Monday, 13 February 2012

Materiality – Its Use in Accounting and Auditing

Concept of Materiality  is widely used in the field of ‘Accountancy’ and ‘Auditing’. Information is material if its omission or misstatement can influence the economic decisions of the users taken on its basis. Furthermore, materiality relates to both the ‘Size’ and ‘Nature’ of an item.  

Concept of Materiality is used by “Accountant” and “Auditors” to perform their respective responsibilities in effective and efficient manner. Preparation of financial statements require use of significant estimates by management such as; accruals at closing dates, bad debt provision and disclosures of significant issues such as law suits by or against the company.  Management ensures that size of estimates is materially accurate and information of material nature is disclosed adequately in the financial statements such as related party transactions and events.

Auditing firms conduct audit as efficiently as possible without compromising its effectiveness. Audit firms also need to minimize its cost of providing services to its client to maximize its own profits. Setting a materiality threshold is one way to achieve this objective. Materiality levels for the amount and nature of transactions are calculated/decided during planning an audit engagement.  Most of the audit firms use a certain basis for determining quantitative threshold. Common practice is to take a certain percentage of ‘gross sales’, ‘net profit’, or ‘profit after tax’.  Legal transaction and issues are considered material due to their nature. Amount of such legal transaction and issues maybe small but its future financial impact on the operation of an entity may be critical to the users of financial information.

To understand and the concept of materiality and other underlying concepts used in preparing the financial statements visit my website:

Sunday, 13 November 2011

ACCA Study Tips - 25 Tips for ACCA Exam Success

Here are 25 tips to help you succeed in your ACCA Exams. Most success in ACCA examinations could be attributed to these simple guidelines which are applicable to all ACCA Examinations. I will cover paper specific advice in another article.

1. Planning: Always plan at the start of an exam session. During planning, consider the number of exams that you wish to take, the time you have for preparation, your work and family obligations and so on. Estimate the amount days you have for every exam that you plan to undertake.
2. Syllabus and Structure: Following the ACCA syllabus would help you concentrate on the examinable areas. Syllabus also illustrates the detail at which a particular subject matter is to be tested by reference to 'intellectual level' guidance of which can be found in the following article:
3. Examiner Approach Interview: Examiner Approach Interviews provide you direct insight into what exam markers are seeking in the answers given by candidates, which syllabus portions they regard to be most significant, and how they plan to approach the examinations in the future.
Examiner Approach Interviews can be viewed here:
4. ACCA Approved Study Texts: Candidates must always buy one of ACCA's approved study texts since they are thoroughly reviewed by ACCA for coverage of the whole syllabus and also for any amendments in the course outline.

5. Objective Oriented Approach:  Achievable goals must be set for each day and should focus on matters that will assist you in passing ACCA exams (e.g. a chapter per day).
6. Conceptualize:  Understanding the key concepts is essential for application of your knowledge in a given context and also for understanding the more advanced concepts in later examinations.
7. Seek Assistance: Get help right away and do not let stuff to pile up until it is too late.
8. Past Papers Practice: Thorough past exam paper practice under timed conditions is necessary to improve time and stress management.
Examination practice kits may be more suitable for practice of papers whose content is frequently changing such as Financial Reporting and Taxation.
9. Examiner Reports: Examiner Reports highlight the common problems faced by candidates during the exam. Exam technique could be improved by careful study of the examiner reports.
10. Marking Schemes:  Marking schemes can help students to understand the marking different range of question requirements. For example, if a 6 mark question asks to 'list' something, it would be appropriate to provide a brief list of six points. However, the question requires was to 'explain', it would be better to give three descriptive points.
11. Exam Paper Analysis: It may be helpful to look at the pattern of questions in past examinations. However, students not rely on just speculation. It shall only be used to identify key areas for putting greater focus on.
12. Examiner Analysis Interview:  Examiner Analysis Interviews detail the examiners' observation of the performance of the candidates in preceding exam attempts identifying the key flaws and the outlook of examinations in the future.
Examiner Analysis Interviews may be viewed through the following link:
13. Technical Articles: Student Accountant magazine provides numerous exam related articles discussing areas which have proved difficult for students. Technical articles may also hint at topics to be tested in upcoming examinations.
Technical Articles may be accessed through the following link:
14. Revision: Adequate time must be reserved for revision purposes. Exam Pass Cards may be helpful in case you are not fond of making own notes.
15. Visit the Exam Centre:  It is very important to know not only the exact location of the exam centre but also alternative routes to get there. You may plan a visit to the exam centre before the date of the exam just to be sure.
16. Sleep Well:  A fine sleep before the exam is vital in order to remain attentive and focused during the exam. So try and sleep timely so that you can rise early for the exam.
17. Stress Control: Try to think about positive things before the exam. Stay away from nervous students and try to relax.
18. Reading Time: Efficient use of the 15 minute reading ad planning time could assist you in writing relevant, thoughtful and organized answers in the examination. In Professional Stage exams, you may use this time to choose the right optional question.
19. Question Requirements:  Attention should be given to the specific requirement of every question. It would be a sheer waste of time if half way through the answer you realize that you have misunderstood question requirement.
20. Answer to the Point: It is more suitable dive straight into answering the question requirement directly instead of wasting valuable time in long introductions. An exception could be where you have been expressly required to write your answer in the form of a report.
21. Plan you Answers: Exam Markers always appreciate well-organized answers. Some planning at the beginning could assist you in giving the required structure and fluency to your answers.
22. Facilitate the Examiner:  Make every attempt to ensure that an examiner’s time is not wasted needlessly while marking your answer script due to for example poor handwriting or incorrect labeling. Candidates should cross out any rough workings clearly to prevent any misunderstanding.
23. Do not leave any question Unanswered: If you doubt you will be able to finish an in time, just write down a list of main points before answering the question in detail. Guess if you do not know the correct answer to a question after you have answered all questions that you knew the answers to.
24. Review: At the end of the exam, you may swiftly review your answer script for any noticeable errors. If you still have time left, try to improve your answers in the limited time left.
25. After the Exam: Try not to waste too much time discussing the exam if you have another exam scheduled soon. Get a good rest and arrive well prepared for the next examination.
For the complete article visit my website:

I hope these tips will help you in ACCA Exam preparation. I will be covering exam specific guidance in another article.