Financial Management (FM)


The two questions picked out from section A were the dividend growth model and interest rate risk.

When it comes to section B, the examiner keeps reiterating that if you are asked to select two correct statements then they need to see two – there is no partial marking! There also seems to be a problem with number entry. The examiner says: “If a number is being requested in millions, there will be an ‘m’ after the number entry box. If a candidate puts a full answer of say 13,000,000 in the box rather than 13, this will be marked as incorrect.”

The examiner is concerned about the number of candidates who are unable to correctly calculate the cost effects of introducing accounts receivable factoring or offering an early settlement discount. Please note that offering an early settlement discount will not increase the cash operating cycle!

When it comes to business finance there is a worry that some sitters use cum dividend share prices in the dividend growth model, rather than ex dividend prices.

The FM examiner says students struggle with the uses and limitations of the valuation models, rather than applying the models to produce valuation. Derivatives is another area where students are “not strong”.

For section C, candidates at the September diet were presented with questions drawn mainly from the June questions (see right) and the following:

• The nature, elements and importance of working capital.

• Adjusting for risk and uncertainty in investment appraisal.

• Sources of finance and their relative costs.

• Capital structure theories and practical considerations.

•Finance for small & medium sized entities (SMEs).


The examiner felt the performance in June was generally satisfactory. Summer candidates were well prepared in the subjects that feature regularly, such as performing a discounted cash flow appraisal of an investment project. However, they seemed less prepared when it came to determining working capital needs and funding strategies and estimating the cost of capital.

In section B, one question that caused a problem asked candidates to identify the effects on the company of changing the working capital financing policy from aggressive to matching. Students were unable to correctly forecast a quick ratio for a company, because they did not factor sales revenue growth into their revised receivables figure. A number of sitters also struggled with the question on portfolio theory and its relationship with the capital asset pricing model. Portfolio diversification does not reduce systematic risk!

The examiner wanted future candidates to note that if a question asks for the market value of loan notes, but not the total value, then the answer must be given as the market value for one nominal unit of the loan notes.

FM candidates are not strong on questions featuring derivatives. In June there was a question on testing the characteristics of options and future contracts.

The section C questions in this diet were drawn mainly from the following areas:

• Management of inventories, accounts receivables, accounts payable and cash.

• Determining working capital needs and funding strategies.

• Investment appraisal techniques.

• Allowing for inflation and taxation in DCF.

• Specific investment decisions.

• Sources of and raising business finance.

• Estimating the cost of capital.

Audit & Assurance (AA)


The examiner is pleased that almost all candidates attempted all 15 questions across the three OT cases. Section A in the September 2019 exam included, but was not limited to, questions on the following areas:

• Professional ethics and the application of ACCA’s Code of Ethics & Conduct.

• Substantive procedures, including bank and cash, share capital and inventory.

• Audit finalisation & review.

• Auditor’s reports.

The examiner said that for section A it is imperative that you ensure your knowledge of the IASs, relevant financial accounting and important areas of the syllabus such as auditor’s reports. Questions may test specific details of examinable documents including IASs, the code of ethics and CG code.

The September report reiterates the points made in June, that candidates can’t clearly explain the implications of deficiencies (see below). Similarly, a general knowledge of substantive procedures doesn’t help if you can’t tailor your answer to specific issues.


As with previous sessions large numbers of AA candidates did not explain how each issue can impact on the audit risk, and therefore were not awarded the second 0.5 mark! To explain audit risk, the examiner said you MUST (it was put in bold in the report) state the specific area of the financial statements impacted with an assertion (eg cut off, valuation, etc), or a reference to under/over/misstated, or a reference to inherent, control or detection risk.

Internal control questions remain highly examinable and performance in June 2019 was mixed. In common with previous sittings many candidates did not clearly explain the implication of the deficiencies. The examiner said: “It is important that the explanation fully details the impact to the company.”

There is also a call for PQs to strive to understand substantive procedures. Just learning a generic list of tests will not translate to exam success.

In this session there was also a question focusing on key audit matters (KAM). Performance here was ‘very disappointing’. In particular, a number of candidates demonstrated a lack of understanding of the appropriate use of an emphasis of matter paragraph. Other candidates just focused on materiality and modified auditor’s reports.

Performance Management (PM)


The examiner says that exam technique is an important aspect of success in this exam. Never answer the question that you want rather than the one you are given. In section B, the range of topics covered in the September 2019 exams were:

• Life-cycle costing.

• Pricing.

• Variance analysis.

• Throughput accounting.

• Short-term decisions.

Candidates were presented with questions drawn mainly from the areas of:

• Transfer pricing.

• Limiting factor analysis.

• Performance measurement.

• Cost volume profit (CVP) analysis.

• Budgeting.

Transfer pricing remains unpopular with sitters, says the examiner. Take a look at Portable Garage Company (March/June 2018) sample questions for help.

While candidates seem well prepared on budgeting, the examiner would like to see an ability to discuss the beyond budgeting approach.


The PM examiner knows that transfer pricing questions are never popular candidates. And while PQs seem able to calculate the very basic transfer price for one division, as soon as they have to calculate something that involves splitting out a total overhead cost into its fixed and variable components they seem stumped!

Many students also seem confused when asked to calculate and discuss a suitable transfer price. Some June sitters seemed to panic over the short-term decisions question, and did not even try to look for the easy marks – the examiner said there were plenty of these. When it comes to the balanced scorecard candidates need to understand the difference between a goal and a measure. A goal is an objective and should begin with the word ‘to’.

If you are asked to explain the advantages and disadvantages of a performance measure then the examining team wants to see an explanation, not bullet points.

Finally, for budgeting you must be ready to discuss the budgeting approach in relation to the organisation in question. Try to avoid a list of generic points.

Topics covered in section B of the June 2019 exam were:

• Cost volume profit analysis.

• Activity based costing.

• Target costing.

• Variance analysis.

• Decision making under risk and uncertainty.

• Budgeting.

For section C, candidates were presented with questions drawn mainly from the areas of:

• Transfer pricing.

• Short-term decisions.

• Variance analysis.

• Performance measurement.

• Divisional; performance measurement.

• Budgeting.