Monthly Archives: August 2012

Burnout

Burnout is very common at about this time of your UFE study period. You’ve been maybe going for eight or more hours a day for three weeks straight, maybe even more. I know I was feeling it. You’ve got to watch for it and catch it.

If you’re feeling this way or are seeing your marks dip from previous highs, you’ve got the UFE Blog permission slip to take Monday off and enjoy the long weekend. Give it a shot if you haven’t used one of your flex days yet. Even a National Gold Medallist was feeling it around this time, so do think about it.

The two big signs of burnout: You just can’t stand to write another exam, more so than usual and you aren’t doing a good marking or debrief and you’re marks have a sudden drop.

If you don’t have some kind of support system to catch these things be aware of it yourself. Take some time off, do mindless things and get lots of sleep.

I hope you’ll take this advice. Have a great long weekend and I’ll be back Monday.

Know your role

The role you play on a UFE case dictates the kind of response you should give.

In general, in 2010 and 2011 The Board of Evaluators had mostly positive things to say about candidates ability to handle the diverse roles presented to them in the UFE. I’m including the comments from the past three years below in case you want to review, but they have ‘spoilers’ in them as to what was required in the simulation response so for those that want to keep it a mystery you need not look below the line.

Some tips for remembering and adjusting to your role:

  • Always write your role down somewhere on your outline – this way it’s easy to check back and chances are you will see it many times and it will remind you.
  • Remember who your client is. When providing assurance you are providing this for users of the financial statements and therefore it is important to consider what would be material and useful to them. When you are providing advise to a client (not assurance role) you are serving the client and should be providing a response which would improve their position or interests. One of the more challenging and interesting roles was on the 2006 UFE where you played the role of a CRA Tax Auditor. Many students provided advice to the client instead of playing a compliance checking role which is what CRA is concerned with. Auditor, not tax planner!
  • Of course you should always provide only ethical information/suggestions. Rumour has it that in one of the past UFEs some candidates advised a client to commit crimes. I can only assume that candidates that offered this advice weren’t taking the exam seriously but of course it’s important to only provide advise which is ethical.
Chances are that you’ll see at least one very unique role on the UFE so always remember to step back and think about what your client (or boss if it may be the case) would want from you.
What roles do you find challenging?

 Spoilers below!


2009 UFE Report:

The roles assigned and scenarios presented to the candidates on the 2009 UFE continued to be varied, with only one simulation presenting a traditional auditor role (Paper II, Simulation 3). The other audit role (Paper I) involved planning a special engagement to provide assurance regarding a sales brochure, which is a less traditional role. The Board was generally pleased with how the candidates adapted to the roles, which included a controller of a school board, an external tax advisor, a manager of financial reporting for a small public company, an internal accountant asked to comment on a strategic plan, and a CA asked to advise a union. For the most part, candidates presented information that was suited to these roles.

However, candidates seemed to struggle the most with their role on the Assurance indicators. On Paper III, Simulation 1, many candidates forgot that they were asked to review a draft response to the management letter that had already been prepared, rather than respond to the management letter themselves. These candidates often wasted time repeating the case facts rather than going to the heart of the matter and critically analyzing the comments made by Sandra to determine whether the auditors would be satisfied. On both Paper II, Simulation 1 and Paper III, Simulation 3, many candidates lost sight of the nature of the engagement involved and provided invalid or irrelevant procedures.

2010 UFE Report:

The roles assigned and scenarios presented to the candidates on the 2010 UFE continued to be varied, with only two simulations presenting a traditional assurance role (Paper II, Simulation 1, and Paper III, Simulation 3). Candidates generally adapted to the roles, which included an advisor to an executive committee (Paper I), a financial advisor on a proposed merger (Paper II, Simulation 2), an advisor for a new business opportunity (Paper II, Simulation 3), a mergers and acquisitions consultant advising on a potential purchase (Paper III, Simulation 1), and an advisor to a client on various issues associated with the death of a spouse (Paper III, Simulation 2). For the most part, candidates presented information that was suited to these roles. The one exception was on Paper III, Simulation 1, where candidates were asked to develop due diligence procedures for a potential purchase. Some candidates struggled to fulfill this role and, instead, fell back into the traditional auditor role.

2011 UFE Report:

The roles assigned and scenarios presented to the candidates on the 2011 UFE continued to be varied, with only two simulations presenting a traditional assurance role (Paper III, Simulation 1, and Paper III, Simulation 2). Most candidates adapted to the roles, which included an advisor to a retired business owner regarding the calculation of a bonus the owner was to receive after retiring (Paper III, Simulation 3), an advisor on a new business opportunity and expansion (Paper II, Simulation 1, and Paper II, Simulation 3), an advisor to a small-business client regarding various issues (Paper II, Simulation 2), and a consultant to a government-controlled organization (Paper I). For the most part, candidates presented information that was suited to these roles.

Conclude and Recommend Consistently

One of the things that challenges a lot of candidates initially can be concluding and recommending consistently. And I completely understand why and so this is a bit difficult advice to give.

You’ve done a quant or some other part of the case, and you know it’s wrong. You know the simulation wants you to head down another path but for whatever reason you cannot get your quant to agree. You get some ridiculous number. For example, the simulation asks you to create a retirement plan and your quant says the client is so rich they should have retired 10 years ago. I’ve been here and it sucks.

This is a tough situation to be in but in general, the advice out there, is that you should be consistent overall with your response. Don’t start inserting what-if paragraphs that are inconsistent with your response.

  • Your quant will likely be marked based on what you are including/excluding in it in most cases. So even if you reach the wrong conclusion, you may still include 3 required items in your calculations and perhaps you just missed another one which would have made it correct. You can still get an RC or maybe even a C with an incorrect conclusion.
  • Inserting what-ifs is likely to just waste your time and add no value. I have never heard advice where what-if scenarios add value to a simulation response. This is the tough part to accept.
  • The simulations are setup in ways that will still allow you to score pretty well despite a bad quant. You’ll be put in positions where you can offer advice despite your quant conclusion, these are still worth the same despite your bad quant. Try to remember that.
For a little more on the topic you can check out the post on concluding over Krupo’s blog.

Bottom Line: Conclude and recommend consistently based on your findings. Don’t go down the what-if path as it usually just leads to wasted time. 

What do you think?

Marking a UFE Case – Case Walkthrough Today

There’s been some people searching around this blog for tips on how to mark a case and I’ve been asked to discuss marking a little. With less than two weeks until the UFE you should start, at this point, trying to mark simulations pretty realistically. Not too easy and not too hard. Usually candidates tend to mark too hard to be on the safe side but there’s of course always the danger that we’re being too easy. As I’ve mentioned before, there’s no definitive information from the CICA of exactly what consititutes an RC, C or a HC but they give you some pretty good hints. Today we’ll go through marking a real candidates response here using the the UFE Report. As you may already know, there are marking guides out there that make this a little easier but I think it’s a good idea to do it the old fashioned way once in a while. I do believe it helps a little more with understanding what’s required.

The case we’ll look at is 2009, Paper II, Simulation I – Memorial City School Board. I’m including the valid parts of an actual real response. Please download the accompanying two files and follow along there to see how this specific case was marked.

Word Document Download: 2009-P2-S1 + Excel Quant Download: 2009-P2-S1

Here is how I would mark this simulation.


Primary Indicator 1 (Finance): The candidate compares the PPP option with the alternative of the CSB constructing and operating the school itself.

From the solution, you can see that this indicator has both a quantitative and a qualitative element.

Quantitative Element:

You had to compare Option 1 : The school board builds the school and had to compare that to Option 2: PPP with Fox.

From the solution you can see that there are 6 items in the calculation of Option 1 and 5 items in the calculation of Option 2. It’s critical to read the Board of Evaluators comments which present good information about how this was marked. From the comment right below the calculation you can gather pretty strong evidence of a few things they were looking for.

  • A Net Present Value calculation was neccessary
  • Large items mattered, particularily rental revenue

You can therefore assume that in order to get to a C you had to

  • compare both options,
  • include the large items
  • include rental revenue
  • do a Net Present Value calculation

At the end of the Primary Indicator you can see that in a Competent response, “The candidate prepares a reasonable quantitative assessment of the options” so the only thing we need to still determine is what constitutes reasonable in this quant. We must use some judgment and considering this case, I would say that reasonable means the 3 clearly large items from each Option should be compared including the rental revenue.

What did our example candidate achieve?

  • Our candidate included three items from the PPP agreement and five items from the CSB options. They attempted a NPV but sometimes the numbers were off. They got all the large number items including the rental revenue. The quant was well documented what they were trying to achieve and what they were including. Based on this it appears that they knew what they were doing and this is a reasonable quantitative analysis. The numbers have to be reasonable, they need not be correct, except often with tax you need correct numbers.

Qualititative Element:

Next, there is a qualitative element to this indicator which is a discussion of the three options. The solution has the following three things discussed:

  1. Board of Trustees should consider it may be exposed to cost over runs if it chooses to build the school
  2. Funds would have to be disbursed up front if they choose to build the school vs. not paid up front with Fox
  3. CSB would be exposed to risk of inflation and would have to assume the extra cost over the years
  4. Even a small difference in the assumptions could yield significant differences in the results, assumptions should be confirmed
  5. Advantage of going with Fox – Rental revenue may be higher than if CSB ran the school
  6. Reliability of the PPP numbers vs. the reliability of the CSB option numbers

The board mentioned that candidates were rather weak on the qualitative aspect of this indicator but still 59.1% of candidates achieved competent. This leads me to judge that you probably only needed to discuss two of the items above in order to reach competent.

What did our example candidate achieve?

  • This candidate discussed item 1, discussed item 2 and mentioned something not on the above list, the responsibility of Fox for collections which is outside of the core competency of CSB. This last point I thought was good even though it’s not on the solution so I considered it valid. Always use your judgment. Finally there was a strong overall conclusion of which choice to go with and why. This is a competent response based on my criteria.

Overall Indicator Score: Competent – The candidate did a reasonable quant and discussed, using case facts, at least two options. 

For RC, the candidate had to attempt (which I read as include at least two valid items in each option) a quant AND discuss at least two qualitative items. OR, the candidate had to prepare a reasonable quant (same criteria as above) but without a qualitative analysis.

 

Primary Indicator #2 (GSRM): The candidate discusses how some of the risks related to the PPP can be managed.

The solution mentions the follows risks as things that could be discussed:

  1. Agreement – Terms and condition,
  2. Agreement – dispute resolution,
  3. Agreement – Discussing Fox the company.
  4. Building – Design,
  5. Building – Construction,
  6. Building – Value
  7. Use by Fox in off hours
  8. Quality of Services – Maintenance
  9. Quality of Services – Food and beverages

So as you can see, there was a wide range of issues and for RC the board expected the candidate to discuss some risks while for C the board expected candidates to discuss some risks and ways that they could be managed.

So what we must decide is how many does some constitute. When in doubt, I always assumed it was half of the ones mentioned in the solution. So out of nine issues here, I would say that four needed to be discussed to constitute some. In reality, it might have been three or it might have been five but we can’t know and half is always my benchmark for a C. For a C, all four needed to have mitigation/ways to manage these risks.

How did our example candidate fare?

  • This candidate discussed item 7 and provided a suggested mitigation (outline restrictions)
  • The candidate discussed item 8 and 9, the quality of food/service but did not provide a good means to mitigate this
  • The candidate discussed allowing Cola in the schools and suggested they write into the terms restrictions
  • The candidate discussed item 3 and suggested that CSB have a clear plan in place to deal with the possibility
  • The candidate discussed item 5 and suggested that materials allowed in construction be specified
And so forth, a few other items were mentioned but this candidate had discussed, using case facts, more than four issues and provided means by which they could be mitigated or managed. This was a competent response.

Overall Indicator Score: Competent – The candidate discussed at least four issues and provided a means to manage them.

 

Primary Indicator #3 (Assurance): The candidate explains how the CSB will ensure Fox delivers on all the promises it has made with regard to the PPP.

This indicator is a procedures indicator and the solution discusses the following items:

  1. Rental revenue
  2. Volume discount on food contracts with QNI
  3. Vending machine contract with Right Cola
  4. Repairs and maintenance
  5. Minimum government standards
  6. Fox Property Management Corp.

For an RC the candidate had to identify some of the procedures the CSB could perform to ensure obligations were met. For a C the candidate had to discuss some of the procedures.

So it would appear that the same amount had to be either id’d or discussed. As before, I always like to stick to half so in this case, three procedures had to be id’d for an RC and they had to be at a discuss level for a C. What does discuss mean? If you read the Board’s comments, they expected candidates to identify the key promises made and then provide procedures that would provide assurance over these areas. So the standard for this appeared to be the validity of the procedure to the case. When marking these procedures, you would have to use your judgment to decide whether it is a more general procedure (not using specific case facts) or whether it is a good procedure (something that could be done, is valid and uses case facts)

How did our example candidate fare?

  • They discussed rental revenue, which is item 1 above, and suggested a log of room use should be kept. The candidate went a little further with this one than they needed but reviewing a log book is a valid procedure. I also recommend that procedures always be stated in terms of the risk they are covering off. This gets ‘discuss’ level.
  • The candidate did discuss the price/quality of the food (covered under item 5 above) and suggested that surprise inspections be done and samples be sent to labs. I kept this at ID level only.
  • The candidate discussed repair and maintenance (item 5 above) and did suggest keeping a log. As the board mentioned, this was okay but would have been better to discuss more specific items.  I kept this at ID level only
  • The candidate began a discussion about vending machines but ran out of time. However, the one sentence was good enough for ID level.

Overall Indicator Score: Reaching Competent – The candidate discussed one procedure and Id’d 2-3 more. 

 

Primary Indicator #4 (PQ): The candidate discusses other options or issues that should be considered before a final decision can be made

This was a tough PQ and an RC required that the candidate ID one more option or issues that should be considered before a final decision. A C required that a candidate discusses another option.

The achieve ID the candidate had to at least consider that more options should be considered but failed to recommend anything to CSB. To discuss, a candidate had to realize that other options should be considered and provide a recommendation.

This candidate actually did perform well on this PQ. In their overall conclusion they recommended that the agreement be reviewed and touched on some discussion of splitting up the responsibilities with the school between CSB and Fox.

Although I was tempted to give out a C for this indicator, I looked at the numbers and only 4.1% of candidates achieved a C so I felt like although this candidate touched on the item, it was probably not a strong enough discussion to obtain a C. Maybe in reality it was but I sided with caution this time.


I hope you found that helpful. Keep in mind that this is a stronger response and most candidates will have some combination of RCs and Cs and an NA or NC on the PQ. The key take away here is how you should go about marking a case using the UFE Report.

What now?

Debrief that sucker! Happy Studying!

Ranking Issues on the UFE

One of the issues that candidates often have trouble with on the UFE is ranking issues. Some candidates find they have a good intuition while others struggle trying to understand why one issue is ranked higher than another. Today I’m offering some suggestions of things to consider when you’re doing your ranking on your outline.

Specifically Required Info

It should be self evident by now that when someone who you are working for in the case asks for something specifically, this is a priority and must therefore be ranked high enough that you have time to tackle it. If somebody says they need to know how much tax they owe, you’ll need to calculate the taxes owing. This is more a required (links to a competency) than  issue ranking but I thought I’d mention it.

Survival of the Entity

Survival of the business or person is of course paramount and issues which could impact that survival should be ranked high. If a business does not have enough working capital to survive this year, a discussion surrounding this issue should be had with recommendations that could be taken to assure survival.

Future Viability

Similar to survival above, the future success and viability of the entity usually ranks high.

Impacts on cash and cash flow

Issues which impact cash are usually ranked high because they also related to the survival of the entity and future viability and may impact numerous aspects of the entities health and future success as well as what the owner of the business can pay themselves.

Major/Large Changes Year over Year

Occasionally you’ll see large swings in numbers from year to year or new users will exist for the financial information, issues that are important to these new users can often be ranked high so do consider things that are new or large (in quantity) in the current year.

Materiality

In simulations where a materiality is know, it’s important to keep an eye on which amounts are material and rank the material amounts higher than immaterial amounts. Even in simulations where a “materiality” isn’t set, look for $ amounts which are high relative to the others, those are generally more important.

Lots of Numbers

When a lot of numbers are provided for a particular issue, it often means they want you to discuss it.

Fraud

Anytime fraud is an issue it should be discussed.

Pervasive Issues

Issues which are big picture and impact more than one part of the simulation are usually ranked high, these may often lead to the PQs as well. For example, control issues which double charge customers could be a pervasive issues. Double charging customers impacts the accuracy of revenue (PMR), is a control issue because it’s not caught (Assurance), impacts customer satisfaction (business survival/risk/gsrm). Think about which issues impact multiple areas of the entity when thinking about control issues.

 

What other issues or tips do you see in identifying highly ranked issues? Tell us in the comments!

UFE Pass Rates

Something a lot of candidates are always searching for is the UFE Pass Rates. The UFE Pass rate used to be published in the annual UFE report but this practice was stopped in 2009 and the pass rates have not been released since.

Here is what the pass rates were like when they were known:

  • 2003: 65.5% (1,707 Successful out of 2,607 writers)
  • 2004: 74.5% (1,908 Successful out of 2,561 writers)
  • 2005: 74.0% (1,862 Successful out of 2,516 writers)
  • 2006: 79.3% (L1: 81.5%, L2: ~96.3%, L3: 97.8%) (2,136 Successful out of 2,694 writers)
  • 2007: 74.6% (L1: 71.6%, L2: ~97.1%, L3: 98.2%)* (2,701 Successful out of 3,117 writers)
  • 2008: 71.7% (Individual Level results don’t appear published) (2,640 Successful out of 3,682 writers)
  • 2009: 3,127 Successful
  • 2010: 3,046 Successful
  • 2011: 2,857 Successful

* There is clearly an error here but this is as it was published. I assume L1 should have been 74.6%

Note: I obtained the pass rates from the UFE Reports but the number of successful and total writers I gathered from numerous sites on the web, not all of them official. I had to calculate a few of these numbers based on the pass rate as well, so chances are it’s not 100% accurate but should be close. If anyone has a reliable source for any number up there that is wrong please let me know!

As you can see, the pass rate used to be in the 74% – 80% level so overall the odds are in your favour by a decent margin!

I'm still getting NCs, help!

One of the downsides of running this web site is that most of the visitors are anonymous but I can see what’s on their mind through the keywords that appear in their searches. Surprisingly, a lot of people are searching for the same things though which are bringing them here. So hopefully I can help some of them.

“scoring nc in ufe prep” 

First off, you’re not alone. This is one of the reasons I started this web site, try the Community Forum with your question, maybe you can get some support and help there. There isn’t a lot right now but a lot of you are passing through. All it takes is a few good questions. If you prefer, we’ve also got Facebook and Twitter which are gaining followers and you can leave your question on. Give it a shot, it’s can’t hurt.

If you’re getting more NCs than RCs the good news is that at least you are not missing the issues and that’s still a reasonable place to be. Make sure you are debriefing properly. This is hard work, don’t give up now or take the easy way. Debriefing is hard but you have to do it to improve. At this point in my study schedule I was in between study groups and getting very worried I was going to fall behind but I still go through it.

It’s also possible you’re feeling some burnout or stress that’s causing a downside in your performance. Consider taking a day off on Friday. Give yourself a long weekend UFE free and start again Monday.

Last thought on this, even though by UFE day you should be getting more RCs and Cs than NCs, it’s still not uncommon to see NCs. Each UFE report has a breakdown of how candidates scored on each indicator and there’s usually a handful of indicators where more than 20% of candidates score NC or NA.

2011 UFE Report

PQ: NA: 12.9% / NC: 30.1%
GSRM: NA: 0.2% / NC: 12.0%
Finance: NA: 0.6% / NC: 19.8%
Tax: NA: 0.7% / NC: 28.5%
Assurance: NA: 0.6% / NC: 6.5%
PMR: NA: 0.3% / NC: 11.1%

And that’s on the actual UFE. Again, you want to aim for RC and C but don’t freak out if you are still getting the odd NC or NA closer to the UFE. Even Vicky Au, 2010 UFE National Gold Medallist saw some NCs in the week prior to the UFE.

There are still two full weeks to get those NCs to RCs and C so hang in there. All the best!

 

I’m still getting NCs, help!

One of the downsides of running this web site is that most of the visitors are anonymous but I can see what’s on their mind through the keywords that appear in their searches. Surprisingly, a lot of people are searching for the same things though which are bringing them here. So hopefully I can help some of them.

“scoring nc in ufe prep” 

First off, you’re not alone. This is one of the reasons I started this web site, try the Community Forum with your question, maybe you can get some support and help there. There isn’t a lot right now but a lot of you are passing through. All it takes is a few good questions. If you prefer, we’ve also got Facebook and Twitter which are gaining followers and you can leave your question on. Give it a shot, it’s can’t hurt.

If you’re getting more NCs than RCs the good news is that at least you are not missing the issues and that’s still a reasonable place to be. Make sure you are debriefing properly. This is hard work, don’t give up now or take the easy way. Debriefing is hard but you have to do it to improve. At this point in my study schedule I was in between study groups and getting very worried I was going to fall behind but I still go through it.

It’s also possible you’re feeling some burnout or stress that’s causing a downside in your performance. Consider taking a day off on Friday. Give yourself a long weekend UFE free and start again Monday.

Last thought on this, even though by UFE day you should be getting more RCs and Cs than NCs, it’s still not uncommon to see NCs. Each UFE report has a breakdown of how candidates scored on each indicator and there’s usually a handful of indicators where more than 20% of candidates score NC or NA.

2011 UFE Report

PQ: NA: 12.9% / NC: 30.1%
GSRM: NA: 0.2% / NC: 12.0%
Finance: NA: 0.6% / NC: 19.8%
Tax: NA: 0.7% / NC: 28.5%
Assurance: NA: 0.6% / NC: 6.5%
PMR: NA: 0.3% / NC: 11.1%

And that’s on the actual UFE. Again, you want to aim for RC and C but don’t freak out if you are still getting the odd NC or NA closer to the UFE. Even Vicky Au, 2010 UFE National Gold Medallist saw some NCs in the week prior to the UFE.

There are still two full weeks to get those NCs to RCs and C so hang in there. All the best!

 

Discussing Control Weakness on the UFE

You’ll more than likely encounter control weaknesses at some point during the UFE and you’ll have to probably discuss at least 4-5 of them to get the C in this assurance indicator. Here’s the WIR (weakness, implication and recommendation) strategy most students will probably use to tackle control weaknesses. As always, I caution that this is just a strategy and not always applicable so use your judgment in determining when this is appropriate and inappropriate to apply.

Weakness

Here you are answering, using case facts, what the specific control weakness is. You can include this as part of a longer paragraph covering off everything or I prefer to keep everything separate and just use “Weakness: … ” so it’s even more clear and keeps you on track.

Examples of a weaknesses:

  • Presently the finance department is overworked and there are insufficient segregation of duties since the same individuals are creating POs, entering information into the accounting system and preparing the cheque runs.
  • The transposition error for the receivable contract of $1.5M was not caught despite managements insistence that this would normally be caught by a manager’s review.

Implication

The implication answers the “so what?” This is equally as important as identifying the weakness, you must state what will continue to go wrong if this weakness is not resolved. Think about the Financial Statements or the business itself. Will amounts be misstated? Will the business lose cash? Will fraud occur? And so forth.

Examples of an implication:

  • The lack of segregation of duties is inappropriate since it does not separate accounting entry from payment and can result in finance staff making inappropriate accounting entries (for example payments to themselves) and then issuing the cheques to themselves with no oversight. Fraud could occur without being detected in time to prevent it.
  • It is possible that there are other (possibily material) errors due to similar oversights by management review. Managers are presently being overworked and unable to keep up with their duties resulting in a lack of functioning controls such as this review. This can result in misstatements due to errors not being caught by management review.

Recommendation

The recommendation is your suggested solution to this problem. This must be a control that is specific and practical given the circumstances and of course must be related to the simulation risk and implication discussed.

Examples of a recommendation:

  • Hiring a new controlled ASAP should be given priority in order to set up proper segregation of duties and have proper oversight. Presently, management review is too late and merely a detective control and not preventative.
  • For the time being, managers should be spoken to regarding the importance of reviewing these forms and held accountable for their oversights. Longer-term, CompanyX should assess whether they should hire additional staff in order to allow the manager to focus on reviewing such forms appropriately since the cost of errors may outweigh the savings in management reductions.

 

Now altogether, what an actual response might look like:

Segregation of Duties

Weakness: Presently the finance department is overworked and there are insufficient segregation of duties since the same individuals are creating POs, entering information into the accounting system and preparing the cheque runs.
Implication:  The lack of segregation of duties is inappropriate since it does not separate accounting entry from payment and can result in finance staff making inappropriate accounting entries (for example payments to themselves) and then issuing the cheques to themselves with no oversight. Fraud could occur without being detected in time to prevent it.
Recommendation:  Hiring a new controlled ASAP should be given priority in order to set up proper segregation of duties and have proper oversight. Presently, management review is too late and merely a detective control and not preventative.

Oversight Problems

Weakness: The transposition error for the receivable contract of $1.5M was not caught despite managements insistence that this would normally be caught by a manager’s review.
Implication: It is possible that there are other (possibily material) errors due to similar oversights by management review. Managers are presently being overworked and unable to keep up with their duties resulting in a lack of functioning controls such as this review. This can result in misstatements due to errors not being caught by management review.
Recommendation: For the time being, managers should be spoken to regarding the importance of reviewing these forms and held accountable for their oversights. Longer-term, CompanyX should assess whether they should hire additional staff in order to allow the manager to focus on reviewing such forms appropriately since the cost of errors may outweigh the savings in management reductions.

As you can see, each is 4-5 sentences in total and covers off everything neatly. I’m sure the wordsmiths out there can even get them shorter and more direct.

Do you have any trouble discussing Control Weaknesses? What’s the worst part about these?

 

Achieving Depth in PMR – Accounting Discussion

Acheiving depth in PMR / Accounting on the UFE is an important skill to continually try to develop since it often means taking your RCs to Cs which is necessary to successfully pass the UFE. While the issues on the UFE will vary and a template approach is risky and cautioned against by The Board of Evaluators, today I’m offering a framework which is used for discussing PMR issues which could give you some thoughts on tackling accounting issues and achieving depth.

  1. Identify The Issue – First, it’s obviously important to identify the accounting issue and rank it high enough to discuss. This is usually because the simulation asks advice about this particular issue, they are accounting incorrectly in the simulation or some other case fact points you to discussing this issue.
  2. Was the Accounting Treatment Correct? – Ask and answer whether the accounting is correct. Support WHY with case facts. Give reasons based on The Handbook or if guidance is not provided then based on the conceptual framework/definitions.
  3. Are There Alternative Accounting Treatments? – If yes, present these alternatives with reference to The Handbook. Consider and discuss the impact on the Financial Statements, both Statement of Operations and Statement of Financial Position, and where possible, quantify the impact. Consider whether there is further information required. If no alternative treatments are available, use relevant GAAP to discuss the issue, again, consider the impact on both sides of the Financial Statements and quantify where possible. Consider whether further info is required.
  4. Recommend and Conclude – It is important to consider Financial Statement user needs or reporting objectives and to conclude on which accounting treatment is superior for users, or alternatively, only one may be allowed for areas where specific guidance is available.
  5. Consider Impact on Other Areas – Consider how this accounting may impact other areas in the case, this is where you’ll think above how this may be a pervasive issue and could impact assurance, purchasing of a business, going concern, and so forth.

Not every accounting issue will open itself up to a discussion in all of these areas but I think that if you keep these things in mind you’ll be able to have a rich discussion and achieve depth in a lot of accounting discussion.

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