In the third of our series of guides, tutors share their insights on the Professional Level Audit and Assurance, Financial Management and Tax Compliance exams.
Audit and Assurance
The facts
Sittings: March, June, September and December
Duration: 2.5 hours
Pass mark: 55%
Format: six short-form questions (20%); three longer questions (80%)
Permitted texts or open book? Permitted texts – find out more here
Syllabus breakdown:
- Legal and other professional regulations, ethics, accepting and managing engagements and current issues (35%)
- Planning and performing engagements (40%)
- Concluding and reporting on engagements (25%)
The inside track
From Aaron Mortlock, First Intuition
For many students, this is one of the first exams where they’ve had to write a lot, so it can feel like quite a jump up from the ICAEW CFAB/Certificate Level. With Audit and Assurance, they can’t just memorise the learning materials – a lot of it has to be based on the scenario in the question – so students can get a bit of a shock when they first start attempting practice questions! They will be familiar with the broad content – planning, testing and reporting – from the ICAEW CFAB/Certificate Level Assurance exam, but now they have to go into a lot more depth. The syllabus is divided into three main areas: planning and performing the work (including how to test it), reporting, and then everything else that might affect an audit, such as legal and ethical considerations.
In terms of content, students tend to struggle most with explaining why they’re doing a test; I always say, ‘First tell me what you’re going to do, and then tell me why you’re going to do it.’ It’s the same with explaining the consequences of a risk: the examiners want to know not only how a risk materialises, but what the implications of that risk are for the company. In terms of the exam format, students often find it hard to judge how much they should write for the short-form section, and can quickly go over time. With the long-form questions, there can be a mental barrier of ‘I’m not an auditor, I don’t know how to write like an auditor.’ If that’s the case, I always advise them to look at the words they have written, look at the solution, and see how they differ.
The fundamental skill this exam assesses is communication – and communicating in a professional way. It’s about being able to build up an answer logically; building that story for the examiner. Professional scepticism is key, too: students are being asked to interrogate data to determine risk, and they need to be able to judge whether that data is correct or might be based on biased opinion. Don’t take everything at face value.
My top tip for approaching Audit and Assurance is to plan your answers. I’ve had plenty of students say, ‘I don’t have time to plan a question.’ To which I say, ‘Well then you don’t have time to write a proper answer!’ Just sum up the five or six points you want to make in one word each. There are a few big questions that come up regularly because they’re so fundamental – risks and how to address them, procedures and how to test them, and reporting implications – so have a structure in place. It’s important to practise a breadth of questions, including those you’re not so familiar with (the short-form questions in particular are on the whole syllabus).
When it comes to the day itself, make sure you read through the whole exam at the start to decide the order you plan to address the questions, and be disciplined about moving on to the next. If you find in practice that you’re always over time on the short-form questions, start with the long-form and work your way back. And if you have a tendency to get stressed and dive straight in, just pause for a second and take a breath. That way you’re taking control of the exam, rather than the other way around.
Financial Management
The facts
Sittings: March, June, September and December
Duration: 2.5 hours
Pass mark: 55%
Format: 3 questions
Permitted texts or open book? None
Syllabus breakdown:
- Financing options (35%)
- Managing financial risk (30%)
- Investment decisions and valuation (35%)
The inside track
From Juliet Good, BPP
The reason I like this exam, and the way the examiners do it, is that it’s very practical. Each question will have a scenario – the story of what’s happening in a particular organisation – and everything has to be related to that scenario. There are facts to learn, and how to do a calculation, but the crucial bit is then applying those facts to the scenario. That’s the big jump from the ICAEW CFAB/Certificate Level to the Professional Level, and the thing that students can find difficult.
The syllabus is divided into three main areas: investment decisions, financing and risk management. The first two used to be discrete topics, but now they tend to be combined, which makes sense – knowing where the finance is coming from if you’re going to invest somewhere. Risk management is the area that students tend to struggle with at the start, but ultimately end up doing well on. It’s technically difficult – it’s the first time students will have encountered options, for example – and there is a lot to get your head around. I always describe it as a lightbulb moment – the lightbulb will flicker for a while, but if you keep practising the questions, it will stay on!
Many students find the maths element of Financial Management challenging, particularly rearranging formulas. Spreadsheet software has been introduced this year, and in my experience most students have loved it; they’ve found it makes the exam easier rather than harder, and it certainly helps with the time pressure. There is a whole skill involved in that, though, using those spreadsheets efficiently and effectively. The other challenge is with the written marks, and learning how to take your answer and make it a good one. The temptation is to make a list of points, the advantages and disadvantages of a particular technique, but you won’t get the marks unless you apply it to the scenario.
Question practice is key, but don’t neglect learning the facts as well. You need to know a little about everything on the syllabus. Reading around the subject and being interested in finance really helps as well. The examiners go out of their way to make the questions relatable and practical, and will often use business stories from the news to create scenarios. One of the new parts of the syllabus, for example, is how to value a high-tech company that doesn’t have physical assets. It’s all very current, and that’s what makes it so interesting.
The most common mistake students make is learning the facts but not applying them. It’s all very well to memorise a list of bullet points, but you have to be able to turn them into full sentences – applied to the scenario – in the exam. The other thing to watch out for is that if you get a number that doesn’t make sense, don’t just plough on regardless! There’s a number called beta, for example, which is usually one or two. If you put a beta of 50 into the answer, you’ll just look like you don’t know what you’re doing. You need to have the understanding, and the confidence, to say, “I’ve spent long enough on this now, I’m going to stop, make a sensible assumption and move on.” Otherwise you can waste an awful lot of time worrying about it.
Tax Compliance
The facts
Sittings: March, June, September and December
Duration: 2.5 hours
Pass mark: 55%
Format: 5 questions
Permitted texts or open book? Permitted texts – find out more here
Syllabus breakdown:
- Ethics and law (5-10%)
- Indirect taxes (10-15%)
- Capital taxes (20-30%)
- Corporation tax (15-25%)
- Income tax and NIC (30-40%)
The inside track
From Simon Fox, Kaplan
Tax Compliance has a large syllabus – there’s a lot in it. You’ve got to work at it from day one. The maths is not that complicated, so it can appear straightforward, but it’s easy to get mixed up. This is not a cramming exam by a long shot – don’t wait until the week before to start revising. And the more question practice you do, the better. If you put the effort in, and sort out your time management and exam technique, it’s a very doable, fair exam.
I often advise students to start with question five and work backwards. Question five has the most marks. Question five is also the topic that students tend to find the easiest and most enjoyable: Income Tax and National Insurance. They often struggle with questions two and four, on indirect taxes (VAT and Stamp Duty) and Corporation Tax respectively. But if you do lots of question practice, it will start to click.
Although the detailed weighting changes, Tax Compliance will always include questions on those areas, along with ethics and law and capital taxes. I would start with question five and work my way back to question one – but obviously students should do whatever works for them and makes them feel most confident. Some prefer to get the more difficult questions out of the way first. Just make sure that whatever approach you take in practice, you do the same on the day. And when you’re practising questions or mock exams, do them properly – under time constraints, and without stopping after each part of a question, or when stuck, to look at the answer.
As with all these exams, lots of question practice is the key to doing well. If you’ve done all the questions in the question bank, you’re not going to be surprised on the day. Don’t waste your time rewriting notes from the textbook – it won’t go in – and get familiar with the tax tables (you’ll have clean copies in the exam). In the exam itself, focus on getting the easy marks. It’s important to show your workings and how you’ve arrived at your answer – that’s where the marks come from – and don’t forget that you need to copy and paste from the spreadsheet area into the word processing area. Make sure you’ve practised with the software in advance so that it becomes natural.
Time management is important, too: look at the clock, plan, move through the question – and move on to the next part or question when the time is up. One of my tips when practising questions is to start typing in a different colour when you reach the end of the allotted time – that way, you still get to finish the question but you can see how many marks you would have lost due to running out of time.
- Read our articles on the ICAEW CFAB and Certificate Level Accounting, Assurance, and Business, Technology and Finance exams here, and the Principles of Taxation, Law and Management Information exams here.
- You can find resources for all the Professional Level exams here. Remember that marks feedback is available in the event of a failed exam – find it under the ‘Examinations’ tab of your online training file.