corporate governance with an in-depth review of the UK Code of Corporate Governance (the Code). At the heart of the Code is a set of principles that emphasise the value of good corporate governance to long-term sustainable success. Successful companies are investing significant resources into creating a healthy corporate culture and many studies have shown that, when done correctly, this provides a source of competitive advantage. Corporate social responsibility is obviously a key part of this and you will learn about the different strategies that are used in this area. Not all risk is created equal The concept of risk management is derived from the Code, requiring companies to establish appropriate procedures to manage risk and implement sound internal control systems. You will learn about the process that a board undertakes to discharge this responsibility and how a risk management strategy is developed. You will soon recognise this process involves many stakeholders.  A company faces many different types of risk, but you will learn that not all risks are created equal and risk is definitely not static. You will also learn the importance of risk evaluation, which is vital for companies in planning and decision-making.  Get prepared Risk management is very practical and interesting. It will present an excellent opportunity for the examiner to test your general business awareness, and links in very well with the Strategic Management element of FAE Core. If you do not currently read any of the business newspapers, you should start now; it will help a tremendous amount.  From an exam perspective, the types of scenarios you could be presented with include: Valuation of corporate governance practices for compliance with the Code, e.g. reviewing the structure of a board of directors; Advising on how a company might implement a risk management strategy; Apply a five-step process for risk management. For example, you may be asked to identify the types of risks facing a company based on case facts and/or advise on appropriate actions to mitigate each risk. Professional scepticism and ethics The other core element of this subject is professional scepticism and ethics. As a future Chartered Accountant, it is fundamental that you understand the Institute’s Code of Ethics. In your career, you will inevitably be faced with ethical challenges, so it is important that you know how to respond. The Code of Ethics provides a framework for responding to these challenges, so this will be your reference when dealing with any ethical scenario presented in the exam.

Mar 02, 2020
Exams

Learning about artificial intelligence and robotic process automation is not only worthwhile, but they are likely to affect the trajectory of your career in the future, explains John Munnelly. Topic area 3.2, Artificial Intelligence (AI), introduces the concepts of AI to candidates and focuses on machine learning, natural language processing and robotic process automation (RPA). RPA is rapidly gaining global traction as a productivity tool across all industries and, inevitably, will feature in the careers of current and future FAE candidates.  At its heart, AI attempts to solve age-old problems of efficiency, value creation and cost-saving. The whole notion of performing repetitive tasks at 100% accuracy and freeing up human operator time to be repositioned higher in the value creation chain is an obvious benefit of AI, but the concepts of AI can be linked to wider parts of the syllabus – namely strategy and decision-making. Making an impact Companies considering the adoption of artificial intelligence tools are embarking on strategic change, whether they realise it or not. Decisions made by senior management demands strategic or financial analysis. This is where FAE candidates qualifying as Chartered Accountants can make a big impact. By studying AI, candidates should be able to see opportunities to link lessons from other parts of the Core syllabus, such as business leadership and risk management.  AI and strategy The insurance company teaching case in the course materials involves deep learning software prediction. The solution requires the use of project appraisal techniques and strategic choice.  Candidates should ensure they are comfortable with techniques such as net present value, relevant costs, etc. The potential for change with this technology will offer the examiner the chance to assess trade-offs between status quo and potential AI solutions in indicators.  Candidates should also bear in mind there may be scenarios where AI is not yet a ready-made solution. (Perhaps the SIPOC framework could help candidates assess the case for automation in such circumstances.) This part of the syllabus is broken down into an initial classroom session to work through the principles and a second self-guided day, using the RPA tools of UiPath. Candidates will be able to create their own first automated process. The process is intuitive and can be taken at a candidate's own pace. Go wild, candidates – experiment and enjoy! Aligned with your wider FAE knowledge, some of you will create automations that will fundamentally change business for the better.

Mar 02, 2020
Exams

Do not let a poor performance at FAE Elective interim assessment in April 2020 sink your efforts later this year, says John Munnelly.  At this stage, candidates should be focused on the upcoming FAE Elective interim assessments due to take place on Saturday 25 April 2020.  At this time of year, it can be difficult for candidates to focus. While the main exam is still six months away, the FAE Elective interim assessment represents an opportunity to build a successful foundation that will give candidates a great chance at success later on in the year.  The FAE Elective interim assessment is a 90-minute assessment. It is worth 15% of a candidate’s final subject score. Candidates will be presented with a scenario that requires them to solve three issues. In 2019, the average mark earned by candidates across all electives was 8.47%; proof positive that a focus on studies now can help candidates later in the year.   Winning approach In order to guarantee the best chance of success, consider the following: The Elective interim assessment exam is structured to solve three issues. In a 90-minute exam, this naturally suggests you have 30 minutes to solve each issue. Candidates should get into the habit of practising exam questions, indicators and issues in 30-minute segments.   One of the most frequent admissions by candidates in their FAE examinations is that they do not practice indicators under exam conditions.  This isn’t surprising to hear: most examiner and marking teams report that candidates run out of time and that the last indicators are usually rushed or not attempted. Handwriting that begins neatly turns into illegible scrawls – all tell-tale signs of poor time technique preparation. The approach to practising indicators under exam conditions is straight-forward. It does, however, take proper dedication to achieve.  Although the Examinations Executive reserves the right to alter the number of indicators per paper in line with the guidance laid out in the competency statements, generally the current trend is to examine three issues in the interim assessment and eight indicators in the main exams to allow 30 minutes per issue and indicator.  Candidates should take the first five minutes of an indicator to re-read it and ensure each of the requirements are clearly flagged. It is a predominant feature of each examiner across the whole FAE to break each issue/indicator requirements into a number of sub-asks. Identify each section of the indicator that needs answering by marking each part of the ask in a different colour highlighter. Use the next five minutes to plan out what you are going to write for the next 25 minutes. Once those five minutes are up, get going. Write and don’t stop until you reach the time limit. DO NOT go over your time. If you go over your time in the main exam by as little as a minute in each of your first seven indicators, this means you have to get your last indicator done in just 23 minutes as opposed to 30. Every minute counts. Like most things in life, there is no substitute for hard work and preparation. We have yet to see a candidate rock up with little or no preparation and pass. The exam is designed to reward hard work and effort. Best of luck in your interims.

Mar 02, 2020
Exams

The interim assessment – your opportunity to boost your chance of exam success – is coming up. But are you prepared, asks Garret Mulvin.   The CAP 2 Auditing and Assurance interim assessment is worth 15% of the overall result for that subject.  While the assessment does not have a pass/fail result, aspiring candidates should be looking to secure a healthy score from the April interim assessment to carry into the final exam in June. A poor relation Disappointingly, in the April 2019 interim assessment, an average of 53 marks out of 100 was achieved; marginally lower than the April 2018 average score of 58. Unfortunately, the Auditing and Assurance interim assessment result typically compares very poorly when put up against its CAP 2 counterparts, Financial Reporting (FR) and Strategic Finance and Management Accounting (SFMA).  This is most likely due to the fact that, unlike FR and SFMA, the April 2020 interim assessment will be the first time that CAP 2 candidates will be tested on their understanding of Auditing and Assurance. As such, they should be prepared to meet the different challenge that this assessment presents. Accounting standards The four shortlisted topics for the April assessment will be published on 4 March 2020.  Although this is an audit paper, it is not possible to audit a financial statement balance if you do not first understand the appropriate accounting treatment for the balance in question. Candidates should have a firm knowledge of the applicable international financial reporting standards governing a particular line item in the financial statements. Past examiner reports have highlighted this as one of the reasons for poor performance in this interim assessment. Additionally, candidates are typically asked to set out any journal adjustments that may be necessary. An understanding of the applicable accounting standard is paramount. A well-prepared candidate should be comfortable with the double-entry journals for the four topics provided in the shortlist published in advance of the exam. Risk Risk is a cornerstone of the audit process and a regular feature in the CAP 2 Auditing and Assurance interim assessment. Candidates are frequently asked to identify why audit risk may exist in respect of a particular financial statement line item. In such questions, it is vital that candidates strive to identify risks that are specific to the client and the background information with which they are presented. Simply transcribing generic risks from notes is not sufficient; at least half of the available marks will be missed in this case and you will most likely fail that requirement. Professional scepticism Auditors are required to have a critical mind and be prepared to evaluate the audit evidence which is presented to them. As such, in any CAP 2 Auditing and Assurance examination, candidates should be prepared to demonstrate sufficient levels of professional scepticism when assessing the documentation provided. Unfortunately, this has not proved to be the case. A review of previous Examiner Reports reveals some missed opportunities.  For example, in the words of the examiner: “It was disappointing that very few candidates identified the fact that only €/£1.75m of income was received post-year end when €/£2.5m should have been expected,” and, “Not enough candidates thought to question why a profitable company would be receiving a tax rebate.” Similarly, candidates are often required to review the audit work performed by a junior member of the audit team. Candidates should be prepared to scrutinise the quality of the audit evidence used by the audit junior and to suggest more appropriate audit evidence to be obtained. Chartered Accountants Ireland has highlighted the importance of professional scepticism as an essential part of the auditor’s mindset. The Auditing and Assurance examiner has continuously flagged professional scepticism as an area of underperformance in the interim assessments of past years.  CAP 2 candidates should be prepared to critically evaluate the audit evidence provided to them and identify issues which inevitably will be present. Finally, as with any examination, ensure to practice past papers and to read the examiner reports. Good luck!

Mar 02, 2020
Exams

The CAP 1 Management Accounting interim assessment can now be taken online in your home, but that doesn’t mean your preparation has changed. Philip Nicolls explains how you should approach your upcoming e-assessment. April 2020 brings the transition of the CAP 1 Management Accounting interim assessment to our e-assessment platform. Hopefully, you will find that moving the assessment out of the exam hall is more convenient and less stressful. As you prepare for the interim assessment, it is important to remember that good exam technique is largely unchanged by the move to e-assessment and just as important as before. Preparation As ever, practising exam standard questions in exam conditions is the best possible preparation for the assessment. The examinations department has provided two mock interim assessments. These will allow you to familiarise yourself with the e-assessment platform, as well as test your knowledge and practice your exam technique.  Unsurprisingly, the Double-entry Bookkeeping (DEBK) and Law assessments earlier in the year showed a high correlation between performance on the mock assessments and performance on the actual assessment. Many of the poorest performances were from candidates who didn’t attempt the mock assessments at all. It’s important to remember that the scope of the assessment hasn’t changed for 2020 and so, the past papers from 2018 and 2019 are also a great resource. Be sure to read the examiner’s comments, too. On a practical note, you should use the ‘test my equipment’ functionality on the ProctorU homepage well in advance of the assessment to validate your hardware, software and internet connection. Assessment tips Here are some top tips to remember on the day of your assessment: Make sure that you are set up in good time. Twenty minutes before the assessment is not the time to realise that you have lost your power cable or that someone has changed the WiFi password. Read the requirement carefully. For the multiple-choice questions in Section A, make sure that you carefully read all of the available answers – don’t just choose the first one that sounds right. Include your work. Just like on a paper assessment, most of the available marks in a quantitative requirement are for following the correct method, not for having perfect arithmetic. Some of the e-assessment will include a box for you to show your work. Make sure that you input that work in the same amount of detail you would for a paper exam. This allows the examiner to award you marks for method, even if your final answer is not fully correct. Provide enough detail. For the qualitative requirements, avoid using overly brief bullet points. Be sure to include as much detail as you would on a paper assessment. Manage your time and prioritise your answers. As ever, the amount of time that you spend on a requirement should be proportional to the number of marks available. The Management Accounting interim assessment has 100 available marks and lasts for 75 minutes. For example, you should spend no more than six minutes on an eight-mark question. If you reach a question that you know you are going to struggle with, it might be better to skip it and come back at the end. To see which questions you have not completed in your e-assessment, click the overview button on the screen. This allows you to quickly navigate back to any unanswered questions. You can also ‘flag’ any questions that you want to highlight for further attention later. Attempt every requirement. There is no negative marking so give everything an answer, particularly for the multiple-choice questions. Even if you are not completely sure of the correct answer, rule out the answers that you know are wrong and then go with an educated guess! It’s better than not filling it in at all. Practising good exam technique from the outset will pay huge dividends, not just in your interim assessment, but also in the main exams, CAP 2 and all the way to FAE. Philip Nicolls is the Examinations Executive at Chartered Accountants Ireland.

Mar 02, 2020
Exams

Slowly building your knowledge in this new topic area will lead to irrefutable, immutable results in your career, says John Munnelly. Now that the not too-small matter of A.A.F.R.P. (Advanced Application of Financial Reporting Principles) is out of the way, it is time for candidates to turn their attention to the pillars of core. Topic area 3 is an exciting new pillar of core, dedicated to new technologies that intersect with accountancy. A handy mnemonic used to describe topic area 3 was coined by Chartered Accountants Ireland Chief Executive Barry Dempsey: A – Artificial intelligence (Topic 3.2) B – Blockchain (Topic 3.3) C – Cryptocurrency (Topic 3.3) D – Data (incorporating preparation and visualisation) (Topic 3.1) Topics 3.1 Data preparation and visualisation and 3.2 Artificial intelligence are delivered in an exciting interactive mix of classroom learning and guided application of tools through the granting of student licences. Candidates should make every effort to attend whatever sessions are provided.   Topic area 3.3 Blockchain and Cryptocurrency is being delivered as a self-guided module. This does not mean that it is no less relevant than the other two topic areas. Blockchain and cryptocurrency represent a potentially new way of thinking about financial systems and where financial systems will migrate over to candidates’ careers. While cryptocurrency only represents approximately 0.1% of the total global money markets, it, like blockchain, represents some interesting and dramatic ideas that punch way above their market capitalisations.  Teaching approach The syllabus materials have been written to address the big themes and deliberately separates blockchain from cryptocurrency. This is not always the case if you conducted an internet search on this topic, however it is the correct approach to teach the principles.  Candidates should approach this topic area with an open mind. The ideals behind blockchain and cryptocurrency can firmly be connected to accountancy, and the accountant will have an important future function in understanding and protecting companies and clients’ interface with such applications and transactions.   Tackling cryptocurrencies and blockchain Candidates should do an initial read through of the syllabus materials provided. The narrative is written in a story format so as not to get too technical or ‘scare’ candidates off. Once candidates have done read the syllabus, they should watch the accompanying videos. There is one dedicated to each highlighted part of each chapter of the text. Some videos are longer than others. Hopefully on the second watch (and we do recommend rewatching them), some of the initial ideas will start to make more sense.  After viewing the videos, I would advise candidates to make their own notes. The concept of centralised and decentralised trust is a big theme running through the blockchain material, and candidates should appreciate the nuances. Blockchain represents a different opportunity, and industries from banking to logistics are cottoning on to that fact. There is also the classic database versus blockchain comparison which should be intuitive for candidates and, I imagine, highly favoured by examiners as it lends itself to classic compare and contrast differences in an indicator.  Candidates should also be comfortable with blockchain’s current limitations when in assessing a potential scenario to move to a blockchain environment.  Lastly, there are practical considerations that are often overlooked in real world use cases on blockchain. The useful guide of the different skills required to undertake a blockchain project should not be underestimated.  Learning cryptocurrency The chapter on cryptocurrency focuses predominantly on Bitcoin. Ethereum gets a mention because of the work done on that platform in regards to smart contracts, however, after sitting atop of the first blockchain, Bitcoin has proven to be reliable and tamper resistant over its decade-long life.  Chapter two is designed to give candidates an understanding of the principles behind Bitcoin, how it derives its value, how it operates and how it is unique. The Crypto Assessment Framework has been designed primarily with accountants in mind for the situations whereby they come into contact with cryptocurrency transactions. This year’s handbook, Problem Solving and the FAE, contains a sample cryptocurrency indicator and can be solved by using the principles of the Crypto Assessment Framework.  There are a lot of new ideas in topic 3.3. A patient approach will help you build a thorough understanding and an ability to apply those lessons to exam scenarios.

Jan 13, 2020