PQ magazine July 2016
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‘MISMATCH’ FOR YOUNG AUDITORS PQ magazine
ACCA gets tough in the exam hall
EXCLUSIVE
The whole audit process is being compromised by the social ‘mismatch’ between young, inexperienced auditors and older, more experienced client management, says awardwinning research from US academics Bradley Bennett and Richard Hatfield. Their study found that this age mismatch often impacts on the staff auditors’ willingness to gather the additional audit evidence needed to properly complete the audit confirmation task. Young auditors, sometimes with limited experience, can find themselves in intimidating situations with more knowledgeable and experienced clients, who according to the research can often quickly become annoyed with what they perceive as silly questions. The worry is that when young auditors are paired with these older, more experienced company accountants just 35% of them chose to meet with the accountant face-to-face to ask further questions and gather more information. When the age gap between the two was a better match some 83% of auditors wanted to meet face-to-face to ask those extra questions. This reluctance to ask follow-up
Bennett: firms need to provide training so your auditors aren’t intimidated
questions results in less evidence being collected and lower-quality documentation and conclusions, claimed Bennett and Hatfield. And it didn’t end there, as work papers were often prepared in a vague way, making the loss of information hard to detect during the review process. The only saving grace in the process has been the rise in the use of email. Younger auditors are much more likely (69%) to request additional evidence this way. Bennett and Hatfield said that email curtailed the reduction in evidence collection caused by avoiding live face-to-face interaction, but did not
eliminate it altogether. They said: “Overall, while electronic communication helps it does not completely erase staff auditors’ reluctance to ask follow-up questions and, importantly, such communication loses the richer context of in-person interactions.” Bennett told PQ magazine that there may be some specific training that firms could provide to address the staff auditors’ decisions when they feel ‘outmatched’ by client management. He felt that managers and partners must be fully aware of the problem so they can address Continued on page 10
Tighter exam security was in evidence at many ACCA exam halls during the latest sitting. Some candidates felt that invigilators seemed much tougher on what PQs can and can’t bring into the exam hall. We’ve heard stories of labels being cut off water bottles and mint wrappers being confiscated. All phones, smart watches and other electrical devices (including fitbits!) now have to be kept in clear plastic bags under chairs. As one student said: “They cut the label off my beloved Evian midway through the P1 exam today! It took me a while to get over the trauma.” Students are also being told they are no longer allowed to bring coffee or cans of drink into the hall. Even bananas have been confiscated. Turning to the exams, the big surprise was a ‘decent’ P5 exam. Students genuinely wondered if the ‘real’ examiner was on holiday! F5 sitters were worried about ‘the hardest MCQs ever’ and P1 candidates wondered why they had done all that revising when all they needed was a bit of common sense.
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CONTENTS
News 08AAT support Association beefs up student learning support 10The workplace New survey asks: where’s the diversity? 12ATT concerns HMRC urged to delay quarterly digital reporting 13CIPFA/ICAS tie-up Initiative ‘adds value for CIPFA members’ Features, etc 06Mind your Ps&Qs A fiasco in high heels; PER help request; and a nervous ACCA exam sitter 14Your career Royal Opera House COO Sally O’Neill has some top advice for PQs 16Variances How to tackle questions on fixed overhead variances; plus a quick look at accounting for value
18CIMA E3 paper We explain how you can pass the IS in organisational strategy paper; plus updates to PER
20CIMA P1 paper Some test
July 2016 28Target costing All you need to
know about this key subject 30Careers #1 Salary is important when deciding on a new role but it’s not the be all and end all 31Careers #2 Life at Kaplan Financial; our book review; plus the best of social media 34Fun time PwC drones on; a golfing gaffe; mortar fire; The Accountant – the movie; and more great giveaways The columnists Robert Bruce IFRS has created a world of opportunity 8 Prem Sikka BHS: the silence of the auditors is deafening 10 Carl Lygo Education is the key to China’s economic growth 12 Subscribe to PQ magazine It’s FREE – see page 32 or go to www.pqmagazine.co.uk ABC July 2014 – June 2015
questions to help you through the tricky section C
32,233
22Let’s get technical Why it’s vital you identify the different types of ethical questions
24AAT conference All the best bits from the recent Training Providers’ Conference
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27CIPFA and ICAEW focus The
The world’s gone bananas This month saw bananas becoming the centre of attention in many ACCA exam halls. So are they banned or aren’t they? And who needs to bring in their lunch into the exam hall anyway? We were surprised to hear that candidates weren’t allowed to bring in their coffee or a can of drink, now that does seem a bit excessive. You need to watch out for next month’s issue of PQ, where we will look in more detail at all the accountancy bodies’ policies on smart watches. PQ magazine spent two days with the AAT at the Training Providers’ conference recently (see pages 24-25). Students should note that if they want to stay on the old syllabus (AQ2013) then they mustn’t let their student registration lapse. If it does they will be forced onto AQ2016. The new AAT syllabus will put more pressure on students’ ability to write. This will mean tutors need to find strategies to increase the confidence of those PQs who thought accountancy was all about the numbers, because it’s not! No one can fail to be impressed with the amount of great e-learning support the AAT has put together for the new syllabus (see page 8). Its Green Light tests alone have been downloaded 2.2 million times since their introduction. Several PQs also got in contact with us over the new CIMA practical experience requirements (PER). They were being offered two ways of recording their experience and wondered what was going on. We discovered CIMA was running a ‘soft’ launch of its new online process and the institute’s Tricia Buchanan explains exactly what is happening on page 19. Oh, and don’t forget our great giveaways this month. We have reserved four places on HTFT’s ever-popular online bookkeeping course. If you feel these key skills have passed you by then this is the perfect course for you. Go to page 30 for the details. You can also win a Kangaroo, courtesy of Reckon (page 34). What more do you want? Graham Hambly, PQ magazine editor – graham@pqaccountant.com
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PQ have your say
email graham@pqaccountant.com Putting the boot in Can anyone tell me what century we are living in? How can PwC (in the form of Portico) send someone home for wearing flat shoes? If someone told me I had to wear four-inch heels every day I would simply pick up my bag and go. The next thing to expect is a ban on women wearing trousers. They would have us all wearing a skirt with stockings and suspenders! For me the basic question here is this: do male staff also have to
wear high heels to look smart? Eddie Izzard might be happy with this new policy, but I don’t know of
any other man who could cope with wearing them for more than an hour. What disappointed me is PwC’s (apparent) lack of courage in putting out a statement straight away to say the policy was wrong, has been changed, and in future women would not be expected to ‘sex up’ the reception. Perhaps they did and I missed it. All the big firms now sell the efforts they are making on diversity during their university visits, but a story like this totally undermines all that good work. I know employers are entitled to impose dress codes, provided they
don’t infringe discrimination legislation, I am not naive. Firms can make male employees wear a shirt and tie and equally make women wear smart office attire, too. Nothing wrong with that. But if you want to attract and retain the best talent you need to look like a company that is looking forward, not back, and standards of dress move all the time. The whole episode reminds me of a bad Austin Powers movie. We are all living in the 1960s and it is far from groovy, baby! Name and address supplied The editor says: Well said! We’ve covered this story on page 12.
The writer of the star letter each month wins a fantastic PQ memory stick! Impossible situation
I have been following the sad story of PwC trainee Joshua Jones with much interest (PQ, June 2016). However, I was wondering what the firm could really have done if his gambling addiction was hidden from them. In your story you said a few close friends knew the truth, and while some of these might have worked for PwC they would have been put in an almost impossible position as his mental state worsened. Telling the firm would have probably made the situation even worse for poor Joshua. David Jones, by email
An unhappy CIPFA
In the study zone for CIPFA on your website there is the following statement: “Sit your exams anywhere with CIPFA – CIPFA’s transition to e-assessment will mean its students will be able to sit their exams anywhere they want to – at work or even at home in their PJs! PQs will also be able to use their own computers as CIPFA is using online invigilation, in the form of Proctor U.” This is not correct – you can’t sit the exams anywhere; in fact, CIPFA is very strict about where you can and cannot sit the exams. Could I also make you aware of the fact that you cannot use their centres for the exams – they have
write something about it for us. You can find it on page 19.
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I have to admit that I thought PQ magazine’s story last month that ACCA students were ‘terrified’ of the final optional papers was a bit OTT. Then I saw the pass rates! Is that what I have to look forward to? The P1, P2 and P3 exams are tough enough, but at least the pass rates are consistently on the right side of 50%. What is it about the optional papers that makes them so tough?
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abolished this. This has been done without any consultation with members (I am a member and no one consulted me). I’ve had a very bad experience of using the online tool, as such I am trying to opt out of this, which is proving near impossible. Name and address supplied
PER help please
Can PQ magazine please help? CIMA appears to have released
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new PER requirements ‘under the radar’. Now I am confused. Do I use the old method or do I opt for what looks like an easier way to do things? I don’t want to change what I do for something that CIMA is just thinking about. Rebecca Ash, by email The editor says: You are not alone. We have had a number of queries about this soft launch of new PER requirements, so we got CIMA to
Some fellow ACCA students really do believe the ACCA is trying to limit the number of people qualifying, but I just didn’t believe this. Then I saw your tweet from a P5 sitter who said they were laminating their notes so the tears would roll off! Joanna Hayward, by email
DUE TO LACK OF SPACE OUR SOCIAL MEDIA UPDATES HAVE BEEN MOVED TO PAGE 31
PQ Magazine Fourth floor, Central House, 142 Central Street, London EC1V 8AR | Phone: 020 7216 6444 | Email: graham@pqaccountant.com Website: www.pqmagazine.co.uk | Editor/publisher: Graham Hambly graham@pqaccountant.com | Advertising manager: Polly Thrasivoulou polly@pqaccountant.com Associate editor: Adam Riches | Art editor: Tim Parker | Subscriptions: dom@pqaccountant.com | Contributors: Robert Bruce, Prem Sikka, Carl Lygo, Tony Kelly, Phil Gammon, Jo Daley | Origination and print services by Classified Central Media If you have any problems with delivery, or if you want to change your delivery address, please email dom@pqaccountant.com
Published by PQ Publishing © PQ Publishing 2016
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ROBERT BRUCE IFRS has created a world of opportunity One of the great joys of the rapid take-up of international financial reporting standards across the world has been the opening up of career opportunities. Once cultural change had followed the spread and harmonization of IFRS around the world then people would follow. If financial reporting principles were roughly the same in most countries around the world the barriers to young accountants transferring their skills to almost any capital city around the globe would not be far behind. The great change has sprung from the work of the IFRS Foundation, the promulgator of IFRS. From the outset it has been made up of a staff from all over the world. This was deliberate – only by way of a cultural mix would the advantages of diversity among their number come through. And now research has been published that shows just how much the globalization and harmonization of accounting standards is affecting the way accountants are moving around the world. A study by academics from Berlin and Chicago has shown that it has increased mobility by between 17% to 24% compared with other professions. That, as they point out, implies that ‘regulatory harmonisation increased the total number of migrants by 11,000 to 13,000 accounting professionals’ – an astonishing number. They conclude that ‘accounting harmonisation can have a meaningful effect on crossborder migration’. The whole world has become the accountant’s oyster. n Robert Bruce is an award-winning writer on accountancy for The Times
AAT creating a host of e-learning support The AAT has beefed up its learning support offering for its PQs, ready for the introduction of AQ2016. The new dashboard on the ‘Green Light’ tests mean students will see the average score for their tests, creating a more competitive environment. Perhaps more importantly, the AAT has updated the scoring so you will get marks if you get the answer partially right. The Green Light tests have been a massive hit with PQs and some 2.2m have been sat since their introduction. With the move to synoptic tests the AAT is offering a new ‘lucky dip’ Green Light option. This test will take 10 questions from across the whole level. The AAT has also created modules on professional business communication to help with the increased emphasis on the written elements. These look at the right way to send a business email, report and other types of presentations. You are even given a chance to practise writing your own report. A student and tutor qualification introduction video
to the new qualification should help to bring AQ2016 to life. And you can add to this the 67 e-learning modules and 51 key calculation videos. The AAT is encouraging its students to visit the App Store of Google Play and download the Aurasma app. You need to swipe through the tutorial and create an account. Search aat.ls and press Follow.
Where is the Classic way to succeed top Brand? The ICAEW’s Sharron Gunn is one of the surprise entries for CityAM’s Power 100 Women this year, which celebrates the City’s most inspiring women. But, where is accountancy’s most powerful woman? CityAM seems to have overlooked ACCA CEO Helen Brand (pictured) in its list. Among the list of 10 top female accountants is Sacha Romanovitch, Grant Thornton’s boss and Jean Stephens the chief executive of RSM International. Also on the list are: Beth BrookeMarciniak (EY), Tracey Groves (PwC), Stephaine Hyde (PwC), Maria Pinelli (EY), Michelle Quest (KPMG), Sharon Thorne (Deloitte), and Ingrid Waterfield (KPMG).
One way of beating those stress blues while you are revising is to play a little bit of classical music. Scientists have proved that listening to it can make you more receptive to new information. So, maybe it is time to swap your Macklemore for Mozart and Beyonce for Bach. Classic FM has put together 10 pieces of music it thinks will help you in your studies. Top of the list is German Baroque composer Johann Pachelbel and his Canon in D. But don’t go for the piano version, you want the violins and basso continuo. Quite a few movie scores also made the list, including James Horner’s ‘A Beautiful Mind’ and
Philip Glass’s ‘The Hours’. Classic FM’s Top Music for Studying & Revising 1) Canon in D – Johann Pachelbel 2) Academic Festival Overture – Johannes Brahms 3) Well-Tempered Clavier – Bach 4) A Beautiful Mind – James Horner 5) Piano Concerto No 23 – Wolfgang Amadeus Mozart 6) Clair de Lune – Claude Debussy 7) Etudes – Frederivc Chopin 8) 30 Exercises for Harpsichord – Alessandro Scarlatti 9) The Hours – Philip Glass 10) I Giorni – Ludovico Einaudi 11) Gymnopedie No1 – Erick Satie 12) The Draughtsman’s Contract – Michael Nyman 13) Goldberg Variations – Johann Sebastian Bach
Samples are ‘real’ AAT sample assessments really are just like what students get in the assessment, a chief assessor confirmed at the recent Training Providers’ Conference. She told a packed conference that sample assessments come from the live bank and have been developed as a live assessment. For more news from the conference see page 24.
certificate in anti-bribery and corruption studies. It has been developed by the institute and the City of London Police’s Economic Crime Academy. It supports compliance with the UK Bribery Act and takes 15 days to complete (or 105 study hours). You will also qualify for CIPFA affiliate membership. To find out more visit www.cipfa.org/briberycertificate
In brief Bacteria good for the nerves Probiotic milk could help calm students’ exam nerves by producing good bacteria in the gut, say scientists. Drinking a strain of beneficial bugs in the weeks before a critical exam significantly curbs many of the biological signs of stress. So it’s Yakult’s all around! New student leaders The ICAEW Student Council (ISC) has new leaders. The council elected Robert Mann as its new chair (pictured with Hilary Lindsay, 8
the ICAEW Deputy-President) and Rebecca Sutton as vice chair. Mann works as a senior associated at PwC in Bristol. The council meets quarterly and feeds back their opinions of recent exams and are used as a sounding board by the ICAEW for any changes. In addition, the chair sits on the ICAEW governing council, ensuring students have a voice.
New qualification launched CIPFA has launched a new
PQ Magazine July 2016
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PQ news
PREM SIKKA BHS and the silence of the auditors
The demise of high street retailer BHS, owned by Sir Philip Green, is being investigated by two parliamentary committees. Some 11,000 jobs are under threat. BHS had made substantial losses for the years 2009 to 2014. Its balance sheet showed negative equity for the years 2012 to 2014. The 2014 accounts showed negative equity (its liabilities exceeded assets) of £256m. The company accounts soothed creditor, pension scheme member and regulator anxieties with the statement that “the directors believe that preparing the financial statements on the going concern basis is appropriate due to the continued financial support of the company’s ultimate parent company Taveta Investments Limited”. The difficult is that Taveta’s finances were not rosy. The company reported £826 million negative equity in 2005, though it declined to £357m by 2012. BHS had been audited by KPMG from 2002 to 2008, and by PricewaterhouseCoopers from 2009 to its demise. It always received an unqualified audit report. Auditors did not issue an Emphasis of Matter report to flag potential going concern difficulties. PwC have been close to Sir Philip Green for years. In 2014, PwC received £355,000 in audit fees from Taveta (which included BHS) and £2.86m for non-audit fees. It is a poor show from auditors. The debacle once again raises questions about auditor independence, regulation and the tendency to ape the three unwise monkeys. n Prem Sikka is professor of accountancy at the University of Essex
Where’s the diversity? The year may be 2016, but the big accountancy firms’ diversity policies have some way to go. It seems just 5% of partners in the top 10 accountancy firms come from black, Asian minority ethnic (BAME) backgrounds, according to a major new survey from Accountancy magazine. Some 20% of professional staff at the 10 largest firms now come from BAME backgrounds, yet just 234 out of 4,718 partners in these firms were BAME. The survey found that at the top level women fair better, although the 803 female partners in the top 10 is a mere 17% of the total. All the firms say they are taking action to improve the situation, but accountancy fares very badly when comparisons are made with other professions. For example, the
proportion of BAME partner level staff in the legal and financial services industry currently stands at 40%. Accountancy magazine found the most BAME partners can be found at EY, with 58 – that’s 8% of its total partners. Smith & Williamson currently has one partner out of its 306 who is BAME. Interestingly, EY has the most female partners too, with 20%. At Smith & Williamson one in five partners are also women. When you drill down into Accountancy magazine’s figures
Future is in the cloud The future of world ahead. accountancy is in the The accountant’s role cloud, says FreeAgent’s will change, of course. CEO Ed Molyneux. And Instead of chasing as HMRC takes us all receipts and working ‘digital’ accountants will out what happened last have to look to evolve. year they will be Molyneux agrees that expected to help small it makes it very hard for business set up and Ed Molyneux PQ and NQs to map grow. That means their careers. No one accountants will shift really knows what their from crunching the world will look like in even five number to becoming virtual FDs. In years’ time, he suggested. All that turn, that also means accountants you know now might quickly be ‘old can help businesses that they hat’. couldn’t before – those microWhile some people see businesses. automation as a real threat, • FreeAgent provides awardMolyneux is in no doubt that the winning cloud accounting software profession is more than capable of for accountants working with microevolving, and will be able to take business, freelance and contractor full advantage of the brave new clients.
Mismatch for young auditors Continued from page 1 and discuss the issue in a more proactive manner. The ICAEW’s Qualifications Director, Shaun Roberston, said current training gives its trainees the confidence to question the views of senior members of an organisation. He stressed: “They have proved themselves to be professionally sceptical and able to give sound, objective business advice. Their experience or age does not imply a barrier to asking the full questions 10
needed to complete a full audit.” The ACCA’s head of audit and assurance, Andrew Gambier, was also sceptical about the report’s onesided view of the audit process. Seeing young auditors as weak and clients as mean is too simplistic a view, he said, although he loved the authors’ psychological look at the audit process and wanted to see more of it. In Gambier’s view, young auditors are incredibly independent and strong-minded, and are not cowed by difficult clients. He felt
another piece of research was missing from the report – clients who are scared of the auditors! He was not surprised by the move to email ‘conversations’. An email from a client is much better evidence than a hand-written note! • Bennett and Hatfield’s report, ‘The Effect of the Social Mismatch Between Staff Auditors and Client Management on the Collection of Audit Evidence’, was recently recognised with the Deloitte Wildman Medal.
you discover just 10 partners out of 4,700 in the top 10 firms are black. The real concern for many graduates will be that it appears some firms seem to be talking up the diversity card without actually putting into practice what they preach. While firms may be attracting higher numbers of BAME students many leave before they get into senior positions, PwC’s Gaenor Bagley told Accountancy. Meanwhile, EY’s Maggie Stilwell said people need to see other people that they can identify with, so it makes the provision of role models very important.
JOB OF THE MONTH Head of Finance Oldham Coliseum Theatre is seeking a Head of Finance. This is an outstanding opportunity for an experienced and enthusiastic individual to lead the theatre’s finance department. The Head of Finance is responsible for the operation and accountability of all financial systems and the provision of finance management information. As a member of senior management team you will contribute to the development and delivery of the vision, mission, goals and values and play a significant role in the leadership and direction of the company. This is a permanent, full time position. Salary is £32,885. Closing date for this role is Friday 24 June and interviews commence the week beginning 4 July. For more information, including job description, accounts and budget, please download an application pack from the website – go to http://www.coliseum.org.uk/ work-with-us/recruitment/ PQ Magazine July 2016
PQ news
CARL LYGO Education is key to growth in China This month I was in Beijing for a meeting of world education leaders reviewing the 13th Five-Year Plan. There are nine key projects in education as China seeks to increase both the numbers of students from the country studying overseas and international students studying in China. About 390,000 international students spend part of their programme studying in China. The number of people in university level education has rapidly increased: In 1980, 2.7 million students were at university; by 2000 this had increased to 9.3 million and last year reached 36 million. The initial participation rate (the number of school leavers going to university) was 30% in 2012 and last year it reached 40%. This is rapid change. Tony Blair was famously lambasted for setting a UK target of 50% of school leavers attending university but at this rate of growth China will soon be overtaking the UK. The worldwide number of international students studying abroad has grown fairly consistently since 2000, from two million students to about five million a year today and is projected to hit eight million by 2025. The US attracts the most international students with 20% of the market. The UK is second with 11%, followed closely by China. The most popular subject studied in China is business and accounting. One of the key projects for China is to combine more relevant elite vocational education with higher education. The Asian Tiger is growing in strength. n Professor Carl Lygo is chief executive of BPP
Audit of revenue ‘weakness’ Do the big firms need to do more training in the
audit of revenue? The audit of revenue appears to be a key ‘weakness’ of many of the audits looked at as part of the FRC’s audit quality reviews of the six largest firms. The FRC said in PwC’s report that revenue is an important driver of an entity’s operating results and auditors need to evaluate and address fraud risk in relation to 12
Perceived bias of NHS finance More needs to be done to improve gender diversity in NHS finance departments, says a report from Future-Focused Finance (FFF). While women make up two-thirds (62%) of the NHS finance workforce just 26% of finance directors are female, a figure which has increased only slightly since 2009, when it was 21%. The real worry is the number of women who believe the promotion processes are fair and based on merit. Just 43% of women thought they were fair. Some 28% of female NHS staff also felt they were more likely to experience barriers to career progression than their male counterparts. This stops them
applying for promotions and other positions. Another problem is the fact that 71% of women working in NHS finance believe it would be harder for them to maintain a work-life balance if they moved into a more senior role. The NHS’s chief finance officer, Paul Baumann, said: “Diversity within the workforce, and in particular finance, can be used to drive business success, enabling organisations to become more successful, sustainable and better equipped to meet future challenges. A diverse leadership, which bears a good resemblance to the community which it serves, is better able to deliver patient-
focused care. With its mission to ensure NHS finance is fully equipped to support the provision of high-quality patient care under increasingly challenging circumstances, FFF is spearheading this initiative to improve the finance function’s performance by bringing more diversity to its leadership.” • The report is called ‘Diversity in NHS Finance Leadership: beliefs, behaviours and barriers’.
HMRC ‘must put quarterly digital reporting on hold’ The Association of Taxation Technicians (ATT) is calling on HMRC to postpone the introduction of quarterly digital reporting by at least a year. ATT believes a delay to the consultation process is needed because of the EU referendum means the new timetable is overlyambitious. In all there are expected to be five consultation documents on Making Tax Digital, which will all now be issued at the same time
with simultaneous deadlines. The five are expected to cover the scope of quarterly reporting, administration, software, penalties and payments. ATT’s Yvette Nunn said that the Making Tax Digital project represents the biggest change in the way taxpayers will engage with HMRC since the introduction of PAYE in 1945. Her worry is that HMRC will stick with the launch of the public testing phase of April
Stand off over high heels PwC become embroiled in a dress code row earlier this month, after a female temp was sent home for refusing to wear high heels. revenue recognition. It goes on to say that a failure to perform sufficient audit work in this area increases the risk that auditors will not identify a material misstatement of revenue in the financial statements. It told KPMG that insufficient revenue testing was performed on three of its audits. On one audit the analytical procedures and control testing did not provide sufficient audit evidence. In the other two audits only the recognition of revenue in the correct period was tested in detail, without testing the underlying
Nicola Thorp (pictured) was so shocked by being told she had to wear heels that she has launched a petition. It urges parliament to make it illegal for women
revenue. The FRC now wants to see KPMG reviewing its methodology and training for the audit of revenue. The FRC said there was an
2017, giving just six months for full and frank consultation. Nunn stressed: “Rushing ahead with this project without adequate time for the consultation and testing phases could put at risk the many potential benefits for taxpayers and HMRC which greater digital working can bring. That would be a tremendous mistake and in a worst case scenario could result in a system that is not fit for purpose.” to be required to wear high heels at work. In just two days 100,000 people had signed it. Thorp was sent to PwC’s offices by Portico, a firm that supplies front-of-house services to many top companies. PwC was reportedly “in discussions” with Portico over its uniform guidelines. overall improvement in its assessment of Deloitte, EY, Grant Thornton, and PwC, when compared with last year. But half of the eight audits reviewed at BDO ‘required improvements’. There was a significant increase in the number of audits reviewed at KPMG this time around. Two audits were assessed as requiring significant improvements and a further six required improvements. The FRC said it needs to see an improvement in “the scope and depth of the audit work performed by certain of the firm’s specialists”. PQ Magazine July 2016
news PQ
Kaplan buys Osborne Books
Partners: Anton Colella and Rob Whiteman, right
New ICAS partnership initiative ‘adds value for CIPFA members’ CIPFA and ICAS have announced that they are extending their ‘partnership’ with a new initiative that enables CIPFA’s UK examqualified members to attain joint accreditation and ICAS status. The joint initiative is intended to give CIPFA members the opportunity to enhance their professional accountancy status in an increasingly mixed economy for public service. CIPFA’s CEO Rob Whiteman said
the latest initiative “adds value to our members, both in CIPFA and ICAS, and we are confident it adds value for employers as well”. ICAS CEO Anton Colella said: “What we have today is a highly mobile accountancy profession. We are increasingly seeing people moving careers at least five, six, seven times in their professional life, and anything that could add to the leverage they have in that process is a very exciting prospect.”
You’ll never guess what I heard...
Many AAT tutors were surprised to hear at the recent AAT Training Provider’s Conference that Osborne Books had been taken over by Kaplan Publishing. Apparently, owner Michael Fardon put Osborne Books up for sale last summer. Kaplan quickly became the preferred bidder and the takeover was referred to the Competition & Markets Authority. The CMA approved the bid in late 2015 and Kaplan bought the company in mid-February this year. Kaplan’s director of learning solutions, Michael Smith, wanted to
ensure interested parties that it will be business as usual at Osborne. The books will have the same authors. The Ecommerce and online strategy, such as the innovative online assessment package, will also continue as normal. The one thing that will change is the distribution centre, which has moved from Worcester to Wokingham. Smith reiterated that Osborne Books will be run separately company and the team will work hard to keep the good relationships it has colleges and students.
FRS explains its approach to BHS The FRC’s CEO, Stephen Haddrill has formally written to Richard Fuller MP over his concerns about the demise of BHS. Haddrill (pictured) explained that the FRC is looking into events at BHS to determine whether to investigate under its enforcement arrangements. These arrangements apply to accountants, auditors and actuaries who are members of a
professional body in the UK. He said: “It should be noted that our enforcement powers do not extend to company directors unless they are members of the relevant professional bodies. Other regulators and law enforcement agencies have powers to investigate directors and FRC is liaising closely with them to exchange information that is relevant to their respective remits.”
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PQ career advice
Sing for your supper Sally O’Neill explains how the ACA qualification can get you where you want to go!
T
he Royal Opera House’s COO Sally O’Neill was the recent star turn at the ICAEW’s International Prizegiving ceremony. It meant everyone was treated to a first – a five-minute video of Carlos Acosta dancing in Carmen (which was spellbinding). For those not in the know, the Royal Opera House does a bit of ballet as well! What was immediately obvious from the start of her talk was the fact that O’Neill has utilised her ICAEW qualification to get her exactly where she had always dreamed of being, and she is loving it. At work she is in charge of a wide range of operations including finance, facilities, technology, planning, technical and HR. She is also heading up a major new capital project at the Opera House, called Open Up, a cultural transformation project to ‘open up’ the building to new audiences, improve facilities and overhaul the small Linbury Theatre. O’Neill joined the Royal Opera House as director of finance in 2009 and for six months acted as interim CEO before assuming her current position. In truth this was created after she had done such a great job as acting CEO! She told the audience she was extremely proud of her qualification, but admitted studying the ACA with Deloitte felt “like still being a student while wearing smarter clothes”. O’Neill stressed that the ‘technical bit’ of the qualification is the bedrock of what you will need. Then, as you go through your career, you will begin to call on those leadership skills. Your journey is a series of choices, she explained. After an all-girls’ school she went to Cambridge and studied natural sciences. Once qualified, she took a mixture of commercial and not-for-profit roles. She moved every three to five years, discovering what she liked and
14
what she didn’t. Her first FD role was with Historic Royal Palaces. O’Neill told the prizewinners she reads a lot and wanted to encourage them to do the same. Stephen Covey’s ‘7 habits of highly effect people’, which she read in the 1980s, has stayed with her, and she shared his seven habits with prizewinners: 1) Be proactive. You have to control your environment, rather than letting it control you. So focus on what you can influence. 2) Begin with the end in mind. Covey said this is all about personal leadership and defining practical outcomes. 3) Put first things first. Keep focused on what is important not just urgent. 4) Think win-win. Covey explained that win-win is based on the assumption that there is plenty for everyone, so success follows a co-operative approach more naturally than the confrontation view of win-or-lose. 5) Seek first to understand and then to be understood. Communication is key and Covey believes you must diagnose before you prescribe. 6) Synergize. This is about co-operation
Words of wisdom: O’Neill told the ICAEW audience members that they should just ‘keep learning’
again and challenges you to see the good and potential in other people’s contribution. 7) Sharpen the saw. You need to renew yourself, and feed the spiritual, mental, physical and emotional you! O’Neill said that it was also important to know when to take good advice. A good friend had told her to go for a job she didn’t feel ready for, but they loved her and she got the role. Mentors can be another key to success. You may have to seek them out though, as they won’t just fall in your lap. O’Neill admitted that you will sometimes find yourself lying awake at night, but that this can be a good thing if you write your answers down before you forget them! And she has learnt to make painful changes in good time and not just when things get bad. By then it can be too late. Finally, she advised the prizewinners to keep learning. Then it was back to the Royal Opera House for O’Neill, where rehearsals for Tannäuser and The Winter’s Tale were taking place. Which is nice work if you can get it… PQ
PQ Magazine July 2016
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PQ variances
Variances and the life of Brian Neil Arnott explains how you can tackle exam questions on fixed overhead variances
S
tudents often struggle to calculate the fixed overhead variances correctly – and in particular the volume, capacity and efficiency variances. There seem to be so many variables involved – actual cost, budgeted cost, actual quantity, budgeted quantity, standard quantity and so on. It’s a nightmare! And there are so many ways to remember the variances – some tutors love formulas, some suggest drawing graphs… I’ve always believed that if you understand the logic behind any subject you are more likely to carry out any calculations correctly, but also to be able to explain the meaning of your findings. So let’s have a look at explaining these troublesome variances in a much simpler way than you will usually encounter in a typical accounting text book. Meet Brian. Brian is a typical AAT Level 4 student studying the Financial Performance unit. He is hard-working, committed and motivated. He also struggles to understand fixed overhead variances. Brian has his exam in a couple of weeks, so his tutor has given him some additional homework to do. This is to complete four practice exams and to bring them back in to be marked the following week. The tutor explains that each practice exam has a time limit of three hours and Brian should stick to this when he completes them. With this information we can establish some ‘standards’. The plan (budget) is that Brian will complete: 4 exams in 3 hours each = 12 hours work A week later Brian approaches his tutor and tells her that he has done really
well with his homework this week – he didn’t just work for the 12 hours which were budgeted, he actually worked for 15 hours on the practice assessments. Brian is happy with this. So too is his tutor. “That’s excellent, Brian. You worked more hours than we budgeted for – well done!” She then asks Brian for the completed assessments so she can mark them. “Ah… I only managed to complete three of the assessments.” Brian’s tutor isn’t so happy now. “So you worked for 15 hours, but you only completed three papers! What were you doing?” “Well”, replies Brian, “You see they took a bit longer than I thought… and I went on Facebook… and I watched EastEnders…and then my friend came round...” This little tale demonstrates perfectly the fixed overhead variances. Brian had a favourable capacity variance of three hours. By comparing the budgeted hours with the actual hours
A QUICK LOOK AT... Most people will know something about Value Based Management (VBM). It is a management philosophy that, basically, focuses on the creation of value rather than just profits. Sometimes there is, however, confusion about just what we mean by ‘value’ in this context. In this article we will look first at what definition of value isn’t used in VBM. We will then look at what definition of ‘value’ is actually used in VBM. We will then conclude by exploring the various issues, some fairly controversial, in using the chosen definition of ‘value’. First, what it is not. It is not value added, where companies are attempting to increase profits by adding customer/company value at a 16
we can see that Brian worked for 15 hours against a plan of 12 hours – which is, of course, a good thing. But this is not the whole picture; we also need to think about how efficiently he worked during these hours. And this is where Brian underperformed; the three practice exams he completed should only have taken him three hours each, or nine hours in total. So he took 15 hours to complete work which should only have taken nine hours, which is an adverse efficiency variance of six hours. If we add the capacity and the efficiency variances together (taking into account which is favourable and which is adverse) we get a figure of three hours adverse. This is effectively the volume variance, except the volume variance deals with units rather than hours. In three hours the standard output is one mock exam (ie one unit) – which of course reflects that Brian only completed three mock exams instead of four. Of course, in a manufacturing setting we would need to multiply each of these variances by the overhead absorption rate per hour (for the efficiency and capacity variances) and the overhead absorption rate per unit (for the volume variance), to express the variances in monetary terms. But the principles remain the same. Many students struggle to understand how working more hours than budgeted leads to a favourable capacity variance, or how a favourable capacity variance can be ‘paired’ with an adverse efficiency variance. Hopefully the story of Brian has helped to clarify what each of these variances mean so you will feel more confident in both calculating and explaining them in your exam. Of course, the other thing that would help would be having favourable efficiency and capacity variances in your own revision! PQ • Neil Arnott is a course tutor at Premier Training
Accounting for value – defining value
product level. An obvious example of this is where potatoes (which often sell at less than 50p per kilo) are turned into crisps and then sold at more than £20 per kilo. It is also not added value. This is mostly a measure used by governments and other organisations to measure the economic viability of whole industries. It looks at how industries contribute to the economy by measuring employee wages and benefits, taxes paid, dividends paid and the amounts reinvested in the future of the industries. So how is ‘value’ defined for the purposes of VBM? It goes by several names but the one we shall use here is stakeholder value. But here is
where the problems start. As you will know, companies have many stakeholders and creating value can be a very testing and conflicting process. It is often the case that by creating value for one class of stakeholders often can end up destroying value for others. So what often happens is that the definition of value becomes not stakeholder value but shareholder value, and this can be where the controversy starts. • John Foster is an AIA Achieve e-tutor. The AIA Achieve team is producing a series of ‘A Quick Look at….’ articles and more can be found on the AIA website: www.aiaworldwide.com/ a-quick-look-at. PQ Magazine July 2016
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PQ CIMA E3
T
he role of information systems in organisational strategy makes up 15% of the CIMA E3 syllabus, with two lead learning outcomes: E1: Evaluate the information system requirements for successful strategic implementation. • Evaluate the information systems required to sustain an organisation. • Advise management on development of strategies for knowledge management. E2: Evaluate opportunities for the use of IT and IS for the organisation, including big data. • Evaluate the impact of IT and IS on the organisation and its strategy. • Evaluate the strategic and competitive impact of information systems, including the potential contribution of big data. The understanding of this topic is not only vital for the E3 exam, but also for the Strategic case study. Whereas in objective test exam technology is often examined alongside other strategic tools such as Porter’s Five Forces or Value Chain, in the February 2016 case study exam students were asked to review strategic benefits and risks of e-business. The topic of information systems is historically perceived by students as complex, due to the intangible nature of technology; it is often hard to grasp the practical application of many new technological developments such as big data or cloud computing. Yet all of us use technology every day by browsing the internet or using selfservice checkouts, which highlights to us that organisations are becoming more and more aware of the significance of IT in sustaining their ability to compete. For example, in the retail industry the competitive battlefield has shifted away from physical stores towards internet sales. As a result, major retailers are now looking to harness the ability of their website to collect better information about products and customers. Impact of IT and IS on the organisation When you last purchased something on the Internet did you by any chance buy it from Amazon? The company is renowned for its global reach, user friendly website and next day delivery capability. But did you know that Amazon is much more than just an online retailer of goods? Some 67% of Amazon’s income comes from its web service division, which essentially allows other companies to virtually rent Amazon’s technological infrastructure to provide processing power. Being a virtual organisation, Amazon maintains limited physical presence and instead relies on managing its supply chain to be able to deliver its goods. The company was one of the first retailers to realise the benefits of using technology in managing its supply chain. In the upstream supply it encourages independent sellers to list products on its website. Use of GPS and scheduling software in the downstream supply chain ensures on-time delivery to the customer. Apparently, it is even possible to book a tour of an Amazon fulfilment centre to see the whole process in action! Despite the large scale of the retail side of the Amazon business, it is the provision of cloud computing services that adds most to the 18
Why you must the implication Iryna McDonald tells you how to pass the E3 paper
company’s bottom line. Having established the technological infrastructure necessary to process online retail orders, Amazon now also hires their computing power and internet services to other organisations that might need to process complex calculations or just want to add extra flexibility to their data processing. At the core of Amazon’s corporate level strategy lies the understanding that having built up the competencies in data management and analysis, it should not only use them to optimise the operations of its website but exploit these valuable assets, which can generate revenue and profits in their own right. Thus by using technology both within the business and as a core service offered to its corporate customers, Amazon has created a business model that diversifies company’s operations away from retail towards IT outsourcing industry. Impact of technology and big data Efficient data processing is rapidly becoming a business necessity – with the arrival of the ‘internet of things’ many more devices are becoming connected. This creates a deluge of data that an organisation needs to make sense of. Your smartphone has a multitude of sensors, tracking information about location, pace, voice and even temperature. By applying statistical tools to this data a company can now better understand its customers and thus improve its
products and services, which may provide it with an edge over its competitors. The big data concept brings together the need for vast quantities of information processed in real time from a variety of sources in order to help companies make better decisions. Companies such as Pinterest use big data to deliver a personalised visual bookmark service to its users by analysing the intent of each Pin. Using specialised software application, Pinterest will take into account the context of the Pin, together with related images to make suggestions about similar objects the consumer might like as well as the organisations you can buy them from. With over 30 billion Pins and fast growth in the number of users, Pinterest had to double its computing power and triple its storage capacity in the past six months. Such complex processing requires powerful computing capabilities often beyond the resources available to any one company. This in turn creates demand for cloud computing services. To support it growth, Pinterest decided to gain access to extra computing power through Amazon web service division. This collaboration allowed Pinterest to reduce the capital investment required to establish data centres while transferring the risks of technology failure and security breaches to a provider who is better equipped to handle them. PQ Magazine July 2016
Have a go at these questions to test your technical knowledge Question 1: ARC airline has introduced dynamic pricing for its tickets as part of a strategy to improve the company’s overall profitability. Its website is linked to a specialised software application deploying big data techniques through monitoring of travel patterns, weather conditions and holiday periods to change ticket prices in real time. Despite the initial success of
Question 2: KIK, an upmarket clothing retail chain, is planning to expand abroad to country Z. KIK currently operates through physical stores in premium locations in its home country K. Recent market research identified that in country Z there is an increasing preference among consumers for online shopping. As a result, the KIK board has made a decision to enter country Z using only e-business operating model. Which of the following benefits will KIK gain from operating an e-business model? Select all that apply. a) Enhanced shareholder returns through better ROCE. b) Decreased risk of damage to the company’s reputation.
Updates to PER C IMA students might have noticed that there have been some recent changes with regard to our Practical Experience Requirements (PER), notably there is a second choice of how to submit, writes Tricia Buchanan. This is a soft launch of a new online process during which CIMA is gathering feedback from applicants and assessors. The results of this will be used to enhance the new process and CIMA expects to be launching this pilot fully soon, and promoting it to our students, training providers and employers. What is PER? In order to become a CIMA member and Chartered Global Management Accountant (CGMA), students need a minimum of three years’ verified relevant work-based practical experience. This experience is assessed through the process called PER applications, which are an essential part of the CIMA qualification and CIMA’s membership application process. As part of the PER, students are assessed to PQ Magazine July 2016
determine whether they have gained sufficient professional experience and whether they can apply their knowledge and skills to the work environment. If approved, students are awarded Associate membership and therefore receive the ACMA, CGMA designations. We have updated the submission process for the PER to ensure it is aligned with the syllabus and assessment of the 2015 CIMA Professional Qualification and based around the CGMA Competency Framework. Our Framework consists of four knowledge areas: Technical Skills, Business Skills, People Skills and Leadership Skills, and is underpinned by Ethics, Integrity and Professionalism. Each knowledge area contains a number of competency categories and individual competencies or skills. The minimum 36 months’ experience needed is required across the four knowledge areas, with a maximum of 60 months to be evidenced. The new way of submitting an application
c) Seamless management of the supply chain from factory to the consumer. d) Greater price transparency for its garments in country K. e) Better customer retention through data analysis and relationship management. f) Greater insight into competitors’ strategies. PQ
• Iryna McDonald is a tutor at Kaplan Financial THE ANSWERS
Question 1: answer D Velocity as an element of big data refers to speed of decision making. ARC’s customers complained about the website becoming unresponsive as it struggled to process a large volume of information necessary to set the prices in real time. Cloud computing will allow ARC to gain on-demand access to data processing using infrastructure provided by a third party, thus reducing the revenue lost from customers who are not able to make a booking.
Opportunities presented by IT and IS At the strategic level, the conversation about utilisation of technology is moving away from considering whether one is needed towards how it could be used to generate an edge over rivals. With better access to data processing capability companies can now focus more on their core competencies of product innovation and customer service and less on technological infrastructure. Therefore IS could be seen as both a sources of competitive advantage through the enhanced ability to meet customer needs, as well as the strategic imperative for the future survival of the organisation, with technology affecting every aspect of its operations.
the dynamic pricing, ARC received several complaints from customers about the website freezing or becoming unresponsive during peak usage times. As a result, the ARC board requested that a change be made to dynamic pricing system operations to address these customer complaints. Which one of the following features will help ARC address customer complaints? a) Increasing the volume of indicators taken into account when setting prices levels to include frequently searched destinations. b) Use a greater variety of source of information, such as previous ticket purchases made by customers as well as photos and comments made by them on social media. c) Enhance veracity of customer data by asking customers to log in before confirming the final ticket price. d) Increase velocity of pricing decision by adding extra data processing capability through cloud computing.
Question 2: answer A, C, E E-business is less capital intensive compared with operating physical stores, which will enhance Return on Capital Employed (ROCE). A further move towards becoming a virtual retailer would allow KIK to link clothing manufacturers directly to the customers ordering garments. Through the website, the company will be able to collect more information about its customers and thus target them with relevant offerings, leading to better customer retention. However, the e-business model might increase the risk of reputation damage: a breach of security in the event of hackers stealing credit card details might undermine customers’ trust in KIK’s ability to safeguard data. Greater price transparency is unlikely to arise in country K as the website will only operate in country Z. Although the website will provide better information to KIK about its customers and products, it will not provide new information about competitors
t grasp ns of IT
CIMA E3 PQ
also complies with IFAC’s (International Federation of Accountants) international education standards. What does this mean for students? We have created the new user-friendly Membership Application Tool (MAT). Once our pilot is finished students may expect an intuitive online application process where they can easily update their competence on the go as they continue to gain further professional experience. Students can begin to record their practical experience on the MAT as soon as they have started studying at Operational level of the CIMA professional qualification. They also have the option of submitting their application for assessment after they have completed all three objective tests at Strategic level. If students have not completed the Strategic level case study exam at the time their experience is approved, election to membership will be provisional pending their exam results. Existing applicants do not have to worry. They are not at a disadvantage as the existing PER application process will be kept open at least until 31 December 2016. PQ • Tricia Buchanan is Director of Operational Delivery at CIMA 19
PQ CIMA P1
Section C: six of the best Here’s part two of Kate Williams’ article on passing CIMA P1
Which of the following statements are true?
1. The selling price of product y is $30. 2. Product X uses twice as much direct material as product Y. 3. Product Y uses 4 times as much labour as product X. 4. Maximum demand x = 100 units. A: 1 and 2 only B: All of them C: 3 and 4 only D: 3 only
I
n my previous article (PQ, June 2016) we looked at the three key factors to ensure CIMA P1 success: • Understanding – ‘why’ not just ‘how’. • Strong exam technique – keep moving, good use of proformas and formulas, confidence. • Question practice – for ALL learning outcomes. Having provided you with questions for Section A and B, let us now focus our attention on Syllabus area C. Section C Proficiency Section C, Short Term Decision Making: as with Section A, this area covers 30% of your exam and on the day you will facing 18 questions. You should expect to be dealing with areas such as relevant costing, strategic implications of shortterm decisions, make or buy, discontinuing services or products, break even analysis, limiting factor analysis, linear programming and joint costs and by products. An epic amount of content and such a variety of formulas and techniques to contend with, meaning students must take ownership of the syllabus and use relevant revision skills such as mind maps, acronyms, repetition and reading to ensure technical ability and understanding has been achieved. Students must also remember that half of the questions are theory based and so should have excellent comprehension of the P1 Syllabus. Below you will find six questions that look at different syllabus areas of Section C. The answers are available via email – james.taylor@htftpartnership.co.uk I have also prepared six questions on Section D: Dealing with Risk and Uncertainty, and again these can be obtained by email. The questions – Section C 1. The finance manager states “you have given me two unit costs for me to use when considering a selling price for a specific contract. One is a relevant cost 20
of $13.50 and the other is a full production cost of $12.00.” Which of the following statements is true when advising which cost to use: A: The full production cost should be used as it covers all costs including fixed costs. B: Production costs should be used as it is higher, which means a higher selling price can be set and therefore generate more profit. C: The relevant cost should be used as it includes the costs relevant only to this contract. D: The relevant cost should be used as it is lower. 2. A company is considering the future of Product Q and the following costs relating to Product Q are detailed in the table below. Direct Materials Direct Labour Insurance Overhead L
$95,000 $82,000 $6,100 $3,000
The insurance is solely related to Product Q and would not be incurred if the project were discontinued. Overhead L is unavoidable and will continue if Product Q ceases production and are apportioned on the basis of labour hours. What is the cost which would not be incurred if product Q were discontinued? A: $183,100 B: $6,100 C: $9,100 D: $177,000 3. The following linear programming solution has been completed: Objective function 20x + 30y Direct material 2x + 4y ≤1600 kg Direct labour x + 4y ≤2,400 hrs Machine hours 2x + 6y ≤2,000 hrs X ≤ 100 ≤400
Y≤ 0
4. A company produces two products X and Y and they are sold in ratios of 1:4 and the following information is available: X CS Ratio 20% Sales Revenue Fixed Costs
Y 35%
$600,000 $100,000
What is the margin of safety to the nearest $ 5. A company is preparing a quotation for a new customer and the job will involve 200kg of material D. The company has 160kg of material D in stock and had planned to sell this for scrap as it has no further use. The following information is available for Product D: Market Price Scrap Original cost
1.60 3.60
$ 4.80
The relevant cost of the direct materials for this quote will be: A: $960 B: $448 C: $768 D: $320 6. When considering profit maximisation in a scenario with more than one constraint, what will the axis on a graphical linear programming solution represent? A: Product contributions B: Products available for production C: Constraints PQ D: Profit per product • Kate Williams is a tutor at HTFT Partnership Remember, if you want the answers email james.taylor@htftpartnership.co.uk PQ Magazine July 2016
MORE THAN JUST FINANCE
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Start you degree this September. To make an application contact: Tel: 02038 115 503 Email: info@pearsoncollegelondon.ac.uk Visit: pearsoncollegelondon.ac.uk/financedegrees
Study accounting the new way through a degree In today’s complex business environment it is clear that the skills needed by finance professionals are evolving, with employers no longer looking for accountants with just technical skills. The knowledge to drive performance and change is required, and with more than 2 million people in the UK working in financial services, candidates need to think ahead. Those that adopt a wider range of skills and can combine core accounting abilities with business acumen will stand out in a crowded market. Pearson Business School, part of Pearson College London, is the only FTSE 100 company offeringdegrees in Business, Law and Accounting which are designed, developed and delivered with industry. They adopt a realworld teaching method, giving students a unique experience of studying from inside a global company. The curriculum is brought to life with internships, industry workshops, company mentors and projects based on briefs supplied by real businesses. “We have a strong focus on students being able to apply the technical skills that they learn in a real commercial context. Our simulated placements and workshops led by professionals working in the industry enable students to develop the practical accounting skills required to flourish in the workplace.” Will Holt, Head of Pearson Business School
By working with employers, Pearson Business School has identified a broad set of contemporary skills essential for finance professionals to succeed. They train students in emerging areas such as: • Predictive analytics that develop the understanding of big data and how to utilise this to provide meaningful insights; • Advanced risk management understanding the importance of using digital software to provide crucial risk analysis; • Innovation and entrepreneurship developing skills that are key to revolutionising existing practices. Are you interested in becoming a financial leader of tomorrow, today? Are you interested in becoming a financial leader of tomorrow, today? Pearson Business School offers both undergraduate and postgraduate courses in finance that allow students to gain a degree whilst earning exemptions from professional exams – meaning this is a costeffective way for students to obtain professional qualifications as well as gaining a degree. Find out more about the BSc Professional Accounting in Business and MSc Financial leadership programmes at: pearsoncollegelondon.ac.uk/financedegrees
PQ AAT exams
LET’S GET TECHNICAL
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wracked my brain thinking of a subject to focus on this month. I kept thinking, “do I dare try and get away with another tax one?” After much pondering, I thought “what is the one thing which AAT students dislike the most?” Instantly, I thought of the level 3 Professional Ethics unit. However, the thing that catches most people out the most in this exam is not the subject matter. It is how to answer the questions. Knowing what the question requires is just as important as knowing the five fundamental principles. There are various types of questions which may come up, and you need to know how to tackle each one as they are all different.
The ‘state’ question During your studies you may come across questions such as this: State if John, who is AAT qualified, can offer investment advice to his client Jack? I really feel for the student who writes: “No, John cannot offer investment advice. Investment advice is one of the three restricted areas in accountancy. Being AAT qualified is not sufficient enough to be able to offer this service.” The answer is really good. However, I then look at the model answers in our mock, and we are looking for: “No”. That’s it. That is all that you need to write for this question. The question said “state if John can offer this service” and the answer is simply “no”. For a question which says ‘state’, we are looking for a short, to the point, answer. The ‘explain’ question The ‘explain’ question is the opposite end of the scale to a ‘state’ question. You may be asked to explain if someone can take a certain course of action; for example: Jane has never studied, nor worked, in tax. She has been asked by a prospective client if she can complete his tax return for him. Explain if Jane can complete the tax return for the client. If your answer is ‘no’, you are not answering the question. The question asked you to explain if they could take a
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It’s vital you identify the different questions in the ethics papers, says Nick Craggs
“Jane’s objectivity is threatened, because she has known the client for many years, and plays golf with them every Sunday and so lacks professional distance from the client.” Now you are so close! You clearly know the fundamental principles, and can apply them correctly the different scenarios. However, you are not quite there. If the question asks how someone is threatened, there is obviously a threat, so you need to name the threat! Here, you will get credit for naming this as a “familiarity” threat. How can you avoid this threat? The different ways in which you can avoid ethical threats is one of the key subjects in this unit. The typical AAT student dives upon this, as they have an amazingly technical answer about separate accounting and auditing teams which they cannot wait to give the examiner to show how well prepared they are. However, they often overlook the easy option. If the scenario asks how you could avoid a threat to your fundamental ethical principles, you will always get credit for simply saying “I would refuse to do it” or “I would cease to act for the client”. If any act might threaten your fundamental principles, simply do not do it, and there is then no threat! A nice easy point!
course of action. Therefore, you need to state if they can do something and then say why they can, or cannot, take that course of action. A far better answer would be: “Jane cannot take on the client, as she does not have the necessary training or experience. As such, she would be in breach of the fundamental principle of professional competence and due care.”
The facts However, there are certain things which you just have to learn. If you do not know these, you will struggle in this unit. You need to know the fundamental principles, they are, for want of a better word, fundamental. Likewise, the fundamental principles will be threatened, so you need to know the names of the threats. Learning these is only the first step though, you need to then apply these to various scenarios. In the exam you will be told how many marks each question is worth. You can use this as a guide as to how much to write. The exam is hard enough as it is, so don’t make it harder for yourself by writing an essay to get one mark. PQ • Nick Craggs, First Intuition
The ‘threat’ question You may well need to explain how someone’s fundamental principles are threatened. If you are asked which of Jane’s fundamental principles is threatened, due to the fact that she has played golf every Sunday for a number of years with a client, and your answer is:
PQ Magazine July 2016
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PQ AAT Training Providers’ conference
PQ editor Graham Hambly went to the conference on your behalf. Here’s a selection of the best bits
Turning PQs into writers Christine Littler gave tutors some strategies to help their students cope with the increased written content of the AAT qualification
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ith the increased emphasis on written tasks in AQ2016 the AAT will need to turn its PQs into writers. It does, however, understand that learners find this area difficult. Top tutor Catherine Littler told delegates at the Training Providers’ Conference that students often tell them that they opted for AAT because they are ‘good with numbers’. She felt it was also true to say many tutors are more comfortable teaching the numerical questions, too. So while both students and tutors are happy get their calculators out for exam practice they are far less happy about expressing themselves on paper. Littler understood that it doesn’t help that the interpretation of calculations can seem obvious. She said tutors need to have strategies to help build students’ confidence. She finds working in pairs can be a good way to start. Tutors need to pick these pairs carefully and swap people around to ensure one student isn’t doing all the work! Littler stressed that trainees will often write about subjects they find interesting or have a good knowledge of. To help practice letter writing she asks her PQs to write a formal letter to the England TOTAL QUALIFICATION TIME The AAT unveiled just how much study you will need to put in to get a pass. PQs should note that with the introduction of AQ2016 total qualification time (TQT) will replace guided learning hours (GLH). The AAT is keen to stress that the actual number of hours students need to put in hasn’t gone up, but it feels total qualification time gives PQs a much better understanding of what is required and ‘reflects the reality’. That means for Level2/Certificate the GLH of 240 hours will increase to 340 TQT. For the Diploma, the GLH of 340 converts to a TQT
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football manager. Students still resist, she explained, but you have to take away their worries. They will say: “I can’t spell”, “I make a mess because I make mistakes” and “my English isn’t very good”. But computers can help with spelling and can be used to clean up the mess. She felt creating templates right at the beginning is an invaluable tool for building confidence. Schools haven’t helped PQs here, she said. They put an emphasis on creative writing, which doesn’t help with writing reports and letters. English teachers will say start a letter with “I am writing to you”, where Littler says they obviously know that you are writing them a letter. There is a formulae for writing a letter, of 460 hours. Finally, at Level 3/diploma the GLH goes from 390 to a TQT of 520 hours. AAT EXAMS ARE TOUGH! The AAT needs to do more to publicise the fact that it takes 70% to pass its assessments, tutors told the AAT. It was felt that this ‘fact’ should actually appear somewhere on an awarding certificate. The new qualification, AQ2016, will also see the introduction of merits and distinctions as well as the basic pass. Students will need 80% over the level to achieve a merit and 90% to gain a distinction. Certain parts of the
she pointed out. The opening sentence should state what has prompted the letter. The second paragraph explains the problem and issue. The next paragraph expands on that. And the next outlines what the writer wants to see happen. The concluding sentence says ‘please contact me…’. So, it’s just a question of learning this format. Littler said the formula for emails is fairly similar, as are other short written communications. She stressed that students need to learn to use business language. These need not be long words, but slang is a real no-no. Littler has found encouraging short sentences helps build a student’s confidence. PQs also need to be encouraged to read more formally worded newspapers and online sites too – we are talking The Times (and PQ magazine), not The Sun. Another key to success is understanding the verbs. Do students really understand what they mean, she wondered. We have ‘compare’, ‘contrast’, ‘describe’, ‘analyse’, ‘evaluate’, ‘interpret’, ‘justify’ and ‘recommend’! Tutors can use accounting theory to help writing practice. For example, the Financial Performance examiner says students can’t explain the difference between gross profit and gross profit margins. A good exercise is to ask students to describe what they are and how to calculate them and explain how a business will use the information gained from these calculations. Finally, if students are still struggling with the written side she asks them to answer the question verbally, and then write down exactly what they have said. This can help with confidence, too. PQ
level will also be weighted. Some tutors were concerned about the psychological affects of students just getting a pass. “Some may feel they have failed if they get a basic pass,” one lecturer suggested. AAT REGISTRATION RULES Transfers of AQ2013 to AQ2016 can be completed only by training providers and this is the same with the progression onto different levels. Tutors were told not to let their student’s registration lapse if they want to continue with AQ2013. If they lapse they will be forced onto AQ2016!
The closure of the QCF has meant the AAT has been able to reclaim its qualification. It has been able to listen to its marketplace and move forward with AQ2016” – Michelle Lofthouse In Africa, 25% of internet use is via Whatsapp. The challenge then is to provide learning via Whatsapp here” – Kieran Rice, MD BPP Learning Media PQ Magazine July 2016
AAT Training Providers’ conferencePQ
Passing the PTAX assessment T
here is a real problem with the Personal Tax (PTAX) unit at Level 4. Back in 2012 the assessment had a 78% success rate, but now the pass rate has slumped to 47.4%. It all means Personal Tax has by far the lowest AAT pass rate at the final level. Despite this, over the past three years the optional Personal Tax unit has proved as popular as the mandatory units. For example, for the six months ending June 2015 some 9,917 UK assessments were completed. By comparison, the highest number of assessments taken for a mandatory unit in the same period was 12,967 (Financial Performance). AAT’s Theo Ege said that in every report on AQ2013 the chief examiner has highlighted that students have particular difficulties with tasks 2, 6, 7, and 11. Of these, task 7 is the worse of all. Just so you know, in the current sample assessment tasks 6, 7, 8, and 10 are human marked in the live assessment. The AAT feels that many students are taking the Personal Tax assessment without a true mastery of the written task elements of the paper. Some PQs also appear not to have a true understanding of some of the key computations. Another worry is that tutors are allowing students sit the assessments without a firm understanding of what it takes for students to pass, again in
particular the written elements of the assessment. Ege promised a more targeted set of guidance materials, for both tutors and students, focusing on known areas of poor performance. Sample and live assessments for tax units will also contain enhanced reference material specific to the Finance Act where appropriate, akin to what happens in Indirect Tax. He assured tutors that questions are written and checked for plain English. It should also be remembered, said Ege, that marks are awarded for correct methodology and workings in both human marked tasks and computer marked tasks, where this is appropriate. Turning to AQ2016, Ege explained that its content was a bit wider, but felt at the end of the day “tax is tax”. The main difference is the increased emphasis on application and communication, and the introduction of Inheritance Tax. PQ PERSONAL TAX IN NUMBERS • Assessment duration: two hours • Number of tasks in assessment: 11 • Competent pass mark: 70% • Average number of assessments taken each year: over 10,000
So who walked off with this year’s AAT awards? Johnny Javier Morales Solozano, an apprentice at the Training Place of Excellence, walked off with the Apprentice of the Year Award at this year’s AAT awards. Solozano came to the UK from Spain via South America with just €80 in his pocket. After finishing the equivalent of A levels in Spain he looked at his future in his home country and decided it wasn’t good! He took a plane with his €80 and slept on the sofa of a friend, got a job as a cleaner and learnt English. He admits it was all very scary as he couldn’t even say hello to anyone. Solozano, however, found places that taught English for free and enrolled on a course. He knew he wanted to do something with maths and that is when he found out about AAT. Solozano said: “Sometimes you shouldn’t think too much about a decision, you should just do it!” The Student of the Year award went to Jessica Leyland, who completed her AAT qualification in just seven (yes, seven) months. She used Premier Training and said that she enjoyed it so much that studying AAT never felt like a chore. In fact she said: “I loved it.” Leyland left school at 16 with her GCSEs and it was her employer who pushed her (nicely) PQ Magazine July 2016
into AAT. They funded it and also gave her a lot of help during her studies. She was working in an administrative accounts role, and had only a basic knowledge of using accounting systems, and absolutely no knowledge of how the system worked. It was all just data entry. AAT gave her an understanding of ‘everything’ and she is now also a treasurer for a fundraising committee where she has to do everything manually. Leyland burst into tears on hearing her name read out and said she feels “really honoured and immensely proud”. AAT TRAINING PROVIDER WINNERS 2016 • Pauline Sparkes Award for Best New Training Provider: Southend Adult Community College • Training Provider of the Year – small: Damar Training • Training Provider of the Year – medium: Middlesbrough College • Training Provider of the Year – large: Bedford College • International Training Provider of the Year: Botswana Accountancy College • Distance Learning Provider of the Year: Premier Training • Best use of e-learning: Home Learning
Jessica Leyland and Johnny Solozano College • Apprentice Training Provider of the Year: Kaplan Financial • Apprentice of the Year: Johnny Javier Morales Solorzano – Training Place of Excellence • Distance Learner of the Year: Thomas Brinsley – Home Learning College • Student of the Year: Jessica Leyland – Premier Training • Tutor of the Year: Caroline Warburton – iCount Training • Lifetime Achievement – AAT Tutor: Shirley Joseph – Barnet and Southgate College • AAT Champion: South Devon College 25
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CIPFA focus PQ
Getting the whole story
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s accountants, we know that assets and liabilities are just as important as income and expenditure when it comes to medium-term and long-term financial planning. Why then, you might ask, when the Chancellor stands up to give the Budget do we only hear about taxes and spending? That, unfortunately, is because central government, unlike any other sector, still relies on blunt statistical measures to forecast the future. The government too often looks to economists to do accountants’ work. There is, however, a glimmer of hope. At the end of May the government published the Whole of Government Accounts (WGA). Its sixth publication, it remains the world’s only comprehensive set of accounts for the entire public sector. It’s a credit to the government that they have taken this important step towards applying the financial rigour of professional accountancy to state finances. But more needs to be done in improving the usability by a range of stakeholders to support better policy decision making. A quick glance at the WGA proves uncomfortable reading. You would never hear them trumpeted in a Budget statement. For example, the public sector pension liability has continued to grow at a staggering rate, rising from £961 billion in 2010/11 to £1.5 trillion in
Gillian Fawcett outlines why the Whole of Government Accounts are so important 2014/15. It seems that government policies are failing to provide a check and a balance on the growing pensions debt. There is too much focus on addressing the short-term financial situation and not enough on addressing the ‘wicked issues’ that have the potential to store up significant trouble for the future. Another area of concern is around the liabilities for clinical negligence claims against
the NHS. Although the overall liability did not change significantly over the year, contingent liabilities for claims did rise by £2 billion to £14 billion over a six-year period. Again, this suggests that problems are being shifted into the future. Sadly, this is a pattern is repeated across the public sector, it’s a problem that we, as a profession must challenge before it’s too late. As the only accountancy body in the world to specialise in public sector finances, CIPFA is relentless in championing better financial management in government. Our members play an active role in raising and addressing these issues that affect the lives of so many people on a daily basis. But business too needs stable social and economic environments that cannot be delivered without proper accounting at a national level. A failure to use accrual information in fiscal and budgetary decision-making is leading to poor decisions, misallocation of resources and enhanced fiscal risk. Accountants, whether public or private sector, understand the perils of short-termism. I hope you will all take the time to have a look through the WGA and help raise the profile of this document, which must be the foundation for this country’s financial planning in future. PQ • Gillian Fawcett, Head of CIPFA’s Governments Faculty
ICAEW spotlight PQ
Put yourself in their shoes Tutor Sheridan Matthew Gray provides some helpful guidance on how to approach the Business Planning: Taxation exam
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magine you’ve spent hours learning challenging tax concepts. You feel technically strong. You know your way around your open book material like it was as familiar as your journey home from work. How are you going to convert that into a pass for your Business Planning: Taxation exam? It will help if you put yourself in the shoes of the individual in the question. For the purpose of this article I’ve assumed the role of a tax adviser. • Clients will not provide you with all the information you need. Exam questions generally have some ambiguity, and you will be expected to identify any further information that you need to finalise your advice. • Clients like to quickly find their way around a document. Use subheadings. This instantly cuts down the number of words you write, makes it easier for your marker (client) to understand which part of the requirement is being answered PQ Magazine July 2016
and will keep you on track in terms of structure. Adopt a brief (almost blunt) writing style, applying the information given by the client to the tax rules. Your client will want to know when action needs to be taken. An area frequently forgotten by candidates, but very important for a client, is the administration of tax. Inform your client when claims and elections need to be made. • Clients do not pay for factsheets. These are simply generic documents that many accountancy firms produce to give an overview of a particular area of tax. Avoid copying straight from your open book material, but instead take the information from the question and apply the tax rules to that specific scenario. Your client is not interested in learning tax, what matters is how the rules apply to them. • Clients do not provide information in a particular order. Most questions have a number of requirements and the
information you require to answer the requirements may well be spread over several pages and in a different order to the requirements. During your planning time you should be deciding which requirement(s) each bit of information relates to. • Clients often want you to make a decision. Make a recommendation if asked for and ensure you justify it. Clients will only pay for advice they have asked for. If a client stated that they were not interested in any VAT consequences and you went on to provide VAT advice, you would not be paid for this work. Similarly, you would not be given marks for this in the exam. Final thoughts Taking the time to imagine you are the actual individual in the question will help to focus what and how you write and hopefully lead to exam success. Access Business Planning: Taxation exam resources at icaew.com/examresources PQ • Sheridan Matthew Gray is a tutor at BPP Professional Education 27
PQ target costing
TARGET PRACTICE AAT and ICB Level 4 students, together with those studying Management Accounting at a more senior level, must read this article by Philip Dunn
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uch literature cites Japanese companies developing and using target costing – Toyota, Honda and Nissan are such examples. In the US, Caterpillar and Chrysler are examples where economic benefits of the technique have been noteworthy. Traditional pricing and costing . Full cost pricing has been the model used by many businesses in the past. Standards and standard costing technique was used to determine a product’s cost of labour and material, overhead was absorbed, a share of selling distribution and administration cost was added to achieve a product’s total cost. Price was then set by adding a desired profit margin. This additive model worked well and was appropriate when markets were less efficient and responsive as they are today. If the price was acceptable in the market it was only experienced when the product was actually introduced to potential customers. This could result in the price being either too high or too low and therefore a technique was developed that prevents pricing error and aids faster more focused product development. Targeting costing . “Target costing describes a process of first assessing a target price and then designing a product to meet this price.” (Hergeth) It is part of a total cost management system which moves away from traditional accounting to managerial accounting and moves decision making from an accountants perspective to the market place. It is a top down process: • Setting price • Setting profit • Setting cost The process is interactive and comprises three phases: market level, product level and component level (Cooper and Slagmulder 1999): Market Level Strategy • • •
Target Price Target Profit Target Cost
Product Level Design product to meet target cost
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Component level Design components to meet target cost Supplier management This can also be viewed as: Understand Customer Need Price Sensitivity
Value of Product Features
What Price
What Features
Set Profit Set Target Cost Target costing therefore builds upon a design to cost approach where the focus is a market driven price as a basis for establishing target costs. It is said of target costing that: • The costing process becomes a managerial tool to achieve successful product design rather than analysing historical data. • An economically relevant target price becomes the driver of the product development process. • It focuses on target price and market orientation and considers long-term marketing
strategy. Marginal Costing and Activity Based Costing tend to focus on short-term objectives. • It clearly provides relevant information and aids decision making, whereas the use of traditional absorption costing models tend to generate information not necessarily linked to the decision making process. The target costing process integrates many activities and tasks. The target costing team needs to be drawn from disciplines within an organisation to include: finance, manufacturing, purchasing and marketing. Management require in addition the Budgetary Control mechanism a participative approach to Target Cost Management. Conclusion . Although the technique in its simplest form is merely a model (target price – profit margin = target cost), today’s highly competitive market place and external environment can make the technique a strategic management tool. It can be incorporated into the management accounting portfolio and provide an organisation with economic value added and strategic benefit. It will allow an organisation to focus on the use of limited resources to maximise opportunity to achieve target return on investment. Readers are also referred to ‘A Practical Guide to Target Costing’ by Frank Robinson (a CIMA publication). PQ • Dr Philip E Dunn, Assessor and freelance writer, Kaplan Financial PQ Magazine July 2016
Enhance your reputation The CTA qualification is held in high regard by employers and their clients – and it contributes to career progression. It enhances reputation and value and ensures credibility of the individual and the employer.
Tax is Held in High Regard Find out more about how the CTA can help your career and to register as a student at: www.tax.org.uk/workingintax
PQ careers
It’s not about the money… Salary is important, but it’s not the be all and end all of your working life, say Karen Young
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alary is not the only important consideration when choosing your next role. To make the right choice, prioritise the factors about your job and career that you feel are most important to you, and then choose the job that is the best fit. Being aware of all the extras available to you is an essential part of the decision making process. Your benefits can make a big difference to your overall remuneration package and your long-term career with the organisation. Sometimes, it’s not all about the money. With your attention focused on the headline basic salary figure it can be easy to underestimate the importance of a good benefits package. According to the Hays UK Salary & Recruiting Trends 2016 report, 64% of part qualified accountants rated flexible working as important when considering their next job. Some 57% considered a holiday allowance of over 25 days annual leave to be important and 39% of respondents thought an above statutory pension is still a benefit worth having. However, the benefits accountancy professionals receive are not always in line with the ones that are important to them. For example, childcare vouchers are most commonly offered by finance employers, yet fewer than 10% of respondents said they were important when considering a new role. That is not to say that childcare vouchers will always be unimportant. The benefits we like can change at different points in our careers due to changes in
work and personal life. There is also a disparity between employers and employees over the importance of flexible working. When deciding between different jobs flexible working options are a priority for many, yet more than half of employees did not have flexible working options in their current job. PQs clearly value their work-life balance, with 58% of respondents saying it was the most important consideration to them when evaluating the pros and cons of a new job offer. Yet rather mistakenly only 11% of employers think encouraging a good work-life balance will help them to attract new talent. While home working or flexi-time may not be practical for all organisations, this can be an area where employers can stand out when competing for the best people. Ambitious people will naturally look for financial support for training from employers, not only for their initial professional accountancy qualification but continued professional development throughout their career. Both employers and employees see the value of financial training support. Over half of PQs (55%) ranked it as important and it is offered by
62% of finance employers. It is worth considering the study support on offer when deciding on a new job. The benefits package is a crucial part of a job offer so evaluate what is being proposed and ask your recruitment consultant to help negotiate the best package. There is a mood of confidence and ambition within part qualified accountancy. Almost all (98%) of PQs feel they have the skills necessary to do their current job. Yet almost half (46%) think there isn’t scope for progression within their present organisation. It is no surprise then that the opportunity for career development is considered the most critical factor when choosing a new role. Employers are more likely to hire candidates who demonstrate their desire to build a career at the organisation. So enquire about career development opportunities at interview. It goes to show that it isn’t all about the money! For more go to www.hays.co.uk/pq and for further information on your salary visit salaryguide.hays.co.uk PQ • Karen Young, Director, Hays Accountancy and Finance
Four great bookkeeping courses to give away! WE HAVE JOINED FORCES WITH HTFT TO OFFER PQ READERS FOUR SPACES ON ITS HUGELY POPULAR ONLINE BOOKKEEPING COURSES HTFT’s bookkeeping course is delivered ‘live online’ (evening sessions from 18.30 until 20.45) and is recorded – with recordings being made available as a ‘rewind and play’ option. Although free, these courses are so popular it is hard to get a place, but we have four reserved slots, just for you. The course covers the background to the preparation of accounts and the big three ‘need to learns’ – the dual effect, business entity concept and accounting equation. You will also look at recording transactions, statement of financial position, statement of profit or loss, double bookkeeping, balancing the ledger accounts and preparation of accounts. The next schedule course dates are 12 July, 19 July, 26 July, 2 August, and 8 August. To enter this great giveaway simply email graham@pqaccountant.com with your name and contact number, heading up your email ‘HTFT bookkeeping course’. Deadline for entries is Friday 8 July 2016.
* PQ magazine’s usual terms & conditions apply
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PQ Magazine July 2016
careers PQ
social media ROUND-UP PQ is sure there will be lots of ACCAs out there still lying down in darkened rooms after the June exams. Thanks for all your exam feedback. However, one of our favorite interactions during exam week took place on Open Tuition’s noticeboard, and it was all about bananas! One PQ said: “Apparently bananas are banned
from exam halls as people have been caught writing answers inside the skin and looking at them during the exam.” Another student wondered just how much you can write on a banana. There are obviously issues about the texture that would make it difficult, but the crux of the issue is, what could you put on the skin that you couldn’t learn in five minutes before the exam? So we asked if anyone had spotted a banana in the exam hall and Matt came straight back on Twitter to say he saw one in London in a P7 exam. Then Kerrib told us food was banned in F8 at Crystal Palace. It was on Facebook that we found a number of CIMA PQs who were all confused about the new PER requirements. Students were unsure whether to carry on with the old methods or use the new one. Lauren Doyle thought at “first glance the new method seems a bit easier to cover all the requirements, and a big plus is that it says it should be back within two weeks!” So we got CIMA’s director of operational delivery to write something in this issue, it’s on page 19. We were also tweeting out from the AAT Training Providers’ Conference. As we said: “First scoop of the day… Osborne Books has been taken over by Kaplan Publishing!”. Another popular retweet was: “You can now text ‘TPS’ with your email address (for verification purposes only) to 78070 if you want to stop nuisance phone calls.” And then out of the blue we got a great accountancy joke: “Never call an accountant a credit to their profession; a good accountant is a debit to the profession!” Oh how we laughed… PQ Magazine July 2016
Life at Kaplan Financial Julia Falvey, 32, Live Online Tutor and ICAEW Tax Product Specialist, based in London. She has worked there for seven years and has a degree in mathematics from Jesus College, Cambridge. ICAEW qualified, she is the current PQ Lecturer of the Year What time does your alarm clock go off on a working day? 5.45am: I like to have a cup of tea and to read with my children before I go to work. What’s the first thing you do when you get to your desk? Check emails: online students email far more than my classroom students. That takes an hour. What’s on your desk? Nothing, we have a clear desk policy. What’s the best thing about where you work? The people, both students and staff: everyone is very friendly and appreciative of any help you can give them. Where’s your favourite place to go for lunch? We haven’t been in the new office very long so I’m still trying different places.
What (or who) can you see when you sit at your desk? When I’m working at home it’s the Christmas decorations as I work in our loft. What are your favourites websites and why? kaplanlive onlinecommunity.co.uk, which is where our lecture recordings go. Which websites do you use for work? I like to find blogs on topics I’m teaching each week. How many hours a week do you spend in meetings? About an hour a week – we have virtual meetings. What time do you leave the office? If I have an evening class it’s 8.30pm – I’m starving by then! How do you relax? I’ve joined a book club, which has really
broadened my reading horizons. What’s your favourite tipple? Gin and tonic. How often do you take work home with you? I work from home at least two days a week. What is your favourite TV show? Madame Secretary and Elementary. Summer or winter? Winter – I burn easily! Who is your hero? Anyone who runs their own business. If you had a time machine, where would you go? Ancient Rome. If you hadn’t chosen accountancy, where might you be right now? Being a tour guide in London, it’s my current retirement plan.
time on tea breaks than on any form of work-based training!
elaborate scheme between 2006 and 2010.
Insider trader jailed Accountant Andrew Hind has been jailed for three-and-ahalf years for his role in a landmark insider trading case. His co-conspirator, banker Martyn Dodgson, was sentenced to fourand-a-half years for his role in Britain’s biggest insider-trading scam. Hind, a former FD at Topshop, passed on information from Dodgson to traders in an
Deloitte’s women partners Deloitte has unveiled 80 new partners, 24 of whom are women. The firm has established a series of programmes to identify and retain high performing female leaders, including a commitment to gender pay gap transparency, a return to work programme, and a sponsorship initiative for senior women within the company.
In brief Tea breaks or training? An AAT study has found a shocking 30% of finance staff have never had any form of workrelated finance training. That has led to 38% of employees in the finance industry searching online to find out how to do their job better, in their free time. In effect, that means many employees are spending more
The PQ Book Club: books you should read The World’s Most Inspiring Accountants by Steve Pipe, Susan Clegg and Shane Lukas (Added Value Solutions, £45) Of this book the joint authors say: “By helping accountants to understand the profound impact they can have, we hope it will inspire them to stand tall, inspire them to serve their clients better, inspire them to make more of a difference and inspire them to improve the reputation of the entire profession.” They certainly succeed in their aims. This brilliant book is divided into 62 mini chapters, featuring 57 firms in eight countries. Written with the accountancy professional in mind, this to me
takes a holistic approach to the sector. While there’s stack of informative stuff on how to make your business – and your clients’ businesses – make more money, there’s also a focus on the environment, work-life balance, leaving a legacy, and much more. The beauty of this book is its readability. Each chapter is typically just three or four pages long, and starts with a summary of what the accountants achieved for their client. It then explains how the desired change was achieved, and what the long-term impact was. The authors explain how accountants will go the extra mile for their clients – in the case of South Africa’s Middel &
Partners it was 1600km! That’s the distance accountant Coenie Middle travelled across the country to help put right the problems at Rustenberg Wines. This book really does put accountants in a good light, and comes highly recommended for both seasoned and young accountants alike. If the £45 price tag puts you off get the boss to buy a copy for the office to be shared around. But make sure you get your hands on it first, as it’s sure to be popular. Extensively researched and easy to read, the authors really do deserve a pat on the back. PQ rating 5/5 Inspirational! 31
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working better together Assistant Accountant
Finance Analyst
Corporate Finance, Central London
FMCG, Middlesex
£30,000 – £35,000
£35,000 – £40,000
• Part-qualified accountant. • This role has become available due to business growth; services offered by this company include audit and reporting; controls and systems process assurance; international tax services and process optimisation across both financial and management accounting. • This is a fantastic opportunity to use your language skills including fluent French and/or Spanish, however, languages are not a pre requisite. • This company is global and can provide a proactively studying part-qualified accountant with fundamental experience to support ACCA studiers specifically. • Reporting to the Finance Manager, you will have the opportunity to get involved in the end to end production of accounts for a number of small companies. • Duties also include; the preparation and filing of tax returns and financial statements.
• Part-qualified accountant. • This role sits within the procurement function of a market leading fast moving consumer goods organisation and is suitable for candidates with a focus on securing a dynamic career path looking to excel in their role of choice. • This company can demonstrate the ability to both support and nurture like minded individuals who are keen to build on existing analytical skills and develop their business partnering and decision support expertise. • The key responsibility of the role is to deliver financial reporting, planning and analysis of procurement performance, both for the Procurement team and also for the wider business. • Duties include; providing factories with new material pricing and managing requests with buyers. • Experience with working with cross-functional teams is desirable.
redefining financial recruitment T +44 (0)20 8408 9999 E info@walkerdendle.co.uk www.walkerdendle.co.uk
PQ got a story, funny or serious, you want to share? Email graham@pqaccountant.com
DON’T FORGET THE BONUS! Can you believe annual reports? Well, not if it is Legal & General’s! Boss Nigel Wilson was down in the latest report as receiving an annual pay package of £4.7m. But someone had forgotten about the small matter of a £781,000 long-term bonus, which raised his salary to a cool £5.5m. It has been reported that Deloitte, L&G’s remuneration consultant, discovered the ‘mistake’. Not the auditor, which is PwC! L&G has now apologised for the error.
PWC DEPLOYING FITTING TRIBUTE FROM UHY HACKER YOUNG? The Big 4 firms seem to have fingers
DRONES
in almost every pie these days. But even PQ magazine was surprised to read a story in the FT which said that PwC was joining the ranks of companies turning to drones and other new technologies to upgrade their business models. The group’s Poland division was apparently testing drones to help launch its commercial surveyor offering. PwC’s Michal Mazur is partner of the ‘drone-powered solutions division’!
DON’T THROW
IT IN THE AIR!
UHY Hacker Young recently announced it had replaced a famous Banksy artwork at its London HQ with a new piece from urban artist Pure Evil, as a tribute to the Queen for her 90th birthday! The new artwork, entitled ‘Prince Philip’s Nightmare’, depicts the Queen with black paint streaming from her right eye. It is a provocative anti-establishment piece and PQ magazine wondered what the Queen would actually think of it. There might be a few more roundhead accountants around than we might think! UHY Hacker Young’s ‘Lab Rat’ by Banksy is on tour, and can be seen in Rome.
IF THE CAP FITS
THE ACCOUNTANT – TEASER TRAILER OUT
The Accountant, the movie staring Ben Affleck, is coming soon to a cinema near you. If you can’t wait then perhaps you should take a sneak look at the teaser. Affleck plays accountant Christian Wolff, who looks like he serves up a great breakfast! He looks certain to turn out to be a wolf in sheep’s clothing! Catch it at www.youtube.com/watch?v=Qw_EO8qKydg
’ WEV E
KPMG may have to do some more risk assessments of its sponsorship deals after top golfer Phil Mickelson was named as a ‘relief defendant’ in a case of insider trading. It is believed that Mickelson has paid $1m to US regulators after benefitting from the scam. A picture of the golfer wearing his trademark KPMG cap accompanied practically every picture used with the story!
THE CAPITAL DOESN’T WANT ACCOUNTANTS
Poor old Zac Goldsmith didn’t stand a chance of being elected mayor. As one caller to the Vanessa Feltz radio show said: “…he’s like my accountant. Once he starts going I switch off. There’s no personality.”
The University of East Anglia is banning students in large groups from throwing their mortarboards in the air at their graduation ceremonies. Apparently there is a real risk of injury from such careless activity! The Health and Safety Executive has said the university is merely ‘repeating tired myths’ and the risks are ‘incredibly small’. The HSE also wanted to make it clear the law does not stop graduates having fun. UEA told PQ magazine it has not introduced a policy banning the throwing of mortarboards: “We have simply asked our photography supplier not to encourage it during large group sessions.” UAE explained it has taken this step because in each of the past two years students have suffered facial injuries. Last year a student needed treatment in A&E. “If individuals or small groups want to throw their mortarboards they can, but we don’t think doing it in groups of around 250 students is sensible.”
GOT THE L OT
Sudoku heaven
We have a four-book treat for all you Suduko fans out there. These books will keep you entertained for hours, and let you down slowly from all those hours you spend studying. The collection takes the puzzles from The Times and range from mild to fiendish. To be in with a chance of being sent one of these three great giveaways send your name and address to graham@pqaccountant.com. Head up your email ‘Sudoku’.
Win a toy kangaroo! PQ magazine spent a couple of days at Excel, not for the ACCA exams this time but for Accountex, the national accountancy exhibition and conference. One relatively new player there among the usual suspects was Aussie software company Reckon. And we reckon they had the best giveaway bag – so we blagged three for you. They include a toy Kangaroo, boomerang, sunglasses and other nick-nacks. To win this great giveway just head up your email ‘Reckon’ and send your name and address to graham@pqaccountant.com
Terms and conditions: One entry per giveaway please. You must send your name and address to be entered for the draw. All giveaway entries must be received by Friday 8 July. The main draw will take place on Monday 11 July 2016.
TO ENTER THESE GIVEAWAYS EMAIL GRAHAM@PQACCOUNTANT.COM 34
PQ Magazine July 2016
EXECUTIVE EDUCATION
COURSES IN NEW YORK
London School of Business & Finance (LSBF) has now joined forces with Manhattan Institute of Management (MIM), giving you the opportunity to study LSBF’s Executive Education courses in the heart of New York. • Postgraduate Certificate in Accounting and Financial Management • Postgraduate Certificate in Global Marketing • Postgraduate Certificate in Project Management • Postgraduate Certificate in Management Consulting • miniMBA
Internship opportunities available in New York. Find out more: www.LSBF.org.uk/pq-new-york | 020 3005 6236
Now there’s nothing standing in your way At De Broc School of Business you can expect leading-edge practical business education with a focus on your employability. This year you could be eligible for a UK government loan of up to £10,000, as well as a range of other funding options. Choose from postgraduate courses in: Finance | Marketing | Management | Human Resources
T: 0800 107 6766 E: admissions@debroc.ac.uk W: debroc.ac.uk/PQ