The Institute of Chartered Accountants in England and Wales

CORPORATE REPORTING

Edition 4

Study Guide

www.icaew.com
Contents

1 Introduction 1

2 Corporate Reporting 2

3 Permitted texts 4

4 Study guide 5

5 Syllabus and learning outcomes 35

6 Technical knowledge grids 41

7 Key resources 54
1 Introduction
ACA qualification
The ICAEW chartered accountancy qualification, the ACA, is a world-leading professional qualification in
accountancy, finance and business.
The ACA has integrated components that will give you an in-depth understanding across accountancy,
finance and business. Combined, they help build the technical knowledge, professional skills and
practical experience needed to become an ICAEW Chartered Accountant.
Each component is designed to complement each other, which means that you can put theory into
practice and you can understand and apply what you learn to your day-to-day work. Progression
through all the elements of the ACA simultaneously will enable you to be more successful in the
workplace and exams.
The components are:
Professional development
Ethics and professional scepticism
3-5 years practical work experience
15 accountancy, finance and business modules
To find out more on the components of the ACA and what is involved in training, visit your dashboard
at icaew.com/dashboard.

Study Guide 1
 2 Corporate Reporting
The full syllabus and technical knowledge grids can be found within the module study guide. Visit
icaew.com/dashboard for this and more resources.

2.1 Module aim

To enable students to apply technical knowledge, analytical techniques and professional skills to resolve
compliance and business issues that arise in the context of the preparation and evaluation of corporate
reports and from providing audit services.
Students will be required to use technical knowledge and professional judgement to identify, explain
and evaluate alternatives and to determine the appropriate solutions to compliance issues, giving due
consideration to the needs of clients and other stakeholders. The commercial context and impact of
recommendations and ethical issues will also need to be considered in making such judgements.
On completion of this module, students will be able to:
Formulate, implement and evaluate corporate reporting policies for single entities and groups of
varying sizes and in a variety of industries. They will be able to discern and formulate the
appropriate financial reporting treatment for complex transactions and complex scenarios.
Students will be able to evaluate and apply technical knowledge from individual accounting
standards and apply professional skills to integrate knowledge where several accounting standards
are simultaneously applicable and interact.
Analyse, interpret, evaluate and compare financial statements of entities both over time and across
a range of industries.
Explain the processes involved in planning an audit, evaluating internal controls, appraising risk,
gathering evidence and drawing conclusions in accordance with the terms of the engagement. In
addition, they will be able to perform a range of assurance engagements and related tasks.
Evaluate corporate reporting policies, estimates and disclosures in a scenario in order to be able to
assess whether they are in compliance with accounting standards and are appropriate in the
context of audit objectives.
Identify and explain ethical issues. Where ethical dilemmas arise, students will be able to
recommend and justify and determine appropriate actions and ethical safeguards to mitigate
threats.

2.2 Prior knowledge

This module assumes and develops the knowledge and skills acquired in the Financial Accounting and
Reporting module and in the Audit and Assurance module.
Background knowledge based upon the strategic elements of the Business Planning: Taxation, Business
Strategy and Financial Management modules will also be required in evaluating the business and
financial risks of reporting entities.

2.3 Ethics
Ethical codes will be those issued by IFAC and ICAEW. The ethical implications will be at both the
organisational level and for individuals, particularly with respect to the accountant in business.

2.4 Method of assessment

The Corporate Reporting module will be examined using a paper-based assessment of 3.5 hours. Each
exam will contain questions requiring integration of knowledge and skills, including ethics. Students will
be allowed to take any written or printed material into the exam hall subject to practical space
restrictions.

2 Corporate Reporting
 The exam will consist of three questions. Ethical issues and problems could appear in any of the three
questions.

2.5 Specification grid

This grid below shows the relative weightings of subjects within this module and should guide the
relative study time spent on each. Over time the marks available in the assessment will be within the
ranges of weightings below, but slight variations may occur in individual papers to enable suitably
rigorous questions to be set.
Weighting
Syllabus area (%)
Corporate Reporting Compliance
5565
Corporate Reporting Financial statement analysis
Audit and Assurance 3040
Ethics 510

Study Guide 3
 3 Permitted texts
At the Professional and Advanced Levels there are specific texts that you are permitted to take into your
exams with you. All information for these texts, the editions that are recommended for your
examinations and where to order them from, is available on icaew.com/permittedtexts.

Professional Level Examinations Permitted Text

Audit and Assurance

Financial Accounting and Reporting
Tax Compliance
Business Strategy
Financial Management
Business Planning No restrictions

Advanced Level Examinations

Corporate Reporting No restrictions

Strategic Business Management No restrictions
Case Study No restrictions

Business Planning: Banking/Insurance/Taxation and the Advanced Level exams have no restrictions so
you may take any hard copy materials into these exams that you wish, subject to practical space
restrictions.
Although the examiners use the specific editions listed to set the assessment, you may use a different
edition of the text at your own risk.
This information, as well as what to expect and what is and is not permitted in your exams is available in
the Instructions to Students. You will be sent this with your exam admission details and it is also
available on our website; icaew.com/exams.

4 Corporate Reporting
 4 Study guide
4.1 Help yourself study for your ACA exams
The right approach
1 Develop the right attitude
Believe in yourself
Remember why you're doing it
2 Focus on the exam
Read through the Syllabus in this
guide
3 The right method
See the whole picture
Use your own words
Give yourself cues to jog your
memory
4 The right recap
Review, review, review
Yes, there is a lot to learn. But thousands have succeeded
before and you can too.
You are studying for a good reason: to advance your
career.
This tells you what you are expected to know.
Keeping in mind how all the detail you need to know fits
into the whole picture will help you understand it better.
The Practical significance and Working context to
each chapter in this study guide put the material in
context.
The Learning objectives, and Section overviews in
the study manual show you what you need to grasp.
To absorb the information (and to practise your written
communication skills), you need to put it into your own
words.
Take notes
Answer the questions in each chapter
Draw mind maps
Try 'teaching' a subject to a colleague or friend
The Study Manual uses bold to highlight key points.
Try colour coding with a highlighter pen
Write key points on cards
Regularly reviewing a topic in summary form can fix it in
your memory. The Study Manual helps you review in many
ways.
Each Chapter Summary will help you to recall that
study session.
The Self-test actively tests your grasp of the essentials.
Go through the Examples in each chapter a second or
third time.
Study Guide 5
 4.2 Study cycle
The best way to approach the Study Manual is to tackle the chapters in order. We will look in detail at
how to approach each chapter below but as a general guide, taking into account your individual
learning style, you could follow this sequence for each chapter.

Key study steps Activity

Step 1 This topic list is shown in the contents for each chapter and helps you navigate
Topic list each part of the book; each numbered topic is a numbered section in the
chapter.
Step 2 The practical significance and working context sections for each chapter, set
Introduction out in this study guide, give you the big picture in terms of the context of the
chapter. The content is referenced by the Study Guide, and Examination
context guidance shows what the examiners are looking for and tells you why
the topics covered in the chapter need to be studied.
Step 3 Section overviews give you a quick summary of the content of each of the
Section overviews main chapter sections. They can also be used at the end of each chapter to
help you review each chapter quickly.
Step 4 Proceed methodically through each chapter, particularly focusing on areas
Explanations highlighted as significant in the chapter introduction or study guide.
Step 5 Take brief notes, if you wish. Don't copy out too much. Remember that being
Note taking able to record something yourself is a sign of being able to understand it. Your
notes can be in whatever format you find most helpful; lists, diagrams, mind
maps.
Step 6 Work through the examples very carefully as they illustrate key knowledge and
Examples techniques.
Step 7 Check yours against the suggested solutions, and make sure you understand
Answers any discrepancies.
Step 8 Review it carefully, to make sure you have grasped the significance of all the
Chapter summary important points in the chapter.
Step 9 Use the Self-test to check how much you have remembered of the topics
Self-test covered.
Step 10 Ensure you have ticked off the Learning objectives.
Learning objectives

Moving on...
When you are ready to start revising, you should still refer back to the Study Manual.
As a source of reference (you should find the index particularly helpful for this).
As a way to review (the Section overviews, Examination context, Chapter summaries and Self-test
questions help you here).
Remember to keep careful hold of the Study Manual you will find it invaluable in your work.

4.3 Detailed study guide

Use this schedule and your exam timetable to plan the dates on which you will complete each study
period as follows.
Revision phase your revision should be centred around using the questions in the ICAEW Question
Bank.

6 Corporate Reporting
Study
Period Practical significance
1 Introduction
So far you will have studied corporate
reporting and audit as separate (single
silo) subjects. However, in real life, audit
and corporate reporting are closely
linked.
Your Corporate Reporting paper is an
integrated paper. As you learn the
financial reporting topics, you will also
learn how to audit that particular area.
Stop and think
Do you feel you have a good grasp of
the audit and financial reporting
material studied at earlier levels? You
will need this in order to tackle this
paper.
Working context Approach
In all areas of Read through Chapter 1 of the Study Manual
accounting and carefully as it gives guidance on how to
reporting, individuals approach the integrated material. This is the
will need a working first time you have tackled an integrated
knowledge of paper.
International Financial
The key point to take in is that many of the
Reporting and Auditing
financial reporting chapters have a separate
Standards. A knowledge
'audit focus' section, which deals with the
of the background to
auditing aspects of the financial reporting
these standards is also
area you have just studied.
important.
Also note the changes which have arisen from
the application by the FRC of the EU Audit
Regulation and Directive set out in section 5.
In particular note that FRC ISAs are now
styled '(UK)' rather that '(UK and Ireland)'.
Exam requirements
70% of your paper is integrated, so it is a
good idea to start thinking in those terms
right away.
Due
Syllabus references and exam context Date
In the examination, candidates may be
required to:
Tackle integrated questions on financial
reporting and auditing
Appraise and explain the role and context
of auditing
Explain the nature and purpose of quality
assurance (both at the level of the firm
and the individual audit) and assess how
it can contribute to risk management
Explain the qualitative characteristics of
financial information and the constraints
on such information
Specific syllabus references for this
chapter are: 9(a), 10(a), 10(b), 14(h)
Study Guide 7
Study Due
Period Practical significance Working context Approach Syllabus references and exam context Date

2 Principles of corporate reporting
Before launching into the detail of
financial reporting and auditing
standards, it is important to understand
the principles that underpin them.
Stop and think
Can you think of any advantages and
disadvantages of a conceptual
framework?
While the Conceptual Chapter 2 is an important chapter as it deals
Framework and with the frameworks, regulatory and
conceptual, that underpin the rest of your
accounting principles
studies (sections 1 and 2).
may not seem directly
relevant to your This Study Manual (and your exam) focuses
everyday working life, on IFRS, but there are other reporting
in fact it forms the basis frameworks you need to know about,
of the approach particularly those that relate to smaller
followed in developing entities (section 3). Note the recent changes
IFRS. It can also be used to UK GAAP, mainly for smaller companies in
to establish the the UK.
accounting treatment
IFRS 13 Fair Value Measurement (section 4) is a
where there is no IFRS
2011 standard bringing together guidance on
on the subject.
fair value and requiring disclosures. It defines
Depending on where fair value as 'the price that would be received
you work, you may be to sell an asset or paid to transfer a liability in
required to consider an orderly transaction between market
other reporting participants at the measurement date'. IFRS
frameworks (UK, small 13 will crop up throughout the text in all
companies). kinds of contexts.
IAS 8 (section 5) could come up in any
context, particularly where the directors are
trying to change the accounting policy to
give a more favourable view. This also raises
ethical issues.
Section 6 summarises the key current issues
and points to where they are treated in more
detail.
Exam requirements
You may need to go back to first principles in
the Conceptual Framework for the correct
accounting treatment. However, you are
much more likely to come across IFRS 13 and
IAS 8 in an exam.
In the examination, candidates may be
required to:
Explain the impact of accounting
principles and bases on measurement in
corporate reporting, for example fair
value measurement
Appraise corporate reporting regulations,
and related legal requirements, with
respect to presentation, disclosure,
recognition and measurement A
statement of profit or loss and other
comprehensive income
Explain and appraise accounting standards
that relate to the impact of changes in
accounting policies and estimates
Explain and evaluate the impact of
underlying assumptions on financial
statements
Identify and explain current and
emerging issues in corporate reporting
Formulate, implement and evaluate
accounting and reporting policies for
single entities and groups of varying sizes
and in a variety of industries
Explain how different methods of
recognising and measuring assets and
liabilities can affect reported financial
position
Specific syllabus references for this
chapter are: 1(a) (e), 2(c), 2(d)

8 Corporate Reporting
Study Due
Period Practical significance Working context Approach Syllabus references and exam context Date

3 Ethics
In order that public confidence is
maintained in the accountant in
practice or in business, the highest
possible ethical standards must be
maintained. Ethical guidance is
provided through regulation and
professional codes of conduct.
However, the success of such codes and
regulation depends largely on the
integrity of the individual.
For an ICAEW Chartered Accountant,
the role of ethics is much broader than
simply monitoring his or her own
behaviour. The accountant is also
responsible for considering the
decisions and actions taken by others,
including fellow accountants and client
management and staff.
All ICAEW members, Chapter 3 revises the topic of ethics. Much of The IESBA Code of Ethics for Professional
including trainees, are the detail here will be familiar. However, at Accountants, the ICAEW Code of Ethics have
expected to comply the advanced stage: been covered in the Assurance and Audit and
with ethical guidance. Assurance manuals at the Professional Level.
The general principle of ethical behaviour is
However, as you Note however that the FRC have issued FRC
likely to be important.
become a more senior Revised Ethical Standard 2016. This replaces
member of staff, you Ethical dilemmas are likely to be less clear cut the 5 Ethical Standards for Auditors and
will become so you will be expected to use your ESPASE. Also note the changes made to
increasingly responsible judgement rather than simply repeating ethical guidance, in particular the additional
for ensuring that ethical ethical guidance. restrictions that apply to the provision of
standards are other services to public interest entity audit
Read section 3 carefully as this discusses
maintained. clients.
ethics from a financial reporting perspective
an angle you would not have seen in as much At the Advanced stage, there will be a
detail previously. Note, in particular, the greater emphasis on your ability to apply this
references to the UK Bribery Act 2010. knowledge to more complex business
scenarios.
Specific syllabus references for this
chapter are: 19(a) (e)

Stop and think

Can you think of any examples of

situations where an auditor may be
required to consider whether a decision
made by the management of a client is
ethical?

Study Guide 9
Study Due
Period Practical significance Working context Approach Syllabus references and exam context Date

4 Corporate governance Accountants are part of Chapter 4 deals with corporate governance. You must be able to understand the reasons
the corporate This is an important issue in the syllabus as it for the different governance structures as
Corporate governance regimes
governance regimes: be is both topical and has a significant impact on well as apply them and, where necessary,
(principle- or rule-based) are important
they auditors working business. Remember, in the exam, the identify weaknesses in those structures within
to help ensure companies are managed
with the audit auditing aspects of corporate governance and business scenarios.
effectively. Compliance with corporate
committee and financial reporting requirements are most
governance requirements is not
reporting on likely to be combined. Specific syllabus references for this
optional the auditor therefore needs
compliance (for chapter are: 13(a) (j)
to understand governance Make sure that you are familiar with the key
example, as required by
requirements and advise clients where provisions of the UK Corporate Governance
Sarbanes-Oxley), or
necessary on compliance issues. Code. Note the changes to the Code, which
internal auditors and
are set out in section 3.
accountants in business
Stop and think
operating and The OECD Principles of Corporate
monitoring the system Governance which you would not have
Can you think of situations where
of internal controls. encountered before and the Sarbanes Oxley
corporate governance has been
are also important from the international
ineffective post Enron? To what
perspective.
extent does the current UK Corporate
Governance Code prevent similar
failures in the future? How effective is
the UK Code compared to other
international equivalents (OECD
Principles of Corporate Governance,
Sarbanes-Oxley, for example)?

10 Corporate Reporting
Study
Period Practical significance
5 The statutory audit: planning and
risk assessment
It is essential that auditors plan their
approach to an audit appropriately, to
ensure that sufficient appropriate audit
evidence is obtained.
While planning is carried out by senior
members of the audit team, as an audit
senior, you will become increasingly
involved in planning activities.
Stop and think
Have you encountered a situation
where the audit plan had to be revised
during the audit, either due to a
planning failure or as a result of
evidence obtained during the audit?
Due
Working context Approach Syllabus references and exam context Date
Inappropriate planning Chapter 5 is the first of three chapters dealing Basic audit planning has already been
could mean that with the audit process. The danger here is covered in the Assurance and the Audit and
material transactions or that as much of the technical material looks Assurance manuals. At the Advanced Stage,
account balances are familiar from your earlier studies, you you will need to demonstrate your ability to
not audited correctly, underestimate the importance of these apply this knowledge to more complex
increasing the risk of chapters. business scenarios, with particular emphasis
material error in the on the risk of creative accounting and the
Watch out for the following areas. They're
financial statements. need for professional scepticism. Big data
likely to be examined:
and data analytics is a key topical issue.
Every member of the Professional scepticism (including the
audit team must Note that the FRC issued a number of revised
APB (FRC) briefing paper Professional
maintain professional ISAs (UK) in June 2016.
Scepticism: Establishing a Common
scepticism throughout Understanding and Reaffirming its Central Specific syllabus references for this
the audit, and this is Role in Delivering Audit Quality) chapter are: 10 (c), 11 (a) (j), 14(a),
crucial at the planning 18(b)
stage. Performance materiality
Creative accounting
Big data and data analytics
Study Guide 11
Study
Period Practical significance
6 The statutory audit: audit evidence
The auditor must obtain sufficient
appropriate audit evidence for each
transaction cycle and account balance
being audited. This involves collecting
audit evidence that is relevant to the
assertions being audited and the
business processes within the company.
When auditing certain accounts, such
as accounting estimates, opening
balances and related party transactions,
the auditor must obtain sufficient
evidence in accordance with the
specific requirements of the ISAs.
The exercise of professional scepticism
is of paramount importance. Auditors
are now required not only to maintain
professional scepticism, but also to
document how they have done so.
Stop and think
Have you encountered a situation
where the collection of evidence was
difficult? There may be a specific ISA to
assist in that area.
12 Corporate Reporting
Due
Working context Approach Syllabus references and exam context Date
In performing an audit, Chapter 6 looks at audit evidence, and the Collection of basic audit evidence has already
auditors must obtain sources and means of obtaining it. At this been covered in your previous studies, with
sufficient appropriate level it is unlikely that an exam question will emphasis placed on knowledge of the
audit evidence. Failure test the detail of an individual ISA, however relevant ISAs. At the Advanced Stage, there
in this context can lead you could be required to state the audit will be a greater emphasis on your ability to
to inappropriate procedures you would perform in a given apply this knowledge to complex business
auditor's reports being situation so you must be familiar with all scenarios, and draw on your financial
produced and could aspects of this topic. Again this is likely to be reporting knowledge.
leave the auditor open combined with accounting issues.
to professional discipline Note that the FRC issued a number of revised
Pay special attention to the following areas, ISAs (UK) in June 2016. See section 1 for
and criminal charges.
with which you may be less familiar: revised financial statement assertions.
Information technology Using the work of others
facilitates audit work Specific syllabus references for this
(through the use of Professional scepticism at the audit chapter are: 14(a) (i)
CAATs), but it also fieldwork stage
brings about increased Work through the Self-test questions. Note
audit risk. Auditors must how these require you to have up-to-date
understand the impact knowledge of financial reporting.
of technological
developments on the
business and on the
audit.
Study
Period Practical significance
7 The statutory audit: evaluating and
testing internal controls
The evaluation of internal controls at
the planning stage, and the testing of
these controls at the fieldwork stage,
form a crucial part of any audit.
Businesses today operate in
computerised environments. Auditors
therefore need to be familiar with
internal control activities in an
computerised environment. Cyber-
security is a key risk to the business and
therefore an issue the auditor must
consider.
Stop and think
If you have been involved in audit
planning, think back to your most
recent experience: how has the
evaluation of the system of internal
controls informed the audit strategy
and audit plan?
Due
Working context Approach Syllabus references and exam context Date
Auditors must consider Most of Chapter 7 should already be familiar Internal controls have been covered at the
internal controls to you from your earlier studies. However, Professional Level. At the Advanced Level,
throughout the audit spend some time on the section on service there will be a greater emphasis on your
process: from planning organisations, which go into more detail than ability to apply this knowledge to more
to audit fieldwork and you would have seen before. complex business scenarios, including cyber-
finalisation. Appropriate security issues.
The auditor's responsibilities with regards to
evaluation and testing
of internal controls, internal control from a corporate governance Specific syllabus references for this
including those relating perspective is discussed in Chapter 4. Make chapter are: 12(a) (g), 13(h)
to cyber-security helps sure you cross-reference back to that chapter.
auditors to identify
areas subject to risks of
material misstatement,
and ensures appropriate
further audit
procedures are carried
out.
Almost all audit firms
now use CAATs to test
application controls.
Study Guide 13
Study
Period Practical significance
8 The statutory audit: finalisation,
review and reporting
Towards the end of the audit, the
auditor will still be collecting audit
evidence concerning the financial
statements. They will focus on
obtaining written representations,
considering subsequent events and
going concern.
Stop and think
You may not have been involved in
audit completion; however, you may
want to consider how uncorrected
misstatements could be carried forward
and affect the audit opinion.
14 Corporate Reporting
Due
Working context Approach Syllabus references and exam context Date
Audit conclusion and Chapter 8 on review and reporting concludes The principles of audit completion and
reporting is important the audit process. It is one of the key decision reporting have already been covered in the
for auditors. Any error making stages of the audit where judgement Assurance and the Audit and Assurance
in the audit opinion can will need to be applied. Ensure that you are manuals at the Professional Level. At the
lead to personal liability familiar with ISA 450, discussed in section 1. Advanced Level, there will be a greater
for the audit partner The principles regarding subsequent events, emphasis on your ability to apply this
and adverse publicity going concern and written representations knowledge to more complex business
for the audit firm. should be revision, but you will need to be scenarios.
able to apply your knowledge in a complex
Note the technical changes in this chapter
scenario. Also note the changes to going
resulting from the FRC revised ISAs (UK). Also
concern reporting introduced by ISA (UK)
note that Bulletin 2010/2 has been replaced
570 (Revised June 2016) Going Concern.
with Bulletin: Compendium of Illustrative
These are described in section 3.
Auditor's Reports on United Kingdom Private
You will be expected to have a thorough Sector Financial Statements for Periods
understanding of the UK auditor's report. This Commencing on or After 17 June 2016. This
is covered in section 6. Note that the FRC has was issued in October 2016.
issued revised audit reporting standards
including a new standard ISA (UK) 701 Specific syllabus references for this
Communicating Key Audit Matters in the chapter are: 15(a) (e)
Independent Auditor's Report.
Read section 6.5 carefully and note the
revised responsibilities of the auditor in
relation to other information, in particular the
need to include an 'other information' section
in the auditor's report.
Work through the Interactive and Self-test
questions. As you can expect, you will again
need financial reporting knowledge to do
well in these questions.
Study
Period Practical significance
9 Reporting financial performance
Financial markets constantly require up-
to-date corporate information.
Reporting frequency has increased, with
interim reporting playing an important
role in the corporate reporting cycle.
The preparation of interim financial
statements may present a number of
challenges. It is common for some
business arrangements, such as supply
pricing agreements, bonus schemes,
taxation and overhead allocation, to be
based on annualised approaches. The
measurement and presentation of such
information may therefore be complex.
External users of financial statements
rely on the limited disaggregation
provided as a result of the requirements
of accounting standards such as the
disclosure of discontinued operations
and segmental information.
Stop and think
What are the challenges presented in
preparing interim financial reports?
How does disaggregation of data help
facilitate the assessment of a company's
performance?
How do standards such as IFRS 5 and
IFRS 8 help provide disaggregated
information to users?
What is the significance in terms of the
company's performance of disclosing
related party transactions?
Due
Working context Approach Syllabus references and exam context Date
As an ICAEW Chartered Chapter 9 addresses seven standards: IAS 1, In the examination, candidates may be
Accountant, you will IFRS 8, IFRS 5, IAS 24, IFRS 1, IAS 34 and IFRS required to:
need to prepare both 14. Appraise the significance of
year-end and interim inconsistencies and omissions in reported
financial reports. You have studied IAS 1(revised 2011) in information in evaluating performance
depth at earlier levels. IAS 34 Interim Financial
In a working context Compare the performance and position
Reporting (a new topic at Advanced Level)
you will need to identify of different entities, allowing for
lays down the principles and guidelines for
and present information inconsistencies in the recognition and
the production of interim reports.
on reportable measurement criteria in the financial
segments, identify and Regarding the other standards, you will have statement information provided
disclose related party acquired a thorough knowledge in your
transactions and apply Make adjustments to reported earnings in
earlier studies both of their subject matter
the requirements of a order to determine underlying earnings
and their application and how in providing
number of standards and compare the performance of an
disaggregated information they enhance the
that have been covered entity over time
reporting of performance.
at Professional Level Calculate and disclose, from financial and
such as accounting for IFRS 14 Regulatory Deferral Accounts is in the
other data, the amounts to be included in
revenue, changes in syllabus, but is not a key topic.
an entity's financial statements according
accounting policies, You need to note the importance of these to legal requirements, applicable financial
and discontinued standards when you study the later chapters reporting standards and accounting and
operations. on financial statements analysis. reporting policies
There are two audit focus sections in this Demonstrate and explain, in the
chapter, one dealing with general application of audit procedures, how
performance reporting issues, and one with relevant ISAs affect audit risk and the
specific issues. evaluation of audit evidence
Specific syllabus references for this
chapter are: 2(a), 2(b), 2(c), 2(d), 14(f)
Study Guide 15
Study
Period Practical significance
10 Reporting revenue
The starting point for this new topic of
construction contracts is to appreciate
the accounting problem, in that if a
construction contract takes a
considerable time to complete and the
profit is only recognised at the end of
the contract, then no profit is
recognised as the work is carried out
over the period of the contract. IAS 11
attempts to deal with this problem by
recognising contract revenue, costs and
profits as the contract progresses. But
to avoid overstatement of profits and
dividend payments, IAS 11 requires any
expected loss on a contract to be
recognised immediately.
Stop and think
An entity has a contract to build a large
suspension bridge which will take three
years to build and span four accounting
periods. It is anticipated that the bridge
will earn the entity 1 million of profit.
Surely it is wrong to wait for four
accounting periods before recognising
any of this profit?
16 Corporate Reporting
Working context Approach
As with lessor Read quickly through section 1 of this
accounting you will find chapter as it is material that has been
that entities which covered in depth in Financial Accounting
enter into construction and Reporting, that is revenue recognition.
contracts are specialists In particular make sure that you can deal
in this area. However it with the interactive questions on revenue
is entirely possible that recognition.
you could come across
Read through section 2 carefully noting
them in your work as
firstly the definition of a construction
an ICAEW Chartered
contract and the difference between fixed
Accountant.
price and cost plus contracts. Make sure
that you understand how contract
revenue, costs and profits are allocated to
accounting periods. You must also be able
to explain how and why the accounting
treatment of an expected loss is different
in that it must be recognised immediately.
Section 3, on current developments, will
not be tested in detail, but you should be
aware of the main changes which will be
introduced by IFRS 15 when it comes into
force. The new standard will have a
significant impact in practice.
IAS 18 is still the examinable standard, and
questions will be set in terms of IAS 18.
IFRS 15 comes into force in 2018. However,
while IAS18 should be applied as the
current standard, it is also necessary to
have an awareness of IFRS 15 as a current
issue and in planning for the future impact
on the financial statements.
Finally, study the audit focus section and
have a go at the interactive question.
Due
Syllabus references and exam context Date
In the examination, candidates may be
required to:
Explain how different methods of
recognising and measuring assets and
liabilities can affect reported financial
performance
Explain and appraise accounting
standards that relate to reporting
performance: in respect of [] revenue;
construction contracts
Calculate and disclose, from financial and
other data, the amounts to be included in
an entity's financial statements according
to legal requirements, applicable financial
reporting standards and accounting and
reporting policies
Determine for a particular scenario what
comprises sufficient, appropriate audit
evidence
Design and determine audit procedures
in a range of circumstances and
scenarios, for example identifying an
appropriate mix of tests of controls,
analytical procedures and tests of details
Demonstrate and explain, in the
application of audit procedures, how
relevant ISAs affect audit risk and the
evaluation of audit evidence
Specific syllabus references for this
chapter are: 1(e), 2(a), 2(b), 2(d), 14(c),
14(d), 14(f)
Study Due
Period Practical significance Working context Approach Syllabus references and exam context Date

11 Earnings per share
Earnings per share (EPS) is one of the
most commonly used performance
measures worldwide. Moreover, it is
also a component in the price earnings
ratio which is a key summary statistic in
business valuation. IAS 33 Earnings per
Share seeks to provide guidance to
ensure a consistent basis is followed so
that a meaningful comparison can be
made over time.
In addition to basic EPS, IAS 33 requires
a diluted figure which takes into
account the existence of convertible
instruments already issued that could
increase the number of shares.
Additional EPS figures are often
reported by entities based on what they
consider to be sustainable earnings.
These are intended to provide a more
realistic measure of future performance.
As an ICAEW Chartered Chapter 11 addresses IAS 33 Earnings per In the examination candidates may be
Accountant, you will Share. You will have had a working required to:
need to calculate basic knowledge of IAS 33 from earlier studies
Explain and appraise accounting
earnings per share and including the calculation of basic and diluted
standards that relate to reporting
diluted earnings per earnings per share (EPS).
performance: in respect of EPS
share where applicable.
Advanced Level addresses further aspects of
You will also need to Analyse financial statements using EPS
dilution including the effect of options.
appreciate the
significance of Specific syllabus references for this
additional EPS figures chapter are: 2(b), 2(d)
and how these may be
calculated to provide a
more stable
performance measure.

Stop and think

What is the impact of bonus issues,

rights issues and share consolidations
on EPS?
What is the impact of convertibles,
options and contingently issuable
shares on EPS?

Why are additional EPS measures often

disclosed?

Study Guide 17
Study
Period Practical significance
12 Reporting of assets
Inventories can often be the most
significant current asset in an entity's
statement of financial position.
In addition, whether an asset is
capitalised or not, the value attributed
to it and how it is depreciated or not
has a significant impact on the financial
statements
Entities also invest in property (IAS 40)
for the potentially attractive returns that
are available from capital gains and
rental income. Measuring such
investment properties as a series of out-
of-date historic costs is not an
appropriate reflection of volatility
caused by changes in property values.
Since the use of a historic cost model
was not seen as wholly appropriate for
accounting for agricultural activity, the
IASB issued IAS 41 Agriculture based on
a fair value model.
Entities such as those in the oil and gas
industry follow a wide range of
practices for the accounting of
exploration and evaluation expenditure
(IFRS 6).
Stop and think
Why do entities hold investment
properties? What are the financial
reporting challenges in their
recognition and continued
measurement How do we distinguish
between biological assets and
agricultural produce?
18 Corporate Reporting
Due
Working context Approach Syllabus references and exam context Date
As an ICAEW Chartered Section 1 gives a brief revision of standards In the examination candidates may be
Accountant you may covered in great detail in terms of content required to:
need to value and application at Professional Level. Explain how different methods of
inventory, including recognising and measuring assets and
They address the reporting of assets,
work-in-progress in liabilities can affect reported financial
impairment, liabilities, provisions and
service industries. You position
contingencies and events after the reporting
may need to exercise
period. These are likely to be examined in an Explain the preparation of a consolidated
judgement as to
integrated way with other areas at Advanced statement of profit or loss in the context
whether an asset is
Level. of the single entity concept, substance
capitalised or not and
assess impairment for Revise the main principles and attempt the over form and the distinction between
both tangible and interactive questions. Go back to your earlier control and ownership
intangible non-current studies if you have a problem answering
these. Use the Self-test questions for further Explain and appraise accounting
assets.
revision. standards that relate to assets and non-
financial liabilities for example: property,
Working in the context
The rest of the chapter deals with the plant and equipment; intangible assets,
of the agricultural
following industry specific standards, IAS 40, held-for-sale assets; inventories;
sector or of extractive
industries you will need IAS 41, IFRS 4 and IFRS 6. investment properties; provisions and
to make judgments on You will have detailed knowledge of IAS 40 contingencies
the valuation of Investment Property both in terms of content Demonstrate and explain, in the
biological assets/the and application from your earlier studies. application of audit procedures, how
appropriate
This is likely to be tested at Advanced Level is relevant ISAs affect audit risk and the
capitalisation of
in an integrated way with other standards. evaluation of audit evidence
expenditure.
Make sure that you study the audit focus Specific syllabus references for this
In a working context section at the end of the chapter to ensure chapter are: 3(a), 3(b), 14(c), 14(d), 14(f)
you may be required to that you are well prepared.
identify an insurance
You need to be aware of the scope and basic
contract; understand
application principles of the other standards
the various forms that
in this chapter which you are encountering
an insurance contract
for the first time at Advanced Level.
may take and set out
the disclosure
requirements, especially
as regards risk.
Study
Period Practical significance
13 Reporting of non-financial liabilities
Regardless of how quickly the financial
statements are published after the end
of the year, subsequent events and
transactions can be so significant that
they need to be considered for either
disclosure or adjustment or (in extreme
situations) for their effect on the
underlying principle of going concern.
IAS 10 Events After the Reporting Period
deals with the treatment of these issues.
IAS 37 Provisions, Contingent Liabilities
and Contingent Assets has strengthened
the required treatment of provisions in
this area, which is now more objective
and restrictive. Provisions need to be
recognised on the basis of obligations
rather than management intentions.
Stop and think
What type of events could be classified
as adjusting or non-adjusting
respectively?
What type of events could affect the
underlying principle of going concern?
Why should the date on which the
financial statements were authorised be
disclosed?
Due
Working context Approach Syllabus references and exam context Date
In a working Sections 1 and 2 of this chapter should be In the examination candidates may be
environment you will mainly revision from your earlier studies. required to:
have to assess Make sure you do all the questions, and look
Explain how different methods of
transactions and events back to your earlier studies if you are still
recognising and measuring assets and
taking place after the unsure.
liabilities can affect reported financial
reporting period and
Section 3 on current issues should be read position
advise how these through to get an overview, but will not be
should be accounted tested in detail. Explain and appraise accounting standards
for or disclosed. You that relate to assets and non-financial
The audit focus section will help you with the
will need to identify the liabilities, for example provisions and
integrated questions on this area.
appropriate cut-off date contingencies
which will depend on
the process of Identify and explain current and emerging
authorisation and the issues in corporate reporting
reporting entity's Demonstrate and explain, in the
jurisdiction. application of audit procedures, how
You will be required to relevant ISAs affect audit risk and the
identify circumstances evaluation of audit evidence
in which provisions will
Specific syllabus references for this
be required and when
chapter are: 1(e), 3(a), 3(b) 14(c), 14(d),
contingent liabilities or
14(f)
contingent assets
should be recognised.
Study Guide 19
Study
Period Practical significance
14 Leases, government grants and
borrowing costs
Lease finance is a common route to
acquiring operating assets. The
classification of leases is a particularly
sensitive issue for corporate entities. If
leases are capitalised, financial gearing
will increase and this may have adverse
consequences on other key ratios, such
as return on capital employed and
interest cover and the level of perceived
risk may increase.
Sale and leaseback arrangements can
provide entities with capital funding by
releasing capital caught up in the
business for investment in other core
opportunities.
Stop and think
Why is the classification of leases
important when analysing financial
statements?
Why is the unguaranteed residual value
of a leased asset important?
Why do companies enter into sale and
leaseback transactions?
20 Corporate Reporting
Due
Working context Approach Syllabus references and exam context Date
In a working context You will have covered IAS 17 Leases in great In the examination candidates may be
you may have to decide detail in your earlier studies, including sale required to:
on the classification of a and leaseback transactions.
Determine and calculate how different
lease and may need to
Revise the topic through interactive questions bases for recognising, measuring and
review contractual
and ensure you understand the different classifying financial assets and financial
arrangements to
scenarios relating to sale and leaseback. You liabilities can impact upon reported
determine whether
will later encounter sale and leaseback performance and position
these contain a lease.
transactions again in practical real life
You may also have to situations in Chapters 23 and 24 on financial Show, explain and appraise accounting
account for borrowing analysis. standards that relate to an entity's
costs and government financing activities which include:
It is important to understand the related
grants. financial instruments; leasing; cash flows;
accounting requirements to appreciate how borrowing costs; and government grants
such transactions may lead to a boost in
profits, reduction in assets and consequent Appraise and evaluate cash flow measures
improvement in return on asset ratios. and disclosures in single entities and
groups
Note the requirements of IFRIC 4 which you
will not have encountered in earlier studies. Identify and explain current and emerging
issues in corporate reporting
Revise IAS 20 and IAS 23 through interactive
questions and earlier material if necessary. Design and determine audit procedures in
a range of circumstances and scenarios,
IAS 17 was criticised, and in 2016 it was for example identifying an appropriate
replaced by IFRS 16Leases, which brings all mix of tests of controls, analytical
leases into the balance sheet for lessees. This procedures and tests of details
will not be examinable in detail, but you
should have an awareness of the proposals as Specific syllabus references for this
a current issue. chapter are: 1(e), 4(a), 4(b), 4(d), 14(c),
14(d), 14(f)
IAS 17 is still the examinable standard, and
leasing questions will be set in terms of IAS
17. IFRS 16 comes into force in 2019.
However, while IAS17 should be applied as
the current standard, it is also necessary to
have an awareness of IFRS 16 as a current
issue and in planning for the future impact
on the financial statements.
Study
Period Practical significance
15 Financial instruments: presentation
and disclosure
The detailed qualitative and
quantitative disclosures required by
IFRS 7 are intended to provide to the
users of financial statements an
understanding of the significance of
financial instruments for the entity's
position and performance and an
analysis of the risks to which the entity
is exposed and how it manages them.
Stop and think
What is the significance of the
classification of convertible stock
between debt and equity?
Why was it necessary to issue a detailed
standard on disclosures?
Due
Working context Approach Syllabus references and exam context Date
You will need to Chapter 15 covers the presentation and In the examination candidates may be
prepare detailed disclosure requirements of IAS 32 and required to:
disclosures for financial IFRS 7.
Determine and calculate how different
instruments and
Although you will have a detailed knowledge bases for recognising, measuring and
establish the correct
of IAS 32 from earlier studies, the importance classifying financial assets and financial
presentation of
of this topic cannot be underestimated. Make liabilities can impact upon reported
preference shares and
sure you understand the issues relating to the performance and position
convertible instruments
accounting of compound financial
between debt and Show, explain and appraise accounting
instruments.
equity. standards that relate to an entity's financing
At Advanced Level, you will be concerned activities which include:
with more complex issues than at Professional financial instruments
Level, for example the sometimes
controversial arguments about the distinction Specific syllabus references for this chapter
between debt and equity. are: 1(e), 4(a), 4(b), 4(d), 14(c), 14(d),
14(f)
Look in particular at the qualitative disclosures
required by IFRS 7 for each type of risk.
Auditing financial instruments is dealt with at
the end of Chapter 17.
Study Guide 21
Study Due
Period Practical significance Working context Approach Syllabus references and exam context Date

16 Financial instruments: recognition
and measurement
The use of financial instruments by
business for funding, investment and
risk management purposes is an
essential part of operations. Examples
of financial instruments include the use
of foreign currency to purchase assets
from abroad, debt instruments such as
debentures or convertible corporate
bonds and derivative instruments such
as swaps, options, and futures.
Financial instruments, especially
derivatives can significantly change the
risk profile of organisations. Therefore
the IASB requires that fair value
measurement is used for some financial
assets and liabilities.
In a working Chapter 6 builds on knowledge brought
environment you will forward from earlier studies and takes the
have to account for areas of recognition, derecognition and
financial assets and measurement of financial instruments further.
liabilities including
Work through the summary of material
derivatives and
covered in earlier studies as this is a complex
embedded derivatives
topic.
and identify the
appropriate treatment Make sure you are familiar with the
when recognition and accounting treatment of financial assets and
derecognition criteria liabilities by going through the overview
are met. before moving onto section 2 on recognition
and derecognition.
Note the accounting treatment of transaction
costs in section 3.3 of this chapter.
Work carefully through section 4 on
derivatives including all the worked examples,
interactive questions and illustrations.
In the examination candidates may be
required to:
Determine and calculate how different
bases for recognising, measuring and
classifying financial assets and financial
liabilities can impact upon reported
performance and position
Show, explain and appraise accounting
standards that relate to an entity's
financing activities which include financial
instruments
Identify and explain current and
emerging issues in corporate reporting
Specific syllabus references for this chapter
are: 1(e), 4(a), 4(b), 4(d), 14(c), 14(d),
14(f)

Stop and think Study carefully the section on embedded

How are transaction costs recognised?
What are the derecognition rules for
assets and liabilities?
How are impairment losses recognised?
What instruments qualify as derivatives
for accounting purposes?
What is the accounting treatment of
derivatives?
derivatives noting their key characteristics and
the required accounting.
Note in particular the need where relevant, to
separate the host instrument from the
embedded derivative. (This will change for
financial assets when IFRS 9 comes into
force.)
IAS 39 is still the examinable standard. You
should be aware of the changes in
IFRS 9 as a current issue. IFRS 9 comes into
force in 2018.
Auditing financial instruments is dealt with at
the end of Chapter 17.

22 Corporate Reporting
Study
Period Practical significance
17 Financial instruments: hedge
accounting
Most entities which are exposed to
various financial risks employ hedging
techniques to reduce fluctuations in the
value or cash flows of financial
instruments. Hedge accounting
attempts to reflect the economic
aspects of hedging in the accounting
treatment of such relationships. The
hedge accounting requirements of the
international accounting standards
require the recording of strategies and
measurement of the effectiveness of the
hedges. Entities must, therefore,
develop and maintain systems,
processes and documentation. Entities
will normally undertake a cost/benefit
analysis to determine whether or not to
undertake hedging strategies and
hedge accounting.
Stop and think
What is hedge accounting?
What is a hedged item?
What is a hedging instrument?
What is the difference between the
different types of hedges?
What are the qualifying criteria for
hedge accounting?
How is hedging effectiveness
measured?
Due
Working context Approach Syllabus references and exam context Date
In a working Chapter 17 is perhaps the most complex and In the examination candidates may be
environment you may demanding in this text and likely to take you required to:
have to test hedging the longest to study.
Determine and calculate how different
transactions to establish
Study carefully the three types of hedges and bases for recognising, measuring and
whether these qualify
work through all worked examples and classifying financial assets and financial
for hedge accounting,
interactive questions. liabilities can impact upon reported
to prepare the
performance and position
necessary Do the Self-test for further practice. The
documentation and hedge criteria are very important and could Show, explain and appraise accounting
implement the be tested in an integrated question as part of standards that relate to an entity's
accounting treatment. the auditing of controls and documentation financing activities which include financial
relating to derivatives. instruments
Ensure you are able to assess and explain Identify and explain current and
hedge effectiveness. emerging issues in corporate reporting
(The treatment of hedging will be simplified Specific syllabus references for this
when IFRS 9 comes into force in 2018. IFRS 9 chapter are: 1(e), 4(a), 4(c), 4(d), 14(c),
has a more principles-based approach to 14(d), 14(f)
assessing hedge effectiveness.)
The chapter ends with three audit focus
sections: on fair value (very relevant in this
context), on financial instruments in general
and on derivatives. There are also integrated
questions coming FR and audit, which will be
useful for your exam.
Study Guide 23
Study
Period Practical significance
18 Employee benefits
Employee benefit costs can be a very
significant proportion of total expenses.
Whereas accounting for short-term
benefits presents few, if any, problems,
the cost of long-term and post-
employment benefits, which include
pension plans, medical benefits and life
insurance, is difficult to estimate.
Although IAS 19 Employee Benefits sets
detailed accounting and disclosure
requirements to ensure that all pension
plans are accounted for and presented
in a consistent manner, the underlying
assumptions in the estimation process
are highly subjective.
Stop and think
What are the main types of short-term,
long-term and post-employment
benefits?
What is the difference between defined
benefit and defined contribution plans
for post-employment benefits?
Why is the accounting for the defined
benefit plan far more difficult than the
defined contribution plan?
Why do we have to disclose key
assumptions and methods used in the
accounting for defined benefit pension
plans?
24 Corporate Reporting
Due
Working context Approach Syllabus references and exam context Date
You will need to be able Employee benefits is one of two chapters In the examination candidates may be
to account for a range addressing employee remuneration. It is a required to:
of employment new and complex topic to which you will
Explain how different methods of
benefits. need to devote a significant amount of time.
providing remuneration for employees
You will need to be able Section 1 gives a summary of the types of may impact upon reported performance
to apply the benefits that the standard addresses. Note and position
requirements of IAS 19 that the accounting for short-term employee
to the relatively benefits (covered in section 2) is relatively Explain and appraise accounting
straightforward defined straightforward. standards that relate to employee
contribution plans and remuneration which include different
the vastly more Section 3 addresses post-employment forms of short-term and long-term
benefits. Note the two types, defined employee compensation, in particular,
complex defined
contribution (section 4) and defined benefit retirement benefits
benefit plans.
(section 5) pension plans.
For the latter, you will Demonstrate and explain, in the
need to rely on the The accounting for defined benefit plans is by application of audit procedures, how
expertise of actuaries, far the more complex of the two. Section 5 relevant ISAs affect audit risk and the
which will be critical in addresses the most challenging concepts in evaluation of audit evidence
enabling you to the chapter.
Specific syllabus references for this
account correctly for Do not neglect the audit focus section chapter are: 5(a), 5(b), 14(c), 14(d), 14(f)
defined benefit plan pensions are a popular topic and as likely to
costs. come up in an integrated question as in a
single silo FR question.
Study
Period Practical significance
19 Share-based payment
In major capital markets the potential
gains that senior management can
achieve through share-based payment
transactions are so significant that they
may dwarf other elements of
remuneration packages.
Before the publication of IFRS 2 there
was no requirement to include an
expense in profit or loss for this kind of
remuneration. This resulted in entities
that offered low cash salaries but large
quantities of share-based compensation
recording low costs in their
performance statements. By
comparison, entities operating in a
more stable and mature industry where
cash-based remuneration was the norm
recorded higher employee costs in the
performance statement.
Stop and think
If the granting of equity instruments
does not require the entity to part with
assets, why should a charge be
recognised in profit or loss?
Why has this been a controversial
standard polarising views at the highest
political level?
What is the impact of share-based
payments on earnings per share?
Working context Approach
In a working Chapter 19 Share-based Payment is another
environment you may new topic at Advanced Level. It is highly
have to assess the effect topical and its adoption has not been without
of granting stock controversy.
options as a
It is important for its impact on performance
remuneration policy on
and the potential dilution of EPS.
the entity's financial
statements and advise Note the three types of share-based payment
on how these should be recognised by the standard and the
reported and disclosed. importance of vesting conditions.
This chapter ends in an audit focus section,
which should be worked through, together
with the relevant interactive question.
Due
Syllabus references and exam context Date
In the examination candidates may be
required to:
Appraise corporate reporting regulations,
and related legal requirements, with
respect to presentation, disclosure,
recognition and measurement
Explain how different methods of
providing remuneration for employees
may impact upon reported performance
and position
Explain and appraise accounting
standards that relate to employee
remuneration including share-based
payment
Demonstrate and explain, in the
application of audit procedures, how
relevant ISAs affect audit risk and the
evaluation of audit evidence
Specific syllabus references for this
chapter are: 5(a), 5(b), 14(c), 14(d), 14(f)
Study Guide 25
Study
Period Practical significance
20 Groups: types of investment and
business combination
Business combinations are becoming
increasingly complex. The nature of
purchase consideration and the legal
form of such transactions are often
driven by financial and tax features.
Structures are carefully modelled to
ensure that transactions optimise post-
acquisition earnings as well as meeting
corporate strategic objectives.
Users should carefully review the
disclosures included in the financial
statements regarding business
combinations. Extensive disclosures
allow users of the financial statements
to understand the effect of the
combination on the group's operations
during the period. This improves the
predictive value of the financial
information.
Stop and think
Why are business combinations
becoming increasingly complex?
26 Corporate Reporting
Due
Working context Approach Syllabus references and exam context Date
In a working context You will have covered the standards revised in In the examination candidates may be
you will have to this chapter in your earlier studies. Pay required to:
account for particularly attention calculation of goodwill
Identify and show the criteria used to
acquisitions, disposals including the non-controlling interest.
determine whether and how different
and business
Work through the examples and interactive types of investment are recognised and
combinations such as
questions to ensure you understand the key measured as business combinations
investments in
principles.
associates, joint Calculate and disclose, from financial and
arrangements, or You must also ensure that you understand the other data, the amounts to be included in
consolidations of calculations required for step acquisitions and an entity's consolidated financial statements
subsidiaries. disposals. in respect of its new,
You may also be Revise the principles relating to consolidated continuing and discontinued interests
required to prepare statements of cash flows and return to your (which include situations when
consolidated statements earlier studies if necessary. acquisitions occur in stages and in partial
of cash flows, which are disposals) in subsidiaries, associates and
IFRSs 10 to 12 revise the definition of control joint arrangements
likely to include the
and the treatment of joint arrangements, and
effect of acquisitions Determine for a particular scenario what
also change the required disclosures.
and disposals. comprises sufficient, appropriate audit
This is a long chapter, but do not neglect evidence
sections 11 and 12, which deal with group
audits, including foreign subsidiaries (see Design and determine audit procedures in
Chapter 21). a range of circumstances and scenarios,
for example identifying an appropriate
mix of tests of controls, analytical
procedures and tests of details
Demonstrate and explain, in the
application of audit procedures, how
relevant ISAs affect audit risk and the
evaluation of audit evidence
Specific syllabus references for this
chapter are: 6(a), 6(b), 14(c), 14(d), 14(f)
Study
Period Practical significance
21 Foreign currency translation and
hyperinflation
The management of foreign exchange
risk is an important aspect of business
operations. Importing and exporting
goods introduces foreign exchange risk
and results in earnings volatility with
reporting implications on earnings and
cash flow.
It is essential that translation processes
are undertaken on a consistent basis to
ensure comparability of financial
statements, and this is the subject of IAS
21 The Effects of Changes in Foreign
Exchange Rates.
In recent years levels of general inflation
in G7 and developed countries have
been low, so the management and
reporting of inflationary price rises has
not been a major challenge to investors
and the users of financial statements.
The adjustments are complicated, and
are the subject of IAS 29 Financial
Reporting in Hyperinflationary Economies.
Stop and think
What are the primary and secondary
indicators of functional currency?
Working context Approach
In a working context Covers IAS 21 The Effects of Changes in Foreign
you may have to Exchange Rates and IAS 29 Financial Reporting
establish the functional in Hyperinflationary Economies.
currency, determine the
IAS 21 is another complex standard you will
accounting treatment
not have covered in earlier studies.
of exchange differences
on monetary and non- You must understand the difference between
monetary items and monetary and non-monetary items in section
translate the financial 1 of the chapter.
statements for
Note the significance of the functional
consolidation purposes.
currency in section 2 and how this is
You may also be
determined.
required to use or
prepare inflation- Note the accounting requirements for
adjusted figures. reporting of foreign transactions,
consolidation of foreign subsidiaries and
goodwill and fair value adjustments.
An awareness of the scope of IAS 29 Financial
Reporting in Hyperinflationary Economies is
required.
This chapter also covers the impact of foreign
currency on statements of cash flows.
The audit of foreign subsidiaries was
considered in Chapter 20. Section 10 of this
chapter gives some further points and a full
exam-style integrated question.
Due
Syllabus references and exam context Date
In the examination candidates may be
required to:
Determine and calculate how exchange
rate variations are recognised and
measured and how they can impact on
reported performance, position and cash
flows of single entities and groups
Demonstrate, explain and appraise how
foreign exchange transactions are
measured and how overseas entities are
translated
Demonstrate and explain, in the
application of audit procedures, how
relevant ISAs affect audit risk and the
evaluation of audit evidence
Design and determine audit procedures
in a range of circumstances and
scenarios, for example identifying an
appropriate mix of tests of controls,
analytical procedures and tests of details
Specific syllabus references for this
chapter are: 7(a), 7(b), 14(c), 14(d), 14(f)
Study Guide 27
Study
Period Practical significance
22 Income taxes
Taxation is a major expense for business
entities and has a direct effect on cash
flow and performance.
Corporate income taxes are a means by
which governments provide incentives
for companies to act in a particular
way, for example beneficial tax credits
to encourage research and
development and allowances to
encourage investment. Therefore,
although taxable profit is based on
accounting profit, there are often
important differences. Accounting for
these types of differences is the major
emphasis of this chapter.
Stop and think
How does deferred tax arise and how is
it measured?
How may deferred tax arise in group
accounting or when non-current assets
are revalued?
28 Corporate Reporting
Due
Working context Approach Syllabus references and exam context Date
In a working context Chapter 22 Income Taxes gives a brief In the examination candidates may be
you may have to overview of the material that you have required to:
identify deferred tax covered at Professional Level on current tax
Explain, determine and calculate how
assets and liabilities and goes on to address the complex and new
current and deferred tax is recognised
arising out of topic of deferred tax.
and appraise accounting standards that
deductible and taxable
You must understand the concept of relate to current tax and deferred tax
temporary differences
temporary differences and how these give rise
and report and present Demonstrate and explain, in the
to deferred tax. Go through the examples
these as appropriate in application of audit procedures, how
very carefully.
the financial relevant ISAs affect audit risk and the
statements. Ensure that you follow the steps relating to evaluation of audit evidence
the recognition and measurement of deferred
tax. Specific syllabus references for this
chapter are: 8(a), 14(c), 14(d), 14(f)
Study the presentation and disclosure
requirements.
Deferred tax at this level is very demanding,
and you should attempt the comprehensive
interactive question 13 to make sure you
completely understand it.
The audit of tax is covered in the final section.
Procedures should be adopted to ensure any
assumptions are reasonable and the
requirements of IAS 12 have been met.
Study
Period Practical significance
23 Financial statement analysis 1
The annual financial statements provide
users with a comprehensive source of
financial information about an entity.
The financial statements are prepared in
a conventionalised way. They provide
substantial amounts of narrative and
numerical information. A key skill is to
be able to analyse the information they
provide so that past performance can
be analysed and future performance
predicted.
Stop and think
How might different accounting
policies affect the interpretation of
financial statements? Will management
be influenced in their choice of
accounting policies and the judgement
they make in determining accounting
estimates by the way the information
may affect a user's view of the business?
Due
Working context Approach Syllabus references and exam context Date
Analytical skills are So far your financial reporting studies have The analysis and interpretation of financial
essential in a wide been focused on preparation of financial statements is a significant portion of the
range of work areas statements. The focus of the next two Corporate Reporting examination and could
from audit planning to chapters changes to that of users (section 1). account for approximately 30% of the total
desk-top analysis of In section 2 we look at the main accounting marks in an exam if the single-silo FR
competitors and ratios and relationships that are important to question is on financial analysis.
acquisition targets. You users. While most ratios follow accruals-based
In the examination candidates may be
may have been asked to accounting, cash flow ratios are important
required to:
calculate a range of too.
ratios and to provide Analyse and evaluate the performance,
Note in sections 4 and 5 how important it is
some explanation for position, liquidity, efficiency and solvency
in interpretation scenarios to take account of
their movements from of an entity through the use of ratios and
both economic factors affecting all businesses
previous periods or similar forms of analysis
and the specific industry the business is
their comparability to
operating in. Compare and appraise the significance of
industry averages.
accruals basis and cash flow reporting
Read through section 6 to ensure you
understand the importance of accounting Compare the performance and position
policy choices when interpreting financial of different entities allowing for
statements. inconsistencies in the recognition and
Ethical issues are an important part of the measurement criteria in the financial
syllabus, covered in section 7. statement information provided
Make adjustments to reported earnings in
Sections 8 and 9 cover practical examples
order to determine underlying earnings
and non-financial indicators.
and compare the performance of an
It is important that you understand the entity over time.
limitations of ratio analysis in section 10.
Specific syllabus references for this chapter
Reflect on how the various issues covered in are: 9(d), 9(g), 9(h), 9(k)
this chapter will impact upon how you
interpret financial information.
Finally work through the Self-test questions
carefully to ensure that you have grasped the
main points in this chapter.
You will probably be required to make
adjustments to the figures, correcting the
accounting treatment, before going on to do
the analysis.
Study Guide 29
Study
Period Practical significance
24 Financial statement analysis 2
The information that is provided by a
company to its shareholders forms the
basis for the formation of ideas about
the prospects of the company. Financial
analysis assesses the quality of this
information and helps stakeholders
make decisions.
Stop and think
What are the main types of creative
accounting, and how can accounts be
restated?
What are the main financial ratios and
what are the main accounting issues
involved in their construction and
application?
How do we forecast financial
statements and analyse the impact of
business decisions on the value of a
company?
30 Corporate Reporting
Due
Working context Approach Syllabus references and exam context Date
As an ICAEW Chartered This chapter brings together elements of your In the examination candidates may be
Accountant you need to study from your whole Study Manual, aspects required to:
appreciate the of financial management and business
Comment on and critically appraise the
importance of strategy and your study of financial ratios
nature and validity of items included in
disaggregated from Chapter 23.
published financial statements
information as a basis
Note the significance of financial analysis in
for financial analysis, Comment and critically appraise the
assessing the quality of information provided
performance evaluation nature and validity of information
to stakeholders and in helping form decisions.
and decision making. disclosed in annual reports, including
You should be aware of Following on from the creative accounting voluntary disclosures
the difficulties in issues raised in this chapter, section 11 deals
interpreting financial with fraud. Not all creative accounting Appraise the limitations of financial
information as a result practices are fraudulent, but most can be analysis
of the flexibility considered 'red flags' and should alert the Analyse and evaluate the performance,
afforded by certain auditor to potential fraud. position, liquidity, efficiency and solvency
standards and the of an entity through the use of ratios and
potential similar forms of analysis
misrepresentation of
such information. Interpret the potentially complex
economic environment in which an entity
operates and its strategy based upon
financial and operational information
contained within the annual report (for
example: financial and business reviews,
reports on operations by management,
corporate governance disclosures,
financial summaries and highlights)
Appraise the significance of inconsistencies
and omissions in reported information in
evaluating performance
Compare the performance and position of
different entities allowing for
inconsistencies in the recognition and
measurement criteria in the financial
statement information provided
Study Due
Period Practical significance Working context Approach Syllabus references and exam context Date

24 Make adjustments to reported earnings

in order to determine underlying
(cont.) earnings and compare the performance
of an entity over time
Analyse and evaluate financial risks (for
example financing, currency and
interest rate risks) and assess their
implications for corporate reporting
Determine analytical procedures, where
appropriate, at the planning stage using
technical knowledge of corporate
reporting and skills of financial
statement analysis
Design and determine audit procedures
in a range of circumstances and
scenarios, for example identifying an
appropriate mix of tests of controls,
analytical procedures and tests of details
Review and evaluate, quantitatively and
qualitatively, for example using
analytical procedures, the results and
conclusions obtained from audit
procedures

Specific syllabus references for this chapter

are: 9(a) 9(k), 11(f), 14(d), 15(c)

Study Guide 31
Study
Period Practical significance
25 Assurance and related services
Most assurance firms provide a range of
services besides audit. It is therefore
important to know what services are
available and to be familiar with those
services.
In practical terms, knowledge of
additional services may enable you to
provide better client service, especially
where those services can be
recommended to a client.
Stop and think
Can you think of any examples of
situations where you identified that a
client may require additional assurance
services? If so, what actions did you
take?
32 Corporate Reporting
Due
Working context Approach Syllabus references and exam context Date
The provision of You have been introduced to the concept of The concept of assurance is covered in the
additional assurance assurance before. However, the Advanced Assurance and Audit and Assurance papers.
services may require Level looks at this topic in much more detail. The provision of additional services is a new
additional knowledge, You will be expected to have a more detailed topic at the Advanced Level.
either of the service or understanding of the individual assurance
Specific syllabus references for this
of the firm's specific services and other services provided by the
chapter are: 16(a) (d), 17(b) (d)
procedures in respect of ICAEW Chartered Accountant together with
those services. This the related technical guidance.
chapter provides an
Make sure you understand the differences
introduction but note
between a reasonable assurance engagement
that additional training
and a limited assurance engagement and
is likely to be required
when these would apply. Also note the
before those services
guidance on compilation engagements.
can be performed in
practice. Forensic audit is an important part of the
syllabus. Make sure you read this section
carefully.
Work through the Interactive and Self-test
questions to ensure that you can apply your
knowledge.
Study
Period Practical significance
26 Environmental and social
considerations
More and more companies are
including additional disclosures about
their environmental and social impact
in their annual reports. It is therefore
important to know what these
disclosures should comprise, and the
auditor's responsibilities in relation to
such disclosures.
Stop and think
When reviewing company annual
reports, can you remember seeing any
additional environmental or social
information? If so, was this audited?
Look at the examples in this chapter
and then review other company
accounts to become more familiar with
the style and content of this type of
report.
Due
Working context Approach Syllabus references and exam context Date
The provision of social Chapter 26 deals with environmental and The provision of social and environmental
and environment audit social audits. This is very topical at the audits is a new topic in the Advanced Level.
services does require moment and is becoming increasingly
Specific syllabus references for this
additional knowledge, important particularly to larger organisations.
chapter are: 18(a)
either of the service or Read through the chapter paying particular
of the firm's specific attention to the extract from the sustainability
procedures in respect of report. This will help you to see how this issue
those services. This is dealt with in practice.
chapter provides an
Sustainability reporting is likely to be
introduction, but note
examined in an integrated question, so make
that additional training
sure you study the sections 3, 4 and 5
is required before those
carefully. They cover how sustainability
services can be
reporting affects the statutory audit, social
performed in practice.
and environmental audits and implications for
assurance services respectively.
Finally, integrated reporting is a very topical
area, so make sure you familiarise yourself
with the integrated report and what this
means for auditors.
Work through the Interactive and Self-test
questions as these will give you an idea of
how this might be examined.
Study Guide 33
Study
Period Practical significance
27 Internal auditing
When auditing companies with an
internal audit department, the external
auditor may decide to place some
reliance on the work of the internal
auditor. However, there is other work
that the internal auditor also performs
which may not be reviewed or
considered by the external auditor.
This section provides an overview of the
range of work of the internal audit
department.
Stop and think
Have you worked at a client that
maintained an internal audit
department? What interaction did you
have with the internal audit team?
34 Corporate Reporting
Due
Working context Approach Syllabus references and exam context Date
Internal auditors are an Chapter 27 looks at the issue of internal audit The work of internal auditors was discussed
important part of the as a discipline in its own right rather than in your Professional Level studies from the
corporate governance from the perspective of the external auditor's perspective of the impact their work might
structure within a reliance on internal audit work. have on the external audit. At the Advanced
business and is one of Level, you may be required to consider the
Notice therefore, that you need to be
the means by which the work of the internal audit department within
prepared to take on different roles. You will
management can the context of the business itself.
not always be adopting the role of the
demonstrate that it is
external auditor in an examination question. Specific syllabus references for this
meeting its obligations
chapter are: 17(a)
to operate effective Read through the chapter carefully taking
internal control. note of the IIA Code of Ethics and
International Standards for the Professional
Practice of Internal Auditing, as you will not
have come across these before. However, also
bear in mind that many aspects of the
internal auditor's work are similar to those of
the external auditor and may be relevant
when attempting a question.
Try the Self-test question.
5 Syllabus and learning outcomes

Corporate Reporting Compliance

Candidates will be able to formulate, implement and evaluate accounting and reporting policies for
single entities and groups of varying sizes and in a variety of industries. They will be able to discern and
formulate the appropriate financial reporting treatment for complex transactions and complex
scenarios. Candidates will be able to evaluate and apply technical knowledge from individual accounting
standards and apply professional skills to integrate knowledge where several accounting standards are
simultaneously applicable and interact.
In the assessment, candidates may be required to:
Covered
in chapter
1 Principles
(a) Explain the impact of accounting principles and bases on measurement in corporate 1, 2
reporting, for example fair value measurement
(b) Appraise corporate reporting regulations, and related legal requirements, with 2, 922
respect to presentation, disclosure, recognition and measurement
(c) Explain and appraise accounting standards that relate to the impact of changes in 2
accounting policies and estimates
(d) Explain and evaluate the impact of underlying assumptions on financial statements 2
(e) Identify and explain current and emerging issues in corporate reporting 2, 922

2 Reporting performance
(a) Explain how different methods of recognising and measuring assets and liabilities 911
can affect reported financial performance
(b) Explain and appraise accounting standards that relate to reporting performance: in 9,10
respect of presentation of financial statements; revenue; operating segments;
continuing and discontinued operations; EPS; construction contracts; interim
reporting
(c) Formulate and evaluate accounting and reporting policies for single entities and 922
groups of varying sizes and in a variety of industries
(d) Calculate and disclose, from financial and other data, the amounts to be included in 922
an entity's financial statements according to legal requirements, applicable financial
reporting standards and accounting and reporting policies

3 Assets and non-financial liabilities

(a) Explain how different methods of recognising and measuring assets and liabilities 911
can affect reported financial position
(b) Explain and appraise accounting standards that relate to assets and non-financial 12, 13
liabilities for example: property, plant and equipment; intangible assets, held-for-
sales assets; inventories; investment properties; provisions and contingencies

4 Financing
(a) Determine and calculate how different bases for recognising, measuring and 1517
classifying financial assets and financial liabilities can impact upon reported
performance and position
(b) Appraise and evaluate cash flow measures and disclosures in single entities and
groups

Study Guide 35
 Covered
in chapter
(c) Evaluate the impact of accounting policies and choice in respect of financing 2, 17
decisions for example hedge accounting and fair values
(d) Explain and appraise accounting standards that relate to an entity's financing 14
activities which include: financial instruments; leasing; cash flows; borrowing costs;
and government grants

5 Employee remuneration
(a) Explain how different methods of providing remuneration for employees may 18, 19
impact upon reported performance and position
(b) Explain and appraise accounting standards that relate to employee remuneration 18, 19
which include different forms of short-term and long-term employee compensation;
retirement benefits; and share-based payment

6 Groups
(a) Identify and show the criteria used to determine whether and how different types of 20
investment are recognised and measured as business combinations
(b) Calculate and disclose, from financial and other data, the amounts to be included in 9, 20
an entity's consolidated financial statements in respect of its new, continuing and
discontinued interests (which include situations when acquisitions occur in stages
and in partial disposals) in subsidiaries, associates and joint ventures

7 Reporting overseas activities

(a) Determine and calculate how exchange rate variations are recognised and measured 21
and how they can impact on reported performance, position and cash flows of
single entities and groups
(b) Demonstrate, explain and appraise how foreign exchange transactions are measured 21
and how the financial statements of overseas entities are translated

8 Taxation
(a) Explain, determine and calculate how current and deferred tax is recognised and 22
appraise accounting standards that relate to current tax and deferred tax

Corporate Reporting Financial statement analysis

Candidates will be able to analyse, interpret, evaluate and compare financial statements of entities both
over time and across a range of industries.
In the assessment, candidates may be required to:

9 Financial statement analysis

(a) Comment on and critically appraise the nature and validity of items included in 23, 24
published financial statements
(b) Comment on and critically appraise the nature and validity of information disclosed 23, 24
in annual reports, including integrated reporting and other voluntary disclosures
(c) Appraise the limitations of financial analysis 23, 24
(d) Analyse and evaluate the performance, position, liquidity, efficiency and solvency of 23, 24
an entity through the use of ratios and similar forms of analysis
(e) Interpret the potentially complex economic environment in which an entity operates 23, 24
and its strategy based upon financial and operational information contained within
the annual report (for example: financial and business reviews; reports on operations
by management, corporate governance disclosures, financial summaries and
highlights)

36 Corporate Reporting
 Covered
in chapter
(f) Appraise the significance of inconsistencies and omissions in reported information in 23, 24
evaluating performance
(g) Compare the performance and position of different entities allowing for 23, 24
inconsistencies in the recognition and measurement criteria in the financial
statement information provided
(h) Make adjustments to reported earnings in order to determine underlying earnings 23, 24
and compare the performance of an entity over time
(i) Analyse and evaluate business risks and assess their implications for corporate 23, 24
reporting
(j) Analyse and evaluate financial risks (for example financing, currency and interest rate 23, 24
risks) and assess their implications for corporate reporting
(k) Compare and appraise the significance of accruals basis and cash flow reporting 23, 24

Audit and Assurance

Candidates will be able to explain the processes involved in planning an audit, evaluating internal
controls, appraising risk, gathering evidence and drawing conclusions in accordance with the terms of
the engagement. In addition, they will be able to perform a range of assurance engagements and
related tasks.
In the assessment, candidates may be required to:

10 Professional practice
(a) Appraise and explain the role and context of auditing 1
(b) Explain the nature and purpose of quality assurance (both at the level of the firm 1
and the individual audit) and assess how it can contribute to risk management
(c) Evaluate and explain current and emerging issues in auditing 4, 5, 6,
26, 27

11 Planning
(a) Identify the components of risk and how these components may interrelate 5
(b) Appraise the entity and the, potentially complex, economic environment within 5
which it operates as a means of identifying and evaluating the risk of material
misstatement
(c) Identify the risks arising from, or affecting, a potentially complex set of business 5
processes and circumstances and assess their implications for the engagement
(d) Identify significant business risks and assess their potential impact upon the financial 5
statements and the audit engagement
(e) Evaluate the impact of risk and materiality in preparing the audit plan, for example 5
the nature, timing and extent of audit procedures
(f) Determine analytical procedures, where appropriate, at the planning stage using 5
technical knowledge of corporate reporting and skills of financial statement analysis
(g) Evaluate the components of audit risk for a specified scenario, for example the 5
interactions of inherent risk, control risk and detection risk, considering their
complementary and compensatory nature
(h) Show professional scepticism in assessing the risk of material misstatement, having 5
regard to the reliability of management
(i) Evaluate, where appropriate, the extent to which reliance can be placed on expertise 6, 7
from other parties to support audit processes
(j) Prepare, based upon planning procedures, an appropriate audit strategy and 5
detailed audit plan or extracts therefrom

Study Guide 37
 Covered
in chapter
12 Internal control systems
(a) Analyse and evaluate the control environment for an entity based on an 7
understanding of the entity, its operations and its processes
(b) Evaluate an entity's processes for identifying, assessing and responding to business 7
and operating risks as they impact on the financial statements
(c) Appraise an entity's accounting information systems and related business processes 7
relevant to corporate reporting and communication
(d) Analyse and evaluate strengths and weaknesses of preventative and detective control 7
mechanisms and processes, highlighting control weaknesses; including risks related
to cyber security
(e) Evaluate controls relating to information technology and e-commerce; including 7
controls associated with cyber security
(f) Explain and appraise the entity's system for monitoring and modifying internal 7
control systems
(g) Devise, explain and evaluate tests of controls 7
13 Corporate governance
(a) Describe and explain the nature and consequences of corporate governance and 4
accountability mechanisms in controlling the operating and financial activities of
entities of differing sizes, structures and industries
(b) Explain the rights and responsibilities of the board, board committees (eg audit and 4
risk committees), those charged with governance and individual executive and non-
executive directors, with respect to the preparation and audit of financial statements
(c) Describe and explain the rights and responsibilities of stakeholder groups (eg 4
executive management, bondholders, government, securities exchanges,
employees, public interest groups, financial and other regulators, institutional and
individual shareholders) with respect to the preparation and audit of financial
statements
(d) Evaluate and appraise appropriate corporate governance mechanisms 4
(e) Explain and evaluate the nature and consequence of relevant corporate governance 4
codes and set out the required compliance disclosures
(f) Explain the OECD principles of corporate governance 4
(g) Explain the respective responsibilities of those charged with governance and auditors 4
for corporate risk management and risk reporting
(h) Explain the respective responsibilities of those charged with governance and auditors 4, 7
in respect of internal control systems
(i) Explain and evaluate the role and requirement for effective two-way communication 4
between those charged with governance and auditors
(j) Describe and explain the roles and purposes of meetings of boards and of 4
shareholders
14 Audit evidence
(a) Explain and evaluate the relationship between audit risk and audit evidence 5
(b) Determine audit objectives for each financial statement assertion 6
(c) Determine for a particular scenario what comprises sufficient, appropriate audit 6, 9, 10,
evidence 11, 12,
13, 14,
17, 18,
19, 20,
21, 22,
24

38 Corporate Reporting
 Covered
in chapter
(d) Design and determine audit procedures in a range of circumstances and scenarios, 6, 9,10,
for example identifying an appropriate mix of tests of controls, analytical procedures 11, 12,
and tests of details 13, 14,
17, 18,
19, 20,
21, 22,
24
(e) Demonstrate how professional scepticism may be applied to the process of 6
gathering audit evidence and evaluating its reliability
(f) Demonstrate and explain, in the application of audit procedures, how relevant ISAs 6, 9, 10,
affect audit risk and the evaluation of audit evidence 11, 12,
13, 14,
17, 18,
19, 20,
21, 22,
24
(g) Evaluate, applying professional judgement, whether the quantity and quality of 6
evidence gathered from various audit procedures is sufficient to draw reasonable
conclusions
(h) Prepare appropriate audit documentation 6
(i) Recognise issues arising whilst gathering assurance evidence that should be referred 6
to a senior colleague
15 Reporting and concluding
(a) Review the appropriateness of the going concern assumption 8
(b) Review events after the reporting period 8
(c) Review and evaluate, quantitatively and qualitatively, for example using analytical 8
procedures, the results and conclusions obtained from audit procedures
(d) Draw conclusions on the nature of the report on an audit engagement, and 8
formulate an opinion for a statutory audit, which are consistent with the results of
the audit evidence gathered
(e) Draft suitable extracts for reports (for example any report to the management or 8
those charged with governance issued as part of the engagement)
16 Assurance engagements
(a) Explain the nature of a range of different assurance engagements 25
(b) Evaluate the evidence necessary to report at the appropriate level of assurance 25
(c) Evaluate risk in relation to the nature of the assurance engagement and the entity or 25
process for a given scenario
(d) Design and determine procedures necessary to attain the relevant assurance 25
objectives in a potentially complex scenario
17 Other engagements
(a) Evaluate the role of internal audit and design appropriate procedures to achieve the 27
planned objectives
(b) Appraise and explain the nature and purposes of forensic audit and prepare and plan 25
procedures required to achieve a range of differing objectives
(c) Explain the roles and responsibilities that auditors may have with respect to a variety 25
of different types of information and design procedures sufficient to achieve agreed
objectives
(d) Explain the nature and purposes of due diligence procedures (for example: financial, 25
commercial, operational, legal, tax, human resources) and plan procedures required
to achieve a range of differing financial objectives

Study Guide 39
 Covered
in chapter

Auditing and Corporate Reporting Integrated Learning Outcomes

Candidates will be able to evaluate corporate reporting policies, estimates and disclosures in a scenario
in order to be able to assess whether they are in compliance with accounting standards and are
appropriate in the context of audit objectives.
In the assessment, candidates may be required to:

18 Integrated learning outcomes

(a) Identify and explain corporate reporting and assurance issues in respect of social 26
responsibility, sustainability and environmental matters for a range of stakeholders
(b) Critically evaluate accounting policies choices and estimates, identifying issues of 5, 24
earnings manipulation and creative accounting
(c) Critically appraise corporate reporting policies, estimates and measurements for 6
single entities and groups in the context of an audit

Ethics
Candidates will be able to identify and explain ethical issues. Where ethical dilemmas arise, they will be
able to recommend, justify and determine appropriate actions and ethical safeguards to mitigate
threats.
In the assessment, candidates may be required, in the context of corporate reporting and auditing, to:

19 Ethics
(a) Identify and explain ethical issues in reporting, assurance and business scenarios 3
(b) Explain the relevance, importance and consequences of ethical issues 3
(c) Evaluate the impact of ethics on a reporting entity, relating to the actions of 3
stakeholders
(d) Recommend and justify appropriate actions where ethical issues arise in a given 3
scenario
(e) Design and evaluate appropriate safeguards to mitigate threats and provide 3
resolutions to ethical problems

40 Corporate Reporting
6 Technical knowledge grids
The tables contained in this section show the technical knowledge in the disciplines of financial
reporting, audit and assurance, business analysis, ethics and taxation covered in the ACA syllabus by
module.
For each individual standard the level of knowledge required in the relevant Certificate and Professional
Level module and at the Advanced Level is shown.
The knowledge levels are defined as follows:
Level D
An awareness of the scope of the standard.
Level C
A general knowledge with a basic understanding of the subject matter and training in its application
sufficient to identify significant issues and evaluate their potential implications or impact.
Level B
A working knowledge with a broad understanding of the subject matter and a level of experience in the
application thereof sufficient to apply the subject matter in straightforward circumstances.
Level A
A thorough knowledge with a solid understanding of the subject matter and experience in the
application thereof sufficient to exercise reasonable professional judgement in the application of the
subject matter in those circumstances generally encountered by ICAEW Chartered Accountants.
Key to other symbols:
The knowledge level reached is assumed to be continued

Study Guide 41
 Assurance and Audit

Advanced Level
Assurance

Assurance
Audit and
Topic

The International Auditing and Assurance Standards Board D C

The Authority Attaching to Standards Issued by the International Auditing and C A

Assurance Standards Board

The Authority Attaching to Practice Statements Issued by the International Auditing A

and Assurance Standards Board

Discussion Papers C

Working Procedures C

International Standards on Auditing (UK)

200 (Revised June 2016) Overall Objectives of the Independent Auditor and the B A
Conduct of an Audit in Accordance with International Standards on Auditing (UK)

210 (Revised June 2016) Agreeing the Terms of Audit Engagements B

220 (Revised June 2016) Quality Control for an Audit of Financial Statements B

230 (Revised June 2016) Audit Documentation C B A

240 (Revised June 2016) The Auditor's Responsibilities Relating to Fraud in an Audit of C B A
Financial Statements

250 A (Revised June 2016) Consideration of Laws and Regulations in an Audit of B A

Financial Statements

250 B (Revised June 2016) The Auditor's Statutory Right and Duty to Report to C
Regulators of Public Interest Entities and Regulators of Other Entities in the Financial
Sector

260 (Revised June 2016) Communication with Those Charged with Governance B A

265 Communicating Deficiencies in Internal Control to Those Charged with B A

Governance and Management

300 (Revised June 2016) Planning an Audit of Financial Statements B A

315 (Revised June 2016) Identifying and Assessing the Risks of Material Misstatement C A
Through Understanding of the Entity and its Environment

320 (Revised June 2016) Materiality in Planning and Performing an Audit C A

330 (Revised June 2016) The Auditor's Responses to Assessed Risks B A

402 Audit Considerations Relating to an Entity Using a Service Organisation C B

42 Corporate Reporting
 Advanced Level
Assurance

Assurance
Audit and
Topic

450 (Revised June 2016) Evaluation of Misstatements Identified during the Audit C A

500 Audit Evidence B A

501 Audit Evidence Specific Considerations for Selected Items B A

505 External Confirmations B B A

510 (Revised June 2016) Initial Audit Engagements Opening Balances C B A

520 Analytical Procedures B A

530 Audit Sampling B B A

540 (Revised June 2016) Auditing Accounting Estimates, Including Fair Value C B A
Accounting Estimates and Related Disclosures

550 Related Parties C B A

560 Subsequent Events B A

570 (Revised June 2016) Going Concern A

580 Written Representations C B A

600 (Revised June 2016) Special Considerations Audits of Group Financial C A

Statements (including the Work of Component Auditors)

610 (Revised June 2013) Using the Work of Internal Auditors C B A

620 (Revised June 2016) Using the Work of an Auditor's Expert B A

700 (Revised June 2016) Forming an Opinion and Reporting on Financial Statements B A

701 Communicating Key Audit Matters in the Independent Auditor's Report A

705 (Revised June 2016) Modifications to the Opinion in the Independent Auditor's A
Report

706 (Revised June 2016) Emphasis of Matter Paragraphs and Other Matter Paragraphs A
in the Independent Auditor's Report

710 Comparative Information Corresponding Figures and Comparative Financial B A

Statements

720 (Revised June 2016) The Auditor's Responsibility Relating to Other Information B A

Study Guide 43
 Advanced Level
Assurance

Assurance
Audit and
Topic

International Standards on Auditing

800 (Revised) Special Considerations Audits of Financial Statements prepared in B

Accordance with Special Purpose Frameworks

805 (Revised) Special Considerations Audits of Single Financial A

Statements and Specific Elements, Accounts or items of a Financial Statement

810 (Revised) Engagements to Report on Summary Financial Statements A

International Auditing Practice Note (IAPN)

1000 Special Considerations in Auditing Financial Instruments B

International Standards on Review Engagements (ISREs)

2400 (Revised September 2012) Engagements to Review Financial Statements C B

International Standards on Review Engagements (UK & Ireland))

2410 Review of Interim Financial Information Performed by the Independent Auditor C B

of the Entity

International Standards on Assurance Engagements (ISAEs)

3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical C B

Financial Information

3400 The Examination of Prospective Financial Information C A

3402 Assurance Reports on Controls at a Service Organisation C A

3410 Assurance Engagements on Greenhouse Gas Statements C

International Standards on Related Services (ISRSs)

4400 Engagements to Perform Agreed-upon Procedures Regarding Financial B

Information

4410 Compilation Engagements (Revised March 2012) B

IFAC Statements

ISQC1 Quality Control for Firms that Perform Audits and Reviews of Financial C B
Statements, and Other Assurance and Related Services Engagements

Other Guidance

2010/2 (Revised March 2012) Compendium of illustrative Auditor's Reports on UK B B

Private Sector Financial Statements

44 Corporate Reporting
 Advanced Level
Assurance

Assurance
Audit and
Topic

FRC Briefing Paper C B

Professional Scepticism establishing a common understanding and reaffirming its
central role in delivering audit quality

Note: In addition to the above, the IIRC's International IR Framework is included in the Study Manual as
a current issue and students need a general awareness.

Study Guide 45
 Business Analysis
Certificate and Professional Levels

Advanced Level
Management

Management
Topic

Information

Business &

Financial

Strategy
Business
Finance
STRATEGIC ANALYSIS
Environmental and market analysis tools
PESTEL analysis C A
Porter's five forces C A
Product life cycle C A
Boston Consulting Group matrix C A
Competitor analysis C A
Positional and other analysis tools
Resource audit C A
Resource-based strategy C A
Value chain analysis B A
SWOT analysis C A
Gap analysis C A
Marketing analysis C A
Competitive advantage C A
Benchmarking C A
Directional policy matrix B
Business process analysis B A
Strategic risk analysis A
Balanced scorecard C A
STRATEGIC CHOICE
Strategy formulation, evaluation and choice C A
Business risk management C A
Financial analysis and data analysis A
Stakeholder analysis B A
Objectives and stakeholders' preferences C A
Corporate responsibility and sustainability C B A
STRATEGIC IMPLEMENTATION
Business plans C A
Organisational structure C A
Information management C B A
Change management A

46 Corporate Reporting
 Certificate and Professional Levels

Advanced Level
Management

Management
Topic

Information

Business &

Financial

Strategy
Business
Finance
Project management A
BUSINESS MANAGEMENT
Performance management C A
Strategic marketing and brand management B A
Corporate Governance C B A
Information strategy B A
Human resource management C A
COST ANALYSIS FOR DECISION MAKING
Costing
Cost classification A
Costing systems direct, marginal, absorption B
Activity based costing (ABC) C B
Break even analysis B A
Multi-product break even analysis B
Budgeting and performance management B A
Pricing
Pricing decisions B A
Transfer pricing B A
Decision making techniques
Expected values B A
Relevant cash flows B A
Sensitivity analysis B A
BUSINESS AND SHAREHOLDER VALUE
Valuation Techniques
Income dividend yield B A
Income P/E B A
Income discounted cash flow B A
Asset based measures B A
Options approach B
Shareholder value
Value based management (VBM) B
Value drivers B A
Shareholder value analysis (SVA) B A
Short and long term growth rates and terminal values A

Study Guide 47
 Certificate and Professional Levels

Advanced Level
Management

Management
Topic

Information

Business &

Financial

Strategy
Business
Finance
Economic profit A
Cash flow return on investment (CFROI) A
Total shareholder return (TSR) A
Market value added (MVA) A
INVESTMENT APPRAISAL AND RISK ANALYSIS
Project appraisal
NPV B A
IRR B A
Payback B A
Relevant cash flows A
Tax and inflation A
Replacement Analysis A
Capital rationing A
Adjusted present value (APV) A
Assessing risk
Project appraisal and sensitivity analysis B A
Project appraisal and simulation B A
Expected values B A
Scenario planning A
Gap analysis B
Continuous vs. event risk B
FINANCIAL ANALYSIS
Cost of capital
Cost of equity B A
Cost of debt B A
Cost of preference shares B A
Cost of bank loans B A
Weighted average cost of capital (WACC) B A
Effective interest rates A
Splitting convertibles into equity and debt elements A
Equity instruments A
Portfolio theory and CAPM
Portfolio theory B A

48 Corporate Reporting
 Certificate and Professional Levels

Advanced Level
Management

Management
Topic

Information

Business &

Financial

Strategy
Business
Finance
CAPM B A
APT and MCPM A
CAPM and cost of capital B A
International cost of capital A
Bonds and fixed interest securities
Bond pricing using NPV A
Yields to maturity A
Duration and price volatility A
Convexity A
Term structure of interest rates A
Corporate borrowing and default risk A
SOURCES OF FINANCE AND FINANCING ARRANGEMENTS
Short, medium and long term sources of finance B A
Loan agreement conditions (warranties; covenants; B A
guarantees)
Raising capital B A
Gearing and capital structure A
Loan agreements and covenants A
Dividend policy A
Financing reconstructions (eg: group reconstruction, spin B A
off, purchase of own shares, use of distributable profits)
Treasury and working capital management C A
Small and medium company financing B
History of finance C
FINANCIAL ENGINEERING
Futures, options and swaps
Options B A
Interest rate futures B A
Interest rate options B A
Interest forward rate agreements (FRAs) B A
Interest rate swaps B A
Foreign exchange
Currency forward contracts B A

Study Guide 49
 Certificate and Professional Levels

Advanced Level
Management

Management
Topic

Information

Business &

Financial

Strategy
Business
Finance
Currency money market cover B A
Currency options B A
Currency swaps B A
Operational techniques for managing currency risk B A
Theoretical determinants of foreign exchange rates B A
Option value
Value of a call and put option C B
Black Scholes option pricing model B
Binomial Option Pricing Model B
Real options C B

50 Corporate Reporting
Ethics Codes and Standards
Ethics Codes and Standards Level Modules

Certificate Level
C/D Accounting
B Assurance
C/D Business and Finance
D Law
C Management Information
C Principles of Taxation

IESBA Code of Ethics for Professional Accountants

Professional Level
(parts A, B and C and Definitions) A Audit and Assurance
B Business Strategy
B Financial Accounting and
ICAEW Code of Ethics
B/C Reporting
B Financial Management
B Tax Compliance
Business Planning

A Advanced Level
A Corporate Reporting
A Strategic Business Management
Case Study

FRC Ethical Standard Parts A and B (revised) B Assurance

A Audit and Assurance
Provisions Available for Small Entities (revised)

Advanced Level
A Corporate Reporting
A Strategic Business Management
A Case Study

Study Guide 51
 Financial Reporting
Certificate & Professional Advanced
Level Level

Accounting &
Accounting

Corporate
Reporting

Reporting
Financial
Title

Preface to International Financial Reporting Standards A A

Conceptual Framework for Financial Reporting B A A
IAS 1 Presentation of Financial Statements A A A
IAS 2 Inventories B A A
IAS 7 Statement of Cash flows B A A
IAS 8 Accounting Policies, Changes in Accounting Estimates and B A A
Errors
IAS 10 Events after the Reporting Period A A
IAS 11 Construction Contracts A
IAS 12 Income Taxes C A
IAS 16 Property, Plant and Equipment B A A
IAS 17 Leases B A
IAS 18 Revenue C A A
IAS 19 Employee Benefits A
IAS 20 Accounting for Government Grants and Disclosure of A A
Government Assistance
IAS 21 The Effects of Changes in Foreign Exchange Rates C A
IAS 23 Borrowing Costs A A
IAS 24 Related Party Disclosures B A
IAS 26 Accounting and Reporting by Retirement Benefit Plans D
IAS 27 Separate Financial Statements B A
IAS 28 Investments in Associates and Joint Ventures B A
IAS 29 Financial Reporting in Hyperinflationary Economies D
IAS 32 Financial Instruments: Presentation B A
IAS 33 Earnings Per Share C A
IAS 34 Interim Financial Reporting A
IAS 36 Impairment of Assets B A
IAS 37 Provisions, Contingent Liabilities and Contingent Assets C A A
IAS 38 Intangible Assets C A A
IAS 39 Financial Instruments: Recognition and Measurement C A
IAS 40 Investment Property A
IAS 41 Agriculture D

52 Corporate Reporting
 Certificate & Professional Advanced
Level Level

Accounting &
Accounting

Corporate
Reporting

Reporting
Financial
Title

IFRS 1 First-time Adoption of IFRS A

IFRS 2 Share-based Payment A
IFRS 3 Business Combinations B A
IFRS 4 Insurance Contracts D
IFRS 5 Non-current Assets Held for Sale and Discontinued B A
Operations
IFRS 6 Exploration for and Evaluation of Mineral Resources D
IFRS 7 Financial Instruments: Disclosures B A
IFRS 8 Operating Segments A
IFRS 9 Financial Instruments C
IFRS 10 Consolidated Financial Statements B A
IFRS 11 Joint Arrangements B A
IFRS 12 Disclosure of Interests in Other Entities B A
IFRS 13 Fair Value Measurement C A
IFRS 14 Regulatory deferral accounts C
IFRS for SMEs A
Note: IFRS 15 Revenue from Contracts with Customers and IFRS 16 Leases are included in the Study
Manual as a current issue and students need a general awareness, but IAS 18 Revenue and IAS 17 Leases
are still the examinable standards, as per the above grid.

Study Guide 53
 7 Key resources
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54 Corporate Reporting