Corporat Reporting Study Guide 2020 PDF

The Institute of Chartered Accountants in England and Wales
CORPORATE
REPORTING
Edition 7
Study Guide
www.icaew.com
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International Financial Reporting Standards including all International Accounting
Standards, SIC and IFRIC Interpretations (the Standards). The Standards together with
their accompanying documents are issued by:
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such loss is caused by negligence or otherwise to the maximum extent permitted by
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ii ICAEW 2020
Contents
1 Key resources 1
2 Permitted texts 3
3 Skills within the ACA 4
4 Study guide 8
5 Syllabus and learning outcomes 55
6 Technical knowledge grids 62
The Corporate Reporting Module enables 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.
To achieve this aim 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.
ICAEW 2020 Contents iii

iv ICAEW 2020
1 Key resources
Whether you’re studying the ACA qualification with an employer, at university, independently
(self-studying), or via an apprenticeship, we provide a wide range of resources and services to
help you in your studies. Here is a selection.
Take a look at the online exam resources available to you on icaew.com/examresources and
discover more resources and services at icaew.com/studentbenefits.
Syllabus, skills development and technical knowledge grids
This gives you the full breakdown of learning outcomes for each module, see how your skills and
technical knowledge will grow throughout the qualification.
Study guide
This guides you through your learning process, putting each chapter and topic of the Study
Manual into context and showing what learning outcomes are attached to them.
Exam webinars
The pre-recorded webinars focus on how to approach each exam, plus exam and study tips.
Past exams and mark plans
Each exam is available soon after it has been sat, with mark plans available once results have
been released. Remember that if you're accessing an exam from 2019, it may not reflect exams
for 2020. To access exam-standard questions that reflect the current syllabus, go to the Question
Bank.
Errata sheets
These are available on our website if we are made aware of a mistake within a Study Manual or
Question Bank once it has been published.
Exam software
You need to become familiar with the exam software before you take your exam. Access a
variety of resources, including exam guide, practice software, webinars and sample exams at
icaew.com/cbe
Student support team
Our dedicated student support team is here to help and advise you throughout your training,
don't hesitate to get in touch. Email studentsupport@icaew.com or call +44 (0)1908 248 250 to
speak to an adviser.
Vital and Economia
Vital is our ACA student magazine. Each issue of Vital is packed with interesting articles to help
you with work, study and life. Read the latest copy at icaew.com/vital.
What's more, you'll receive our member magazine, Economia. Read more at
icaew.com/economia.
Online student community
The online student community is the place where you can post your questions and share your
study tips. Join the conversation at icaew.com/studentcommunity.
Tuition
The ICAEW Partner in Learning scheme recognises tuition providers who comply with our core
principles of quality course delivery. If you are not receiving structured tuition and are interested
in doing so, take a look at our recognised Partner in Learning tuition providers in your area, on
our website icaew.com/dashboard.
ICAEW 2020 Study Guide 1

CABA
Access free, confidential support to help you take care of your wellbeing, at work and at home.
CABA's services are available to you, and your family, face-to-face, over the phone and online.
Find out more at caba.org.uk.
ICAEW Business and Finance Professional (BFP)
ICAEW Business and Finance Professional (BFP) is an internationally recognised designation and
professional status. It demonstrates your business knowledge, your commitment to
professionalism and that you meet the standards of a membership organisation. Once you have
completed the ICAEW CFAB qualification or the ACA Certificate Level, you are eligible to apply
towards gaining BFP status. Start your application at icaew.com/becomeabfp.
2 Corporate Reporting ICAEW 2020

2 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 exams Permitted Text
Audit and Assurance 
Financial Accounting and Reporting 
Tax Compliance 
Business Strategy and Technology 
Financial Management 
Business Planning No restrictions
Advanced Level exams
Corporate Reporting No restrictions

Strategic Business Management No restrictions
Case Study No restrictions
The exams which have no restrictions include the following:

 Business Planning: Banking;
 Business Planning: Insurance;
 Business Planning: Taxation;
 Corporate Reporting;
 Strategic Business Management; and
 Case Study.
This means you can 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 exam (as listed on our website),
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 Candidates. You will be sent the instructions with your exam
admission details. They can also be viewed on our website at icaew.com/exams.

3 Skills within the ACA
Professional skills are essential to accountancy and your development of them is embedded
throughout the ACA qualification.
The following shows the professional skills that you will develop in this particular module. To see
the full skills development grids, please go to icaew.com/examresources.
Assimilating and using information
Understand the situation and the requirements
 Demonstrate understanding of the business context
 Identify and understand the requirements
 Recognise new and complex ideas within a scenario
 Identify the needs of customers and clients
 Explain different stakeholder perspectives and interests
 Identify risks within a scenario
 Identify elements of uncertainty within a scenario
 Identify ethical issues including public interest and sustainability issues within a scenario
Identify and use relevant information
 Interpret information provided in various formats
 Evaluate the relevance of information provided
 Use multiple information sources
 Filter information provided to identify critical facts
Identify and prioritise key issues and stay on task
 Identify business and financial issues from a scenario
 Prioritise key issues
 Work effectively within time constraints
 Operate to a brief in a given scenario
How skills are assessed: students may be required to:
 have a detailed knowledge and understanding of relevant regulations in financial reporting,
auditing and ethics, which will need to be related to practical business scenarios and
applied to any data provided. The data provided will focus on technical compliance and
understanding;
 respond to instructions from a line manager, a client request or from other senior
personnel. The requests may be specific, or they may be more general requiring
interpretation and judgement to be applied by the student;
 evaluate the quality and relevance of information provided in the context of a particular
assignment;
 evaluate inconsistencies in information provided from multiple sources;
 use different sources and types of evidence to confirm, or question, financial statement
assertions applying professional scepticism; and
 evaluate the ethical implications of making information available including confidentiality
and transparency.

Structuring problems and solutions
Structure data
 Structure information from various sources into suitable formats for analysis
 Identify any information gaps
 Frame questions to clarify information
 Use a range of data types and sources to inform analysis and decision making
 Structure and analyse financial and non-financial data to enhance understanding of
business issues and their underlying causes
 Present analysis in accordance with instructions and criteria
Develop solutions
 Identify and apply relevant technical knowledge and skills to analyse a specific problem
 Use structured information to identify evidence-based solutions
 Identify creative and pragmatic solutions in a business environment
 Identify opportunities to add value
 Identify and anticipate problems that may result from a decision
 Identify a range of possible solutions based on analysis
 Identify ethical dimensions of possible solutions
 Select appropriate courses of action using an ethical framework
 Identify the solution which is the best fit with acceptance criteria and objectives
 Define objectives and acceptance criteria for solutions
 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;
 structure problems and solutions in scenario based questions which may be presented in
the following forms:
– Mini case – in the context of auditing but with significant corporate reporting emphasis.
This may be technical, compliance or interpretive (for example including analytical
procedures).
– Financial statement analysis – including technical aspects of corporate reporting.
– Technical question on aspects of audit and corporate reporting (which may include
assurance, internal audit).
 consider ethical problems in reporting, assurance and business scenarios;
 formulate, evaluate and implement accounting and reporting policies;
 measure and recognise assets and obligations on reported financial performance;
 consider the impact and interaction of applicable accounting principles, bases and
standards;
 consider the appraisal of remuneration policies on reported performance; and
 evaluate reporting issues in relation to group scenarios and overseas activities.

Applying judgement
Apply professional scepticism and critical thinking
 Recognise bias and varying quality in data and evidence
 Identify faults in arguments
 Identify gaps in evidence
 Identify inconsistencies and contradictory information
 Assess interaction of information from different sources
 Exercise ethical judgement
Relate issues to the environment
 Appreciate when more expert help is required and always appropriately challenge and
critically review the expert's work
 Identify related issues in scenarios
 Assess different stakeholder perspectives when evaluating options
 Appraise corporate responsibility and sustainability issues
 Appraise the effects of alternative future scenarios
 Appraise ethical, public interest and regulatory issues
 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.
 demonstrate judgement in the following ways:
– selecting between technical choices;
– filtering data to identify critical elements;
– prioritising information, issues or tasks;
– identifying omissions in the information;
– evaluating inconsistencies in information;
– distinguishing between the various qualities of the data provided;
– evaluating the impact of economic and political factors;
– evaluating the effects of known events;
– evaluating the appropriateness of accounting policy choice and estimation selection;
– evaluating options;
– comparing the effects of a range of estimates, outcomes or financial treatments;
– assessing the materiality of errors;
– exercising ethical judgement;
– identifying key linkages; and
– drawing appropriate conclusions from data provided to satisfy specified objectives and
assessing the materiality of errors and omissions.

Concluding, recommending and communicating
Conclusions
 Apply technical knowledge to support reasoning and conclusions
 Apply professional experience and evidence to support reasoning
 Use valid and different technical skills to formulate opinions, advice, plans, solutions,
options and reservations
Recommendations
 Present recommendations in accordance with instructions and defined criteria
 Make recommendations in situations where risks and uncertainty exist
 Formulate opinions, advice, recommendations, plans, solutions, options and reservations
based on valid evidence
 Make evidence-based recommendations which can be justified by reference to supporting
data and other information
 Develop recommendations which combine different technical skills in a practical situation
Communication
 Present a basic or routine memorandum or briefing note in writing in a clear and concise
style
 Present analysis and recommendations in accordance with instructions
 Communicate clearly to a specialist or non-specialist audience in a manner suitable for the
recipient
 Prepare the advice, report, or notes required in a clear and concise style
 draw conclusions from data, facts, calculations, judgments and own analysis;
 draw conclusions from complex assurance engagements;
 identify weaknesses in financial information systems and their potential consequences;
 distinguish between the qualities of data provided or other evidence generated;
 develop risk management solutions in an audit and corporate reporting environment;
 create report/memorandum in response to a specific technical issue and in accordance with
client requirements;
 draft reasoned, practicable advice that is clear and concise, supported by calculations or
analysis of technical/business issues identified;
 use judgement to select the most appropriate audit procedures in the context of risks
identified;
 justify a specific recommended action when a variety of options are available; and
 explain the limitations of their conclusions or recommendations.

4 Study guide
4.1 Help yourself study for your ACA exams

The right approach
1 Develop the right attitude
Believe in yourself Yes, there is a lot to learn. But thousands have

succeeded before and you can too.
Remember why you're doing it You are studying for a good reason: to advance your
career.
2 Focus on the exam
Read through the Syllabus in this These tell you what you are expected to know.
guide
3 The right method
See the whole picture 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 the Study Guide put the material
into context.
 The Learning outcomes, Section overviews in the
Study Manual show you what you need to grasp.
Use your own words 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 mindmaps.
 Try 'teaching' a subject to a colleague or friend.
Give yourself cues to jog your The Study Manual uses bold to highlight key points.
memory
 Try colour coding with a highlighter pen.
 Write key points on cards.
4 The right recap
Review, review, review 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 electronic Self-test bank actively tests your
grasp of the essentials.
 Go through the Examples in each chapter a
second or third time.

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
Topic list navigate 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
Introduction chapter, set out in this Study Guide, give you the big picture in terms of
the context of the chapter. The 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
Section overviews the 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

Explanations areas 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
Note taking being 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, mindmaps.
Step 6 Work through the examples very carefully as they illustrate key
Examples knowledge and techniques.
Step 7 Check yours against the suggested solutions, and make sure you
Answers understand any discrepancies.
Step 8 Review it carefully, to make sure you have grasped the significance of all
Chapter summary the important points in the chapter.
Step 9 Use the electronic Self-test bank to check how much you have
Self-test remembered of the topics covered.
Step 10 Ensure you have ticked off the Learning outcomes.

Learning outcomes
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
electronic 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.

Study Due
Period Practical significance Working context Approach Syllabus references and exam context Date
1 Introduction In all areas of Read through Chapter 1 of the Study In the examination, candidates may be
So far you will have studied accounting and Manual carefully as it gives guidance on required to:
corporate reporting and audit as reporting, how to approach the integrated material.  comment on and critically appraise
separate (single silo) subjects. individuals will need This is the first time you have tackled an the nature and validity of items
However, in real life, audit and a working integrated exam. included in published financial
corporate reporting are closely knowledge of statements including how these
The key point to take in is that many of the
linked. International correlate with an understanding of
financial reporting chapters have a
Financial Reporting the entity;
Your Corporate Reporting exam separate 'audit focus' section, which deals
and Auditing
is an integrated exam. As you with the auditing aspects of the financial  appraise and explain the role and
Standards. A
learn the financial reporting reporting area you have just studied. context of auditing;
knowledge of the
topics, you will also learn how to background to these Context is important when considering the  explain the nature and purpose of
audit that particular area. standards is also relationship between audit and financial quality assurance (both at the level
Stop and think important. reporting. Section 5 describes how the of the firm and the individual audit)
business world is currently in a state of and assess how it can contribute to
Do you feel you have a good considerable flux, with changes to the risk management; and
grasp of the audit and financial regulatory regime (the FRC) and the audit
reporting material studied at itself mirrored by the generally volatile  prepare appropriate audit
earlier levels? You will need this nature of the current global outlook. You documentation.
in order to tackle this exam. should be able to respond to questions
Specific syllabus references for this
with these developments in mind.
chapter are: 9(a), 10(a), 10(b), 14(h)
Exam requirements
70% of your exam is integrated, so it is a
good idea to start thinking in those terms
right away.

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

Study Due
2 role of data analytics in financial

asset and liability valuation.
(cont.)
chapter are: 1(a)–(e), 2(c), 3(a), 18(a)
and (b)

Study Due
3 Ethics All ICAEW Chapter 3 revises the topic of ethics. Much In the examination candidates will be
members, including of the detail here will be familiar. However, required to apply ethical codes as well
In order that public confidence is
trainees, are at the Advanced Level: as knowing them.
maintained in the accountant in
expected to comply
practice or in business, the  the general principle of ethical The IESBA Code of Ethics for
with ethical
highest possible ethical behaviour is likely to be important; and Professional Accountants and the
guidance. However,
standards must be maintained. ICAEW Code of Ethics have been
as you become a  ethical dilemmas are likely to be less
Ethical guidance is provided covered in the Assurance Study
more senior clear cut so you will be expected to use
through regulation and Manual at the Certificate Level and the
member of staff, you your judgement rather than simply
professional codes of conduct. Audit and Assurance Study Manual at
will become repeating ethical guidance.
However, the success of such the Professional Level. Note the
increasingly
codes and regulation depends Read section 3 carefully as this discusses additional restrictions that apply to the
responsible for
largely on the integrity of the ethics from a financial reporting provision of other services to public
ensuring that ethical
individual. perspective an angle you would not have interest entity audit clients.
standards are seen in as much detail previously. Note, in
For an ICAEW Chartered maintained. At the Advanced Level, there will be a
particular, the references to the UK Bribery
Accountant, the role of ethics is greater emphasis on your ability to
Act 2010.
much broader than simply apply this knowledge to more complex
monitoring his or her own business scenarios.
behaviour. The accountant is also
responsible for considering the Specific syllabus references for this
decisions and actions taken by chapter are: 19(a)–(e)
others, including fellow
accountants and client
management and staff.
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 Due
4 Corporate governance Accountants are part Chapter 4 deals with corporate You must be able to understand the
Corporate governance regimes of corporate governance. This is an important issue in reasons for the different governance
(principle- or rule-based) are governance the syllabus as it is both topical and has a structures as well as apply them and,
important to help ensure regimes: be they significant impact on business. where necessary, identify weaknesses
companies are managed auditors working Remember, in the exam, the auditing in those structures within business
effectively. Compliance with with the audit aspects of corporate governance and scenarios.
corporate governance committee and financial reporting requirements are most
reporting on likely to be combined. Specific syllabus references for this
requirements is not optional – the
compliance (for chapter are: 13(a)–(j)
auditor therefore needs to Make sure that you are familiar with the
understand governance example, as
key provisions of the UK Corporate
requirements and advise clients required by
Governance Code. Note the references to
where necessary on compliance Sarbanes–Oxley), or
changes to the Code throughout this
issues. internal auditors and chapter in case they are explored
accountants in discursively in the exam. You should focus
Stop and think business operating on the disclosure elements in section 3 as
Can you think of situations where and monitoring the they are an example of how governance,
corporate governance has been system of internal audit and reporting can be combined. The
ineffective – post Enron? To what controls. role of the UK Stewardship Code in
extent does the current UK section 5 should not be underestimated
Corporate Governance Code either.
prevent similar failures in the
The OECD Principles of Corporate
future? How effective is the UK
Governance – which you would not have
Code compared to other
encountered before – and the Sarbanes–
international equivalents (OECD
Oxley Act are also important from the
Principles of Corporate
international perspective.
Governance, Sarbanes–Oxley, for
example)?

Study Due
5 The statutory audit: planning Inappropriate Chapter 5 is the first of three chapters Basic audit planning has already been
and risk assessment planning could dealing with the audit process. The covered in both the Assurance and the
mean that material danger here is that as much of the Audit and Assurance Study Manuals.
It is essential that auditors plan
transactions or technical material looks familiar from your At the Advanced Stage, you will need
their approach to an audit
account balances earlier studies, you underestimate the to demonstrate your ability to apply
appropriately, to ensure that
are not audited importance of these chapters. this knowledge to more complex
sufficient appropriate audit
correctly, increasing business scenarios, with particular
evidence is obtained. Watch out for the following areas. They're
the risk of material emphasis on the risk of creative
likely to be examined:
While planning is carried out by error in the financial accounting and the need for
senior members of the audit statements.  Professional scepticism (including the professional scepticism. Big data,
team, as an audit senior, you will APB (FRC) briefing paper Professional blockchain, AI, RPA and data analytics
become increasingly involved in Every member of the Scepticism: Establishing a Common are key topical issues.
planning activities. audit team must Understanding and Reaffirming its
maintain Central Role in Delivering Audit Quality) Specific syllabus references for this
Stop and think professional chapter are: 10(c), 11(a)–(e), 11(g),
scepticism  Performance materiality 11(h), 11(j), 12(a), 12(b), 14(a)
Have you encountered a
situation where the audit plan throughout the  Creative accounting
had to be revised during the audit, and this is
 Cryptocurrencies and blockchain
audit, either due to a planning crucial at the
failure or as a result of evidence planning stage.  Big data, robotic process automation
obtained during the audit? (RPA), artificial intelligence (AI) and
data analytics

Study Due
6 The statutory audit: audit In performing an Chapter 6 looks at audit evidence, and the Collection of basic audit evidence has
evidence audit, auditors must sources and means of obtaining it. At this already been covered in your previous
The auditor must obtain sufficient obtain sufficient level it is unlikely that an exam question studies, with emphasis placed on
appropriate audit evidence for appropriate audit will test the detail of an individual ISA, knowledge of the relevant ISAs. At the
each transaction cycle and evidence. Failure in however you could be required to state Advanced Level, there will be a greater
account balance being audited. this context can lead the audit procedures you would perform emphasis on your ability to apply this
This involves collecting audit to inappropriate in a given situation so you must be familiar knowledge to complex business
evidence that is relevant to the auditor's reports with all aspects of this topic. Again this is scenarios, and draw on your financial
assertions being audited and the being produced and likely to be combined with accounting reporting knowledge.
business processes within the could leave the issues.
company. auditor open to
Pay special attention to the following chapter are: 11(f), 11(i), 14(b)–(g),
professional
When auditing certain accounts, areas, with which you may be less familiar: 14(i)
discipline and
such as accounting estimates, criminal charges.  The audit of accounting estimates (ISA
opening balances and related (UK) 540 (revised December 2018)) is
party transactions, the auditor Information likely to contain new material that you
must obtain sufficient evidence in technology have not yet studied
accordance with the specific facilitates audit work
(through the use of  Using the work of others
requirements of the ISAs.
CAATs and audit  Professional scepticism at the audit
The exercise of professional
data analytics), but it fieldwork stage
scepticism is of paramount
also brings about
importance. Auditors are now  Audit data analytics (particularly the
increased audit risk.
required not only to maintain implications of their use in obtaining
Auditors must
professional scepticism, but also audit evidence and on professional
understand the
to document how they have scepticism)
impact of
done so.
technological Work through the questions in the
Stop and think developments on electronic Self-test bank. Note how these
the business and on require you to have up-to-date knowledge
Have you encountered a
the audit. of financial reporting.
situation where the collection of
evidence was difficult? There
may be a specific ISA to assist in
that area.

Study Due
7 The statutory audit: evaluating Auditors must Most of Chapter 7 should already be Internal controls have been covered at
and testing internal controls consider internal familiar to you from your earlier studies. the Professional Level. At the
The evaluation of internal controls throughout However, spend some time on the section Advanced Level, there will be a greater
controls at the planning stage, the audit process: on service organisations, which go into emphasis on your ability to apply this
and the testing of these controls from planning to more detail than you would have seen knowledge to more complex business
at the fieldwork stage, form a audit fieldwork and before. The issue of cloud computing is scenarios, including cyber security and
crucial part of any audit. finalisation. also important as it is increasingly corporate data security issues.
Appropriate common in practice.
Businesses today operate in evaluation and Specific syllabus references for this
computerised environments and testing of internal Read section 6 on cyber security and chapter are: 12(a)–(g), 13(h)
may make use of virtual controls, including corporate data security carefully as this is
arrangements or cloud those relating to very topical.
computing. Auditors therefore cyber security and
need to be familiar with internal The auditor's responsibilities with regards
corporate data
control activities in a to internal control from a corporate
security, helps
computerised environment. governance perspective is discussed in
auditors to identify
Cyber security and corporate Chapter 4. Make sure you cross-reference
areas subject to risks
data security is a key risk to the back to that chapter.
of material
business and therefore an issue misstatement, and
the auditor must consider. ensures appropriate
Stop and think further audit
procedures are
If you have been involved in carried out.
audit planning, think back to your
most recent experience: how has Almost all audit firms
the evaluation of the system of now use CAATs to
internal controls informed the test application
audit strategy and audit plan? controls.

Study Due
8 The statutory audit: finalisation, Audit conclusion Chapter 8 on review and reporting The principles of audit completion and
review and reporting and reporting is concludes the audit process. It is one of reporting have already been covered
Towards the end of the audit, the important for the key decision making stages of the in the Assurance and the Audit and
auditor will still be collecting auditors. Any error audit where judgement will need to be Assurance Study Manuals at the
audit evidence concerning the in the audit opinion applied. Ensure that you are familiar with Professional Level. At the Advanced
financial statements. They will can lead to personal ISA 450, discussed in section 1. The Level, there will be a greater emphasis
focus on obtaining written liability for the audit principles regarding subsequent events, on your ability to apply this knowledge
representations, considering partner and adverse going concern and written representations to more complex business scenarios.
subsequent events and going publicity for the should be revision, but you will need to be
The example auditor's reports in this
concern. audit firm. able to apply your knowledge in a
chapter are based on Bulletin:
complex scenario. Also note the changes
Stop and think Compendium of Illustrative Auditor's
to going concern reporting introduced by
Reports on United Kingdom Private
You may not have been involved ISA (UK) 570 (Revised June 2016) Going
Sector Financial Statements for Periods
in audit completion; however, Concern. These are described in section 3.
Commencing on or after 17 June 2016.
you may want to consider how You will be expected to have a thorough This was issued in October 2016.
uncorrected misstatements could understanding of the UK auditor's report.
be carried forward and affect the This is covered in section 6. Note that the Specific syllabus references for this
audit opinion. FRC has issued revised audit reporting chapter are: 15(a)–(e)
standards including ISA (UK) 701,
Communicating Key Audit Matters in the
Independent Auditor's Report.
Read section 6.5 carefully and note the
responsibilities of the auditor in relation to
other information, in particular the need to
include an 'other information' section in the
auditor's report and the recent audit quality
thematic review on other information.
Work through the Interactive questions
and electronic Self-test bank. As you can
expect, you will again need financial
reporting knowledge to do well in these
questions.

Study Due
9 Reporting financial performance As an ICAEW Chapter 9 addresses seven standards: In the examination, candidates may be
Chartered IAS 1, IFRS 8, IFRS 5, IAS 24, IFRS 1, IAS 34 required to:
Financial markets constantly
Accountant, you will and IFRS 14.
require up-to-date corporate  explain how different methods of
need to prepare
information. Reporting frequency You have studied IAS 1 in depth at earlier recognising and measuring assets
both year-end and
has increased, with interim levels. IAS 34, Interim Financial Reporting and liabilities can affect reported
interim financial
reporting playing an important (a new topic at Advanced Level) lays down financial performance;
reports.
role in the corporate reporting the principles and guidelines for the
 explain and appraise accounting
cycle. In a working context production of interim reports.
standards that relate to reporting
The preparation of interim you will need to Regarding the other standards, you will performance: in respect of
financial statements may present identify and present have acquired a thorough knowledge in presentation of financial
a number of challenges. It is information on your earlier studies both of their subject statements; revenue; operating
common for some business reportable matter and their application and how in segments; continuing and
arrangements, such as supply segments, identify providing disaggregated information they discontinued operations; EPS;
pricing agreements, bonus and disclose related enhance the reporting of performance. interim reporting;
schemes, taxation and overhead party transactions
and apply the IFRS 14, Regulatory Deferral Accounts is in  formulate and evaluate accounting
allocation, to be based on
requirements of a the syllabus, but is not a key topic. and reporting policies for single
annualised approaches. The
number of standards entities and groups of varying sizes
measurement and presentation You need to note the importance of these
that have been and in a variety of industries;
of such information may standards when you study the later
therefore be complex. covered at chapters on financial statements analysis.  calculate and disclose, from
Professional Level financial and other qualitative data,
External users of financial such as accounting There are two audit focus sections in this
chapter, one dealing with general the amounts to be included in an
statements rely on the limited for revenue,
performance reporting issues, and one entity's financial statements
disaggregation provided as a changes in
with specific issues. according to legal requirements,
result of the requirements of accounting policies, applicable financial reporting
accounting standards such as the and discontinued standards and accounting and
disclosure of discontinued operations. reporting policies;
operations and segmental
information.  appraise the significance of
inconsistencies and omissions in
reported information in evaluating
performance;

Study Due
9 Stop and think  compare the performance and

(cont.) position of different entities,
What are the challenges
allowing for inconsistencies in the
presented in preparing interim
recognition and measurement
financial reports?
criteria in the financial statement
How does disaggregation of data information provided;
help facilitate the assessment of a
company's performance?  make adjustments to reported
earnings in order to determine
How do standards such as IFRS 5 underlying earnings and compare
and IFRS 8 help provide the performance of an entity over
disaggregated information to time; and
users?
 demonstrate and explain, in the
What is the significance in terms application of audit procedures,
of the company's performance of how relevant ISAs affect audit risk
disclosing related party and the evaluation of audit
transactions? evidence.
chapter are: 2(a)–(d), 9(f)–(h), 14(f)

Study Due
10 Reporting revenue On application of Work through all of Chapter 10 very In the examination, candidates may be
IFRS 15, separate carefully. IFRS 15 is relatively recent and required to:
Revenue is often the single
performance ripe for examination.  identify and explain current and
largest item in the financial
obligations will be emerging issues in corporate
statements, and has in the past Pay particular attention to the five-step
recognised for reporting;
been open to manipulation. This model for recognising revenue in
distinct goods or  explain how different methods of
led to the development of a section 2. Learn this approach – it will help
services. This could recognising and measuring assets
recent standard IFRS 15, structure your answers in an exam:
result in some and liabilities can affect reported
Revenue from Contracts with
revenue being (1) Identify the contract(s) with a customer.
Customers. financial performance;
attributed to goods
(2) Identify separate performance  explain and appraise accounting
Stop and think or services that were
obligations. standards that relate to reporting
By far the most significant previously
(3) Determine the transaction price. performance: in respect of financial
change in IFRS 15 is to the considered
statements; revenue; operating
pattern of revenue reporting. incidental to the (4) Allocate transaction price to segments; continuing and
Even if the total revenue contract – for performance obligations. discontinued operations; EPS;
reported does not change, the instance, to mobile
(5) Recognise revenue as or when each interim reporting;
timing will change in many cases. phones that are
provided free of performance obligation is satisfied.  calculate and disclose, from financial
charge with airtime and other qualitative data, the
Work through all the examples and
contracts and to amounts to be included in an entity's
questions on applying this model.
some post-delivery financial statements according to
A performance obligation can be satisfied legal requirements, applicable
services, such as
at a point in time, such as in retail sales, or financial reporting standards and
maintenance and
over time, such as a construction contract accounting and reporting policies;
installation.
taking place over weeks, months or even
 determine for a particular scenario
years. You will not have studied
what comprises sufficient,
construction contracts before, so pay
appropriate audit evidence;
particular attention to section 2.10.
 design and determine audit
Section 3 deals with specific applications procedures in a range of
of IFRS 15, such as agency transactions. circumstances and scenarios, for
Finally study the audit focus section and example identifying an appropriate
have a go at the interactive question. mix of tests of controls, analytical
procedures and tests of details; and

Study Due
10  demonstrate and explain, in the

application of audit procedures,
(cont.) how relevant ISAs affect audit risk
and the evaluation of audit
evidence.

chapter are: 1(e), 2(a), 2(b), 2(d),
14(c), 14(d), 14(f)

Study Due
11 Earnings per share As an ICAEW Chapter 11 addresses IAS 33, Earnings per In the examination candidates may be
Chartered Share. You will have had a working required to:
Earnings per share (EPS) is one of
Accountant, you will knowledge of IAS 33 from earlier studies
the most commonly used  explain and appraise accounting
need to calculate including the calculation of basic and
performance measures standards that relate to reporting
basic earnings per diluted EPS.
worldwide. Moreover, it is also a performance: in respect of
share and diluted
component in the price earnings Advanced Level addresses further aspects presentation of financial
earnings per share
ratio which is a key summary of dilution including the effect of options. statements; revenue; operating
where applicable.
statistic in business valuation. segments; continuing and
You will also need to
IAS 33, Earnings per Share seeks discontinued operations; EPS;
appreciate the
to provide guidance to ensure a interim reporting;
significance of
consistent basis is followed so
additional EPS  determine for a particular scenario
that a meaningful comparison
figures and how what comprises sufficient,
can be made over time.
these may be appropriate audit evidence;
In addition to basic EPS, IAS 33 calculated to
requires a diluted figure which provide a more
procedures in a range of
takes into account the existence stable performance
circumstances and scenarios, for
of convertible instruments measure.
example identifying an appropriate
already issued that could
mix of tests of controls, analytical
increase the number of shares.
Additional EPS figures are often
reported by entities based on  demonstrate and explain, in the
what they consider to be application of audit procedures,
sustainable earnings. These are how relevant ISAs affect audit risk
intended to provide a more and the evaluation of audit
realistic measure of future evidence.
performance.
Stop and think chapter are: 2(b), 14(c), 14(d), 14(f)
What is the impact of bonus
issues, rights issues and share
consolidations on EPS?

Study Due
11 What is the impact of

convertibles, options and
(cont.)
contingently issuable shares on
EPS?
Why are additional EPS measures
often disclosed?

Study Due
12 Reporting of assets As an ICAEW Section 1 gives a brief revision of In the examination candidates may be
Inventories can often be the most Chartered standards covered in great detail in terms required to:
significant current asset in an Accountant you may of content and application at Professional  explain how different methods of
entity's statement of financial need to value Level. recognising and measuring assets
position. inventory, including and liabilities can affect reported
They address the reporting of assets,
work-in-progress in financial position and explain the
In addition, whether an asset is impairment, liabilities, provisions and
service industries. role of data analytics in financial
capitalised or not, the value contingencies and events after the
You may need to asset and liability valuation;
attributed to it and how it is reporting period. These are likely to be
exercise judgement
depreciated or not has a examined in an integrated way with other  explain and appraise accounting
as to whether an
significant impact on the financial areas at Advanced Level. standards that relate to assets and
asset is capitalised
statements. Revise the main principles and attempt the non-financial liabilities for example:
or not and assess
Entities also invest in property impairment for both interactive questions. Go back to your property, plant and equipment;
(IAS 40) for the potentially tangible and earlier studies if you have a problem intangible assets, held-for-sale
attractive returns that are intangible non- answering these. Use the questions in the assets; inventories; investment
available from capital gains and current assets. electronic Self-test bank for further properties; provisions and
rental income. Measuring such Impairment may also revision. contingencies;
investment properties as a series arise in the context The rest of Chapter 12 deals with the  determine for a particular scenario
of out-of-date historic costs is not of a cyber security following industry specific standards, what comprises sufficient,
an appropriate reflection of breach. IAS 40, Investment Property, IAS 41, appropriate audit evidence;
volatility caused by changes in
Working in the Agriculture, IFRS 4, Insurance Contracts and
property values.  design and determine audit
context of the IFRS 6, Exploration for and Evaluation
Since the use of a historic cost procedures in a range of
agricultural sector or of Mineral Resources. You should be
model was not seen as wholly circumstances and scenarios, for
of extractive aware that IFRS 17, Insurance Contracts
appropriate for accounting for example identifying an appropriate
industries you will will replace IFRS 4, and that the changes
agricultural activity, the IASB mix of tests of controls, analytical
need to make are far reaching.
issued IAS 41, Agriculture based procedures and tests of details; and
judgements on the
on a fair value model. You will have detailed knowledge of
valuation of  demonstrate and explain, in the
IAS 40, Investment Property both in terms
Entities such as those in the oil biological assets/the application of audit procedures,
of content and application from your
and gas industry follow a wide appropriate how relevant ISAs affect audit risk
earlier studies.
range of practices for the capitalisation of and the evaluation of audit
accounting of exploration and expenditure. evidence.
evaluation expenditure (IFRS 6).

Study Due
12 Stop and think In a working context This is likely to be tested at Advanced Specific syllabus references for this
you may be required Level in an integrated way with other chapter are: 3(a), 3(b), 14(c), 14(d),
(cont.) Why do entities hold investment
to identify an standards. Make sure that you study the 14(f)
properties? What are the
insurance contract; audit focus section at the end of the
financial reporting challenges in
understand the chapter to ensure that you are well
their recognition and continued
various forms that an prepared.
measurement? How do we
insurance contract You need to be aware of the scope and
distinguish between biological
may take and set out basic application principles of the other
assets and agricultural produce?
the disclosure standards in this chapter which you are
requirements, encountering for the first time at
especially as regards Advanced Level.
risk.

Study Due
13 Reporting of non-financial In a working Sections 1 and 2 of Chapter 13 should be In the examination candidates may be
liabilities environment you will mainly revision from your earlier studies. required to:
have to assess Make sure you do all the questions, and
Regardless of how quickly the  identify and explain current and
transactions and look back to your earlier studies if you are
financial statements are emerging issues in corporate
events taking place still unsure.
published after the end of the reporting;
after the reporting A provision may be required in relation to
year, subsequent events and
period and advise cyber security breaches.  explain how different methods of
transactions can be so significant
how these should be recognising and measuring assets
that they need to be considered The audit focus section will help you with
accounted for or and liabilities can affect reported
for either disclosure or the integrated questions on this area.
disclosed. You will financial position and explain the role
adjustment or (in extreme
need to identify the of data analytics in financial asset and
situations) for their effect on the
appropriate cut-off liability valuation;
underlying principle of going
date which will
concern. IAS 10, Events After the  explain and appraise accounting
depend on the
Reporting Period deals with the standards that relate to assets and
process of
treatment of these issues. non-financial liabilities for example:
authorisation and
property, plant and equipment;
IAS 37, Provisions, Contingent the reporting entity's
intangible assets, held-for-sale assets
Liabilities and Contingent Assets jurisdiction.
inventories; investment properties;
has strengthened the required You will be required provisions and contingencies;
treatment of provisions in this to identify
area, which is now more circumstances in  determine for a particular scenario
objective and restrictive. which provisions will what comprises sufficient,
Provisions need to be be required and appropriate audit evidence;
recognised on the basis of when contingent  design and determine audit
obligations rather than liabilities or procedures in a range of
management intentions. contingent assets circumstances and scenarios, for
Stop and think should be disclosed. example identifying an appropriate
What type of events could be mix of tests of controls, analytical
classified as adjusting or non- procedures and tests of details; and
adjusting respectively?

Study Due
13 What type of events could affect  demonstrate and explain, in the

the underlying principle of going application of audit procedures,
(cont.)
concern? how relevant ISAs affect audit risk
Why should the date on which and the evaluation of audit
the financial statements were evidence.
authorised be disclosed? Specific syllabus references for this
chapter are: 1(e), 3(a), 3(b), 14(c),
14(d), 14(f)

Study Due
14 Leases, government grants and In a working context You will have covered leasing at In the examination candidates may be
borrowing costs you may have to Professional Level under the old standard, required to:
decide whether an IAS 17. However, IFRS 16 takes a very
Lease finance is a common route  determine and calculate how
arrangement different approach, and is therefore
to acquiring assets. It is also different bases for recognising,
constitutes a lease. covered from scratch at Advanced Level.
topical, being the subject of a measuring and classifying financial
new standard, IFRS 16, Leases, You may also have Practise using all the interactive questions assets and financial liabilities can
examinable for the first time in to account for and ensure you understand the different impact upon reported performance
2020. borrowing costs and scenarios relating to sale and leaseback. and position;
government grants. You will later encounter sale and
For lessees, all leases other than  appraise and evaluate cash flow
leaseback transactions again in practical
short leases and leases of low measures and disclosures in single
real life situations in Chapters 23 and 24
value assets must be recognised entities and groups;
on financial analysis.
in the statement of financial
position. 'Creative' accountants It is important to understand the related
standards that relate to an entity's
may try to argue that an accounting requirements to appreciate
financing activities which include:
arrangement is not a lease in how such transactions may lead to a boost
financial instruments; leasing; cash
order to avoid showing it in the in profits, reduction in assets and
flows; borrowing costs; and
SOFP and thereby reducing consequent improvement in return on
government grants;
gearing. "Is it a lease?" is a asset ratios.
question that could well be  determine for a particular scenario
Revise IAS 20 and IAS 23 through
asked in an exam, perhaps in the what comprises sufficient,
interactive questions and earlier material if
context of ethics. Right of use is a appropriate audit evidence;
necessary.
key test in this respect.
IFRS 16 is now the examinable standard,
For lessors, a distinction is made procedures in a range of
and leasing questions will be set in terms
between finance leases, which circumstances and scenarios, for
of IFRS 16.
transfer the risks and rewards of example identifying an appropriate
ownership, and operating leases, mix of tests of controls, analytical
which do not. Finance leases are procedures and tests of details; and
recognised in the SOFP;
operating lease payments are
application of audit procedures, how
charged to P/L.
relevant ISAs affect audit risk and the
evaluation of audit evidence.

Study Due
14 Sale and leaseback Specific syllabus references for this

arrangements can provide chapter are: 4(a), 4(b), 4(d), 14(c),
(cont.)
entities with capital funding by 14(d), 14(f)
releasing capital caught up in the
business for investment in other
core opportunities.
Stop and think
Why is it important to consider
whether an arrangement
constitutes a lease?
Why is the unguaranteed
residual value of a leased asset
important?
Why do companies enter into
sale and leaseback transactions?

Study Due
15 Financial instruments: You will need to Chapter 15 covers the presentation and In the examination candidates may be
presentation and disclosure prepare detailed disclosure requirements of IAS 32 and required to:
disclosures for IFRS 7.
The use of financial instruments  identify and explain current and
financial instruments
by business for funding, Although you will have a detailed emerging issues in corporate
and establish the
investment and risk management knowledge of IAS 32 from earlier studies, reporting;
correct presentation
purposes is an essential part of the importance of this topic cannot be
of preference shares  determine and calculate how
operations. Examples of financial overestimated. Make sure you understand
and convertible different bases for recognising,
instruments include debt the issues relating to the accounting of
instruments measuring and classifying financial
instruments such as debentures compound financial instruments.
between debt and assets and financial liabilities can
or convertible corporate bonds
equity. At Advanced Level, you will be concerned impact upon reported performance
and derivative instruments such
with more complex issues than at and position; and
as swaps, options, and futures.
Professional Level, for example the
The detailed qualitative and sometimes controversial arguments about
quantitative disclosures required the distinction between debt and equity.
financing activities which include:
by IFRS 7 are intended to
Look in particular at the qualitative financial instruments; leasing; cash
provide to the users of financial
disclosures required by IFRS 7 for each flows; borrowing costs; and
statements an understanding of
type of risk. government grants.
the significance of financial
instruments for the entity's Auditing financial instruments is dealt with Specific syllabus references for this
position and performance and an at the end of Chapter 17. chapter are: 1(e), 4(a), 4(d)
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?

Study Due
16 Financial instruments: In a working Chapter 16 deals with recognition, In the examination candidates may be
recognition and measurement environment you will derecognition and measurement of required to:
have to account for financial instruments further.
Financial instruments, especially  identify and explain current and
financial assets and
derivatives, can significantly Work through the summary of material emerging issues in corporate
liabilities including
change the risk profile of covered in earlier studies as this is a reporting;
derivatives and
organisations. The IASB has complex topic.
embedded  determine and calculate how
therefore paid a great deal of
derivatives and Make sure you are familiar with the different bases for recognising,
attention to developing a new
identify the accounting treatment of financial assets measuring and classifying financial
standard, IFRS 9, Financial
appropriate and liabilities by going through the assets and financial liabilities can
Instruments, which is now
treatment when overview before moving onto section 2 on impact upon reported performance
examinable in full.
recognition and recognition and derecognition. and position;
Stop and think derecognition Note that IFRS 9 requires that financial
 evaluate the impact of accounting
criteria are met. assets are classified as measured at either:
How are transaction costs policies and choice in respect of
recognised?  amortised cost; or financing decisions for example
hedge accounting and fair values;
What are the derecognition rules  fair value through other comprehensive
and
for assets and liabilities? income; or
How are impairment losses  fair value through profit or loss.
recognised?
Note the accounting treatment of financing activities which include
What instruments qualify as transaction costs in section 3.2 of this financial instruments.
derivatives for accounting chapter.
purposes? Specific syllabus references for this
Section 4 deals with the complex area of chapter are: 1(e), 4(a), 4(c), 4(d)
What is the accounting treatment credit losses (impairment). IFRS 9 has
of derivatives? changed the rules from an incurred loss
model to an expected loss model.
Work carefully through section 6 on
derivatives including all the worked
examples, interactive questions and
illustrations.

Study Due
16 Study carefully the paragraphs on

embedded derivatives noting their key
(cont.)
characteristics and the required
accounting.
Note in particular the need to separate the
host instrument from the embedded
derivative, unless the host contract is a
financial asset within the scope of IFRS 9,
in which case the whole contract is
measured at fair value through profit or
loss.
IFRS 9 is now the examinable standard.
However, you need to have an overview
of the IAS 39 hedging rules as these may
still be applied. They are covered in
Chapter 17.
Auditing financial instruments is dealt with
at the end of Chapter 17.

Study Due
17 Financial instruments: hedge In a working Study carefully the three types of hedges In the examination candidates may be
accounting environment you and work through all worked examples required to:
may have to test and interactive questions.
Most entities which are exposed  identify and explain current and
hedging
to various financial risks employ Do the questions in the electronic Self-test emerging issues in corporate
hedging techniques to reduce transactions to
bank for further practice. The hedge reporting;
fluctuations in the value or cash establish whether
criteria are very important and could be
flows of financial instruments. these qualify for  determine and calculate how
tested in an integrated question as part of
Hedge accounting attempts to hedge accounting, different bases for recognising,
the auditing of controls and
reflect the economic aspects of to prepare the measuring and classifying financial
documentation relating to derivatives.
hedging in the accounting necessary assets and financial liabilities can
treatment of such relationships. documentation and Ensure you are able to assess and explain impact upon reported performance
The hedge accounting implement the hedge effectiveness. and position;
requirements of the international accounting
IFRS 9 is now the examinable standard, so  evaluate the impact of accounting
accounting standards require the treatment.
you should focus on the IFRS 9 hedging policies and choice in respect of
recording of strategies and
rules. However, entities may apply the financing decisions for example
measurement of the
hedge accounting rules of IAS 39 to all of hedge accounting and fair values;
effectiveness of the hedges.
Entities must, therefore, develop its hedging relationships while following
and maintain systems, processes the classification and measurement rules
and documentation. Entities will of IFRS 9. You should therefore work
financing activities which include
normally undertake a through section 9 for an overview of what
financial instruments;
cost/benefit analysis to these rules are, focusing on the
determine whether or not to differences from IFRS 9. The main  determine for a particular scenario
undertake hedging strategies difference relates to the hedge what comprises sufficient,
and hedge accounting. effectiveness criteria. Under IFRS 9 this is appropriate audit evidence;
principles-based and aligned with risk
Stop and think  design and determine audit
management activities. IAS 39, in contrast,
What is hedge accounting? procedures in a range of
has a quantitative hedge effectiveness test
What is a hedged item? under which hedge effectiveness must fall
in the range 80%–125%.
What is a hedging instrument? mix of tests of controls, analytical
What is the difference between
the different types of hedges?

Study Due
17 What are the qualifying criteria  demonstrate and explain, in the

(cont.) for hedge accounting? application of audit procedures, how
How is hedging effectiveness relevant ISAs affect audit risk and the
measured? evaluation of audit evidence.

chapter are: 1(e), 4(a), 4(c), 4(d), 14(c),
14(d), 14(f)

Study Due
18 Employee benefits You will need to be Employee benefits is one of two chapters In the examination candidates may be
able to account for a addressing employee remuneration. It is a required to:
Employee benefit costs can be a
range of new and complex topic to which you will
very significant proportion of  explain how different methods of
employment need to devote a significant amount of
total expenses. providing remuneration for
benefits. time.
employees may impact upon
Whereas accounting for short- You will need to be Section 1 gives a summary of the types of reported performance and
term benefits presents few, if any, able to apply the benefits that the standard addresses. Note position;
problems, the cost of long-term requirements of that the accounting for short-term
and post-employment benefits, IAS 19 to the  explain and appraise accounting
employee benefits (covered in section 2) is
which include pension plans, relatively standards that relate to employee
relatively straightforward.
medical benefits and life straightforward remuneration which include
insurance, is difficult to estimate. defined contribution Section 3 addresses post-employment different forms of short-term and
plans and the vastly benefits. Note the two types, defined long-term employee compensation,
Although IAS 19, Employee
more complex contribution (section 4) and defined in particular, retirement benefits
Benefits sets detailed accounting
defined benefit benefit (section 5) pension plans. and share-based payment;
and disclosure requirements to
ensure that all pension plans are plans. The accounting for defined benefit plans  determine for a particular scenario
accounted for and presented in a is by far the more complex of the two. what comprises sufficient,
For the latter, you Section 5 addresses the most challenging
consistent manner, the appropriate audit evidence;
will need to rely on concepts in the chapter.
underlying assumptions in the
the expertise of  design and determine audit
estimation process are highly Do not neglect the audit focus section –
actuaries, which will procedures in a range of
subjective. pensions are a popular topic and as likely
be critical in circumstances and scenarios, for
Stop and think enabling you to to come up in an integrated question as in example identifying an appropriate
account correctly for a single silo FR question. mix of tests of controls, analytical
What are the main types of short-
term, long-term and post- defined benefit plan procedures and tests of details; and
employment benefits? costs.
What is the difference between application of audit procedures,
defined benefit and defined how relevant ISAs affect audit risk
contribution plans for post- and the evaluation of audit
employment benefits? evidence.

Study Due
18 Why is the accounting for the Specific syllabus references for this
defined benefit plan far more chapter are: 5(a), 5(b), 14(c), 14(d),
(cont.)
difficult than the defined 14(f)
contribution plan?
Why do we have to disclose key

assumptions and methods used
in the accounting for defined
benefit pension plans?

Study Due
19 Share-based payment In a working Chapter 19 Share-based payment is In the examination candidates may be
environment you another new topic at Advanced Level. It is required to:
In major capital markets the
may have to assess highly topical and its adoption has not
potential gains that senior  appraise corporate reporting
the effect of been without controversy.
management can achieve regulations, and related legal
granting stock
through share-based payment It is important for its impact on requirements, with respect to
options as a
transactions are so significant performance and the potential dilution of presentation, disclosure,
remuneration policy
that they may dwarf other EPS. recognition and measurement;
on the entity's
elements of remuneration
financial statements Note the three types of share-based  explain how different methods of
packages.
and advise on how payment recognised by the standard and providing remuneration for
Before the publication of IFRS 2 these should be the importance of vesting conditions. employees may impact upon
there was no requirement to reported and reported performance and
This chapter ends in an audit focus
include an expense in profit or disclosed. position;
section, which should be worked through,
loss for this kind of remuneration.
together with the relevant interactive  explain and appraise accounting
This resulted in entities that
question. standards that relate to employee
offered low cash salaries but
remuneration including share-
large quantities of share-based
based payment;
compensation recording low
costs in their performance  determine for a particular scenario
statements. By comparison, what comprises sufficient,
entities operating in a more appropriate audit evidence;
stable and mature industry where
cash-based remuneration was
the norm recorded higher
employee costs in the
performance statement.
Stop and think procedures and tests of details; and
If the granting of equity  demonstrate and explain, in the
instruments does not require the application of audit procedures,
entity to part with assets, why how relevant ISAs affect audit risk
should a charge be recognised and the evaluation of audit
in profit or loss? evidence.

Study Due
19 Why has this been a controversial Specific syllabus references for this
standard polarising views at the chapter are: 1(b), 5(a), 5(b), 14(c),
(cont.)
highest political level? 14(d), 14(f)
What is the impact of
share-based payments on EPS?

Study Due
20 Groups: types of investment and In a working context You will have covered the standards In the examination candidates may be
business combination you will have to revised in Chapter 20 in your earlier required to:
account for studies. Pay particular attention to the
Business combinations are  appraise and evaluate cash flow
acquisitions, calculation of goodwill including the non-
becoming increasingly complex. measures and disclosures in single
disposals and controlling interest.
The nature of purchase entities and groups;
business
consideration and the legal form Work through the examples and
combinations such  identify and show the criteria used
of such transactions are often interactive questions to ensure you
as investments in to determine whether and how
driven by financial and tax understand the key principles.
associates, joint different types of investment are
features. Structures are carefully
arrangements, or You must also ensure that you understand recognised and measured as
modelled to ensure that
consolidations of the calculations required for step business combinations;
transactions optimise
subsidiaries. acquisitions and disposals.
post-acquisition earnings as well  calculate and disclose, from
as meeting corporate strategic You may also be Revise the principles relating to financial and other data, the
objectives. required to prepare consolidated statements of cash flows and amounts to be included in an
consolidated return to your earlier studies if necessary. entity's consolidated financial
Users should carefully review the
statements of cash statements in respect of its new,
disclosures included in the IFRSs 10 to 12 revise the definition of
flows, which are continuing and discontinued
financial statements regarding control and the treatment of joint
likely to include the interests (which include situations
business combinations. Extensive arrangements, and also change the
effect of acquisitions when acquisitions occur in stages
disclosures allow users of the required disclosures.
and disposals. and in partial disposals) in
financial statements to
This is a long chapter, but do not neglect subsidiaries, associates and joint
understand the effect of the
sections 12 and 13, which deal with group ventures;
combination on the group's
audits, including foreign subsidiaries (see
operations during the period.  determine for a particular scenario
Chapter 21).
This improves the predictive what comprises sufficient,
value of the financial information. appropriate audit evidence;
Stop and think  design and determine audit
Why are business combinations procedures in a range of
becoming increasingly complex? circumstances and scenarios,
for example identifying an
appropriate mix of tests of controls,
analytical procedures and tests of
details; and

Study Due
20  demonstrate and explain, in the

(cont.) application of audit procedures,
how relevant ISAs affect audit risk
and the evaluation of audit
evidence.
chapter are: 4(b), 6(a), 6(b), 14(c),
14(d), 14(f)

Study Due
21 Foreign currency translation and In a working context Chapter 21 covers IAS 21, The Effects of In the examination candidates may be
hyperinflation you may have to Changes in Foreign Exchange Rates and required to:
establish the IAS 29, Financial Reporting in
The management of foreign  determine and calculate how
functional currency, Hyperinflationary Economies.
exchange risk is an important exchange rate variations are
determine the IAS 21 is another complex standard you
aspect of business operations. recognised and measured and how
accounting will not have covered in earlier studies.
Importing and exporting goods they can impact on reported
treatment of
introduces foreign exchange risk You must understand the difference performance, position and cash
exchange
and results in earnings volatility between monetary and non-monetary flows of single entities and groups;
differences on
with reporting implications on items in section 1 of the chapter.
monetary and  demonstrate, explain and appraise
earnings and cash flow.
non-monetary items Note the significance of the functional how foreign exchange transactions
It is essential that translation and translate the currency in section 2 and how this is are measured and how overseas
processes are undertaken on a financial statements determined. entities are translated;
consistent basis to ensure for consolidation Note the accounting requirements for  determine for a particular scenario
comparability of financial purposes. You may reporting of foreign transactions, what comprises sufficient,
statements, and this is the subject also be required to consolidation of foreign subsidiaries and appropriate audit evidence;
of IAS 21, The Effects of Changes use or prepare goodwill and fair value adjustments.
in Foreign Exchange Rates. inflation-adjusted  design and determine audit
An awareness of the scope of IAS 29,
In recent years levels of general figures. procedures in a range of
Financial Reporting in Hyperinflationary
inflation in G7 and developed circumstances and scenarios, for
Economies is required.
countries have been low, so the example identifying an appropriate
management and reporting of This chapter also covers the impact of mix of tests of controls, analytical
inflationary price rises has not foreign currency on statements of cash procedures and tests of details;
been a major challenge to flows.
investors and the users of The audit of foreign subsidiaries was application of audit procedures,
financial statements. considered in Chapter 20. Section 10 of how relevant ISAs affect audit risk
this chapter gives some further points and and the evaluation of audit
The adjustments are
a full exam-style integrated question. evidence; and
complicated, and are the subject
of IAS 29, Financial Reporting in  critically appraise corporate
Hyperinflationary Economies. reporting policies, estimates and
measurements for single entities and
groups in the context of an audit.

Study Due
21 Stop and think Specific syllabus references for this

chapter are: 7(a), 7(b), 14(c), 14(d),
(cont.) What are the primary and
14(f), 18(c)
secondary indicators of
functional currency?

Study Due
22 Income taxes 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:
Taxation is a major expense for
identify deferred tax covered at Professional Level on current
business entities and has a direct  explain, determine and calculate
assets and liabilities tax and goes on to address the complex
effect on cash flow and how current and deferred tax is
arising out of and new topic of deferred tax.
performance. recognised and appraise
deductible and
You must understand the concept of accounting standards that relate to
Corporate income taxes are a taxable temporary
temporary differences and how these give current tax and deferred tax;
means by which governments differences and
rise to deferred tax. Go through the
provide incentives for companies report and present  determine for a particular scenario
examples very carefully.
to act in a particular way, for these as appropriate what comprises sufficient,
example beneficial tax credits to in the financial Ensure that you follow the steps relating to appropriate audit evidence;
encourage research and statements. the recognition and measurement of
development and allowances to deferred tax.
encourage investment.
Study the presentation and disclosure circumstances and scenarios, for
Therefore, although taxable
requirements. example identifying an appropriate
profit is based on accounting
profit, there are often important Deferred tax at this level is very
differences. Accounting for these demanding, and you should attempt the
types of differences is the major comprehensive Interactive question 13 to  demonstrate and explain, in the
emphasis of this chapter. make sure you completely understand it. application of audit procedures,
The audit of tax is covered in the final how relevant ISAs affect audit risk
Stop and think
section. Procedures should be adopted to and the evaluation of audit
How does deferred tax arise and evidence.
ensure any assumptions are reasonable
how is it measured?
and the requirements of IAS 12 have been Specific syllabus references for this
How may deferred tax arise in met. chapter are: 8(a), 14(c), 14(d), 14(f)
group accounting or when non-
current assets are revalued?

Study Due
23 Financial statement analysis 1 Analytical skills are So far your financial reporting studies have The analysis and interpretation of
essential in a wide been focused on preparation of financial financial statements is a significant
The annual financial statements
range of work areas statements. The focus of the next two portion of the Corporate Reporting
provide users with a
from audit planning chapters changes to that of users examination and could account for
comprehensive source of
to desk-top analysis (section 1). In section 2 we look at the approximately 30% of the total marks
financial information about an
of competitors and main accounting ratios and relationships in an exam if the single-silo FR
entity. The financial statements
acquisition targets. that are important to users. While most question is on financial analysis.
are prepared in a
You may have been ratios follow accruals-based accounting,
conventionalised way. They In the examination candidates may be
asked to calculate a cash flow ratios are important too.
provide substantial amounts of required to:
range of ratios and
narrative and numerical Note in sections 4 and 5 how important it
to provide some  analyse and evaluate the
information. A key skill is to be is in interpretation scenarios to take
explanation for their performance, position, liquidity,
able to analyse the information account of both economic factors affecting
movements from efficiency and solvency of an entity
they provide so that past all businesses and the specific industry the
previous periods or through the use of ratios and similar
performance can be analysed business is operating in.
their comparability forms of analysis including using
and future performance Read through section 6 to ensure you
to industry averages. quantitative and qualitative data;
predicted. understand the importance of accounting
policy choices when interpreting financial  compare the performance and
Stop and think
statements. position of different entities
How might different accounting allowing for inconsistencies in the
policies affect the interpretation Ethical issues are an important part of the
recognition and measurement
of financial statements? Will syllabus, covered in section 7.
criteria in the financial statement
management be influenced in Sections 8 and 9 cover practical examples information provided;
their choice of accounting and non-financial indicators.
 make adjustments to reported
policies and the judgement they It is important that you understand the earnings in order to determine
make in determining accounting limitations of ratio analysis in section 10. underlying earnings and compare
estimates by the way the
Reflect on how the various issues covered the performance of an entity over
information may affect a user's
in this chapter will impact upon how you time; and
view of the business?
interpret financial information.
 compare and appraise the
Finally work through the questions in the significance of accruals basis and
electronic Self-test bank carefully to cash flow reporting.
ensure that you have grasped the main
points in this chapter.

Study Due
23 You will probably be required to make Specific syllabus references for this
adjustments to the figures, correcting the chapter are: 9(d), 9(g), 9(h), 9(k)
(cont.)
accounting treatment, before going on to
do the analysis.

Study Due
24 Financial statement analysis 2 As an ICAEW This chapter brings together elements of In the examination candidates may be
Chartered your study from your whole Study Manual, required to:
The information that is provided Accountant you aspects of financial management and  comment on and critically appraise
by a company to its shareholders need to appreciate business strategy and your study of the nature and validity of items
forms the basis for the formation the importance of financial ratios from Chapter 23. included in published financial
of ideas about the prospects of disaggregated
Note the significance of financial analysis statements including how these
the company. Financial analysis information as a
in assessing the quality of information correlate with an understanding of
assesses the quality of this basis for financial
provided to stakeholders and in helping the entity;
information and helps analysis,
stakeholders make decisions. form decisions.  comment and critically appraise the
performance
evaluation and Note the section on data and analysis. nature and validity of information
Stop and think
decision making. disclosed in annual reports,
What are the main types of Following on from the creative accounting including integrated reporting and
You should be
creative accounting, and how can issues raised in this chapter, section 11 other voluntary disclosures
aware of the
accounts be restated? deals with fraud. Not all creative including those relating to natural
difficulties in
accounting practices are fraudulent, but capital;
What are the main financial ratios interpreting financial
most can be considered 'red flags' and
and what are the main information as a  appraise the limitations of financial
should alert the auditor to potential fraud.
accounting issues involved in result of the analysis;
their construction and flexibility afforded  analyse and evaluate the
application? by certain standards performance, position, liquidity,
and the potential efficiency and solvency of an entity
How do we forecast financial
misrepresentation of through the use of ratios and similar
statements and analyse the
such information. forms of analysis including using
impact of business decisions on
the value of a company? quantitative and qualitative data;
 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

Study Due
24 governance disclosures,
financial summaries and highlights
(cont.) and an understanding of the entity);
 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;
 make adjustments to reported
earnings in order to determine
underlying earnings and compare
the performance of an entity over
time;
 analyse and evaluate business risks
and assess their implications for
corporate reporting;
 analyse and evaluate financial risks
(for example financing, currency and
interest rate risks) and assess their
implications for corporate reporting;
 compare and appraise the
significance of accruals basis and
cash flow reporting;
 determine analytical procedures,
where appropriate, at the planning
stage using technical knowledge of

Study Due
24 corporate reporting, data analytics

and skills of financial statement
(cont.) analysis;
 review and evaluate, quantitatively
and qualitatively, for example using
analytical procedures and data
analytics and artificial intelligence,
the results and conclusions
obtained from audit procedures.

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

Study Due
25 Assurance and related services The provision of You have been introduced to the concept The concept of assurance is covered in
additional assurance of assurance before. However, the the Assurance and Audit and
Most assurance firms provide a
services may require Advanced Level looks at this topic in much Assurance Study Manuals. The
range of services besides audit. It
additional more detail. You will be expected to have provision of additional services is a
is therefore important to know
knowledge, either of a more detailed understanding of the new topic at the Advanced Level.
what services are available and to
the service or of the individual assurance services and other
be familiar with those services. Specific syllabus references for this
firm's specific services provided by the ICAEW
chapter are: 16(a)–(d), 17(b)–(d)
In practical terms, knowledge of procedures in Chartered Accountant together with the
additional services may enable respect of those related technical guidance.
you to provide better client services. This
Make sure you understand the differences
service, especially where those chapter provides an
between a reasonable assurance
services can be recommended to introduction but
engagement and a limited assurance
a client. note that additional
engagement and when these would
Stop and think training is likely to
apply. Also note the guidance on
be required before
Can you think of any examples of compilation engagements.
those services can
situations where you identified be performed in Forensic auditing is an important part of
that a client may require practice. the syllabus. Make sure you read this
additional assurance services? If section carefully.
so, what actions did you take?
Work through the Interactive questions
and electronic Self-test bank to ensure that
you can apply your knowledge.

Study Due
26 Environmental and social The provision of Chapter 26 deals with environmental and The provision of social and
considerations social and social audits. This is very topical at the environmental audits is a new topic in
More and more companies are environment audit moment and is becoming increasingly the Advanced Level.
including additional disclosures services does important particularly to larger
Specific syllabus reference for this
about their environmental and require additional organisations. Read through the chapter
chapter is: 18(a)
social impact in their annual knowledge, either of paying particular attention to the extract
reports. It is therefore important the service or of the from the sustainability report. This will
to know what these disclosures firm's specific help you to see how this issue is dealt with
should comprise, and the procedures in in practice.
auditor's responsibilities in respect of those
Sustainability reporting is likely to be
relation to such disclosures. services. This
examined in an integrated question, so
chapter provides an
Stop and think make sure you study the sections 3, 4
introduction, but
and 5 carefully. They cover how
When reviewing company annual note that additional
sustainability reporting affects the
reports, can you remember training is required
statutory audit, social and environmental
seeing any additional before those
audits and implications for assurance
environmental or social services can be
services respectively.
information? If so, was this performed in
audited? Look at the examples in practice. Finally, integrated reporting is a very
this chapter and then review topical area, so make sure you familiarise
other company accounts to yourself with the integrated report and
become more familiar with the what this means for auditors.
style and content of this type of Work through the Interactive questions
report. and electronic Self-test bank as these will
give you an idea of how this might be
examined.

Study Due
27 Internal auditing Internal auditors are Chapter 27 looks at the issue of internal The work of internal auditors was
an important part of audit as a discipline in its own right rather discussed in your Professional Level
When auditing companies with
the corporate than from the perspective of the external studies from the perspective of the
an internal audit department, the
governance auditor's reliance on internal audit work. impact their work might have on the
external auditor may decide to
structure within a external audit. At the Advanced Level,
place some reliance on the work Notice therefore, that you need to be
business and is one you may be required to consider the
of the internal auditor. However, prepared to take on different roles. You
of the means by work of the internal audit department
there is other work that the will not always be adopting the role of the
which the within the context of the business itself.
internal auditor also performs external auditor in an examination
management can
which may not be reviewed or question. Specific syllabus reference for this
demonstrate that it
considered by the external chapter is: 17(a)
is meeting its Read through the chapter carefully taking
auditor. This section provides an
obligations to note of the IIA Code of Ethics and
overview of the range of work of
operate effective International Standards for the
the internal audit department.
internal control. Professional Practice of Internal Auditing,
Stop and think as you will not have come across these
Have you worked at a client that before. However, also bear in mind that
maintained an internal audit many aspects of the internal auditor's
department? What interaction work are similar to those of the external
did you have with the internal auditor and may be relevant when
audit team? attempting a question.
Try the question in the electronic Self-test
bank.

5 Syllabus and learning outcomes
Corporate Reporting – Compliance

Students 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. 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.
In the assessment, students may be required to:
Covered
in chapter
1 Principles
(a) explain the impact of accounting principles and bases of measurement in 2
corporate reporting, for example fair value measurement;
(b) appraise corporate reporting regulations, and related legal requirements, with 2, 19
respect to presentation, disclosure, recognition and measurement;
(c) explain and appraise accounting standards that relate to the impact of changes 2
in accounting policies and estimates;
(d) explain and evaluate the impact of underlying assumptions on financial 2
statements; and
(e) identify and explain current and emerging issues in corporate reporting. 2, 10,
13–17
2 Reporting performance
(a) explain how different methods of recognising and measuring assets and 9, 10
liabilities can affect reported financial performance;
(b) explain and appraise accounting standards that relate to reporting performance: 9, 10, 11
in respect of presentation of financial statements; revenue; operating segments;
continuing and discontinued operations; EPS; interim reporting;
(c) formulate and evaluate accounting and reporting policies for single entities and 2, 9
groups of varying sizes and in a variety of industries; and
(d) calculate and disclose, from financial and other qualitative data, the amounts to 9, 10
be included in 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 2, 12, 13
liabilities can affect reported financial position, and explain the role of data
analytics in financial asset and liability valuation; and
(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-sale assets; inventories; investment properties; provisions and contingencies.

Covered
in chapter
4 Financing
(a) determine and calculate how different bases for recognising, measuring and 14–17
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 14, 20
groups;
(c) evaluate the impact of accounting policies and choice in respect of financing 16, 17
decisions for example hedge accounting and fair values; and
(d) explain and appraise accounting standards that relate to an entity's financing 14–17
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; and
(b) explain and appraise accounting standards that relate to employee 18, 19
remuneration 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 20
of investment are recognised and measured as business combinations; and
(b) calculate and disclose, from financial and other data, the amounts to be included 20
in 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 transactions and balances in foreign currencies and operations

(a) determine and calculate how exchange rate variations are recognised and 21
measured and how they can impact on reported performance, position and cash
flows of single entities and groups; and
(b) demonstrate, explain and appraise how foreign exchange transactions are 21
measured and how the financial statements of foreign operations 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
Students will be able to analyse, interpret, evaluate and compare financial statements of entities
both over time and across a range of industries.
Covered
in chapter
9 Financial statement analysis

(a) comment on and critically appraise the nature and validity of items included in 1, 24
published financial statements including how these correlate with an
understanding of the entity;
(b) comment on and critically appraise the nature and validity of information 24
disclosed in annual reports, including integrated reporting and other voluntary
disclosures, including those relating to natural capital;
(c) appraise the limitations of financial analysis; 24
(d) analyse and evaluate the performance, position, liquidity, efficiency and solvency 23, 24
of an entity through the use of ratios and similar forms of analysis including using
quantitative and qualitative data;
(e) interpret the potentially complex economic environment in which an entity 24
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 and an understanding of the entity);
(f) appraise the significance of inconsistencies and omissions in reported 9, 24
information in evaluating performance;
(g) compare the performance and position of different entities allowing for 9, 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 9, 23, 24
earnings and compare the performance of an entity over time;
(i) analyse and evaluate business risks and assess their implications for corporate 24
reporting;
(j) analyse and evaluate financial risks (for example financing, currency and interest 24
rate risks) and assess their implications for corporate reporting; and
(k) compare and appraise the significance of accruals basis and cash flow reporting. 23, 24
Audit and Assurance

Students will be able to explain the processes involved in planning an audit, evaluating internal
controls, appraising risk including analysing quantitative and qualitative data, 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.

Covered
in chapter
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; and
(c) evaluate and explain current and emerging issues in auditing including 5
developments in the use of technology (eg, big data, data analytics and artificial
intelligence).
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, including analysing quantitative and qualitative data, arising 5
from, or affecting, a potentially complex set of business processes and
circumstances and assess their implications for the engagement;
(d) identify significant business risks (including those arising from cyber security and 5
technological advances including cloud computing, cryptocurrencies and
robotic process automations) and assess their potential impact upon the
financial statements and the audit engagement;
(e) evaluate the impact of risk and materiality in preparing the audit plan, for 5
example the nature, timing and extent of audit procedures;
(f) determine analytical procedures, where appropriate, at the planning stage using 6, 24
technical knowledge of corporate reporting, data analytics 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, 5
having regard to the reliability of management;
(i) evaluate, where appropriate, the need for, and extent of reliance to be placed on 6
expertise from other parties to support audit processes including when to
challenge the extent and working practices of other parties; and
(j) prepare, based upon planning procedures, an appropriate audit strategy and 5
detailed audit plan or extracts.
12 Internal control systems

(a) analyse and evaluate the control environment for an entity based on an 5, 7
understanding of the entity, its operations and its processes;
(b) evaluate an entity's processes for identifying, assessing and responding to 5, 7
business and operating risks as they impact on the financial statements;
(c) appraise an entity's accounting information systems and related business 7
processes relevant to corporate reporting and communication including virtual
arrangements and cloud computing;
(d) analyse and evaluate strengths and weaknesses of preventative and detective 7
control mechanisms and processes, highlighting control weaknesses; including
weaknesses related to cyber security and corporate data controls;

Covered
in chapter
(e) evaluate controls relating to information technology and e-commerce; including 7
controls associated with cyber security and corporate data security;
(f) explain and appraise the entity's system for monitoring and modifying internal 7
control systems; and
(g) devise, explain and evaluate tests of controls. 7
13 Corporate governance
(a) describe and explain the nature and consequences of corporate governance 4
and 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 4
and 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 4
governance codes and set out the required compliance disclosures;
(f) explain the principles, practices and disclosures of corporate governance; 4
(g) explain the respective responsibilities of those charged with governance and 4
auditors for corporate risk management and risk reporting;
(h) explain the respective responsibilities of those charged with governance and 4, 7
auditors in respect of internal control systems;
(i) explain and evaluate the role and requirement for effective two-way 4
communication between those charged with governance and auditors; and
(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, 10–14,
evidence; 17–22
(d) design and determine audit procedures in a range of circumstances and 6, 10–14,
scenarios, for example identifying an appropriate mix of tests of controls, 17–22, 24
analytical procedures and tests of details;
(e) demonstrate how professional scepticism should be applied to the process of 6
gathering audit evidence and evaluating its reliability including the use of client-
generated information and external market information in data analytics;
(f) demonstrate and explain, in the application of audit procedures, how relevant 6, 9–14,
ISAs affect audit risk and the evaluation of audit evidence; 17–22

Covered
in chapter
(g) evaluate, applying professional judgement, whether the quantity and quality of 6
evidence gathered from various audit procedures, including analytical
procedures and data analytics, is sufficient to draw reasonable conclusions;
(h) prepare appropriate audit documentation; and 1
(i) recognise issues arising whilst gathering assurance evidence that should be 6
referred to a senior colleague.
15 Reporting and concluding

(a) review the appropriateness of the going concern basis of accounting and 8
describe relevant going concern disclosures;
(b) review events after the reporting period; 8
(c) review and evaluate, quantitatively and qualitatively, for example using analytical 8, 24
procedures, data analytics and artificial intelligence, 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; and
(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 25
entity or process for a given scenario; and
(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 27
the planned objectives;
(b) appraise and explain the nature and purposes of forensic audit and prepare and 25
plan procedures required to achieve a range of differing objectives;
(c) explain the roles and responsibilities that auditors may have with respect to a 25
variety of different types of information and design procedures sufficient to
achieve agreed objectives; and
(d) explain the nature and purposes of due diligence procedures (for example: 25
financial, commercial, operational, legal, tax, human resources) and plan
procedures required to achieve a range of differing financial objectives.

Audit and Corporate Reporting – Integrated learning outcomes
Students 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.
Covered
in chapter
18 Integrated learning outcomes

(a) identify and explain corporate reporting and assurance issues in respect of social 2, 24, 26
responsibility, sustainability and environmental matters for a range of
stakeholders;
(b) critically evaluate accounting policies, choices and estimates, identifying issues 2, 24
of earnings manipulation and creative accounting; and
(c) critically appraise corporate reporting policies, estimates and measurements for 21
single entities and groups in the context of an audit.
Ethics
Students 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, students 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 3
scenarios;
(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; and
(e) design and evaluate appropriate safeguards to mitigate threats and provide 3
resolutions to ethical problems.

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 chartered accountants.
Key to other symbols:
→ The knowledge level reached is assumed to be continued

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 C A

and Assurance Standards Board
The Authority Attaching to Practice Statements Issued by the International A

Auditing 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 B A →

and the Conduct of an Audit in Accordance with International Standards on
Auditing (UK)
210 (Revised June 2016) (Updated July 2017) Agreeing the Terms of Audit B →
Engagements
220 (Revised June 2016) (Updated July 2017) Quality Control for an Audit B →
of Financial Statements
230 (Revised June 2016) Audit Documentation C B A
240 (Revised June 2016) (Updated July 2017) The Auditor's Responsibilities C B A
Relating to Fraud in an Audit of Financial Statements
250 A (Revised December 2017) Consideration of Laws and Regulations in B A

an Audit of Financial Statements
250 B (Revised June 2016) The Auditor's Statutory Right and Duty to Report C
to Regulators of Public Interest Entities and Regulators of Other Entities in
the Financial Sector
260 (Revised June 2016) (Updated July 2017) Communication with Those B A
Charged with Governance
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 C A →
Misstatement Through Understanding of the Entity and its Environment

Advanced Level
Assurance
Assurance
Audit and
Topic
320 (Revised June 2016) Materiality in Planning and Performing an Audit C A →
330 (Revised July 2017) The Auditor's Responses to Assessed Risks C B A
402 Audit Considerations Relating to an Entity Using a Service Organisation C B
450 (Revised June 2016) (Updated July 2017) Evaluation of Misstatements C A

Identified during the Audit
500 (Updated July 2017) Audit Evidence B A →
501 Audit Evidence - Specific Considerations for Selected Items B A
505 (Updated July 2017) External Confirmations B B A
510 (Revised June 2016) Initial Audit Engagements - Opening Balances C B A
520 Analytical Procedures B A A
530 Audit Sampling B B A
540 (Revised December 2018) Auditing Accounting Estimates and Related C B A

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 B A →

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

Advanced Level
Assurance
Assurance
Audit and
Topic
705 (Revised June 2016) Modifications to the Opinion in the Independent A →

Auditor's Report
706 (Revised June 2016) Emphasis of Matter Paragraphs and Other Matter A →
Paragraphs in the Independent Auditor's Report
710 Comparative Information – Corresponding Figures and Comparative B A

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

Information
800 (Revised) Special Considerations – Audits of Financial Statements B A

prepared in Accordance with Special Purpose Frameworks
805 (Revised) Special Considerations – Audits of Single Financial Statements B A

and Specific Elements, Accounts or items of a Financial Statement
International Standards on Auditing
810 (Revised) Engagements to Report on Summary Financial Statements B
International Auditing Practice Note (IAPN)
1000 Special Considerations in Auditing Financial Instruments B
International Standards on Review Engagements (ISREs)
2400 (Revised) Engagements to Review Historical Financial Statements C B
International Standards on Review Engagements (UK & Ireland)
2410 Review of Interim Financial Information Performed by the C B

Independent Auditor of the Entity
International Standards on Assurance Engagements (ISAEs)
3000 (Revised) Assurance Engagements Other than Audits or Reviews of C B

Historical Financial Information
3400 The Examination of Prospective Financial Information C A
3402 Assurance Reports on Controls at a Service Organisation C B
3410 Assurance Engagements on Greenhouse Gas Statements C →

Advanced Level
Assurance
Assurance
Audit and
Topic
International Standards on Related Services (ISRSs)
4400 Engagements to Perform Agreed-upon Procedures Regarding B

Financial Information
4410 (Revised) Compilation Engagements B
Other standards
ISQC (UK) 1 (Revised June 2016) (Updated July 2017) Quality Control for C B
Firms that Perform Audits and Reviews of Financial Statements, and Other
Assurance and Related Services Engagements
Other Guidance
Bulletin (October 2016): Compendium of Illustrative Auditor's Reports on B B

United Kingdom Private Sector Financial Statements for periods
commencing on or after 17 June 2016
FRC Briefing Paper B 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.

Ethics Codes and Standards
Ethics Codes and Standards Level Modules
IESBA Code of Ethics for Professional Certificate Level

Accountants C/D Accounting
(parts A, B and C and Definitions) B Assurance
C/D Business, Technology and
Finance
ICAEW Code of Ethics D Law
C Management Information
C Principles of Taxation
Professional Level
A Audit and Assurance
B Business Strategy and
Technology
B Financial Accounting and
Reporting
B/C Financial Management
B Tax Compliance
B Business Planning
Advanced Level
A Corporate Reporting
A Strategic Business
Management
A Case Study
FRC Revised Ethical Standard (2016) B Assurance

A Audit and Assurance
Advanced Level
A Corporate Reporting
A Strategic Business
Management
A Case Study

Financial Reporting – IFRS
Certificate & Professional Advanced
Level Level
and Reporting
Accounting
Corporate
Assurance
Reporting
Financial
Topic
Preface to International Financial Reporting Standards A A

Conceptual Framework for Financial Reporting (Note 1) 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 B A A
Estimates and Errors
IAS 10, Events after the Reporting Period A A
IAS 12, Income Taxes C A
IAS 16, Property, Plant and Equipment B A A
IAS 19, Employee Benefits – A
IAS 20, Accounting for Government Grants and Disclosure A A
of 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 – D
Plans
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 C A A
Assets
IAS 38, Intangible Assets C A A

Certificate & Professional Advanced
Level Level
and Reporting
Accounting
Corporate
Assurance
Reporting
Financial
Topic
IAS 39, Financial Instruments: Recognition and – A

Measurement (Hedging only) (Note 2)
IAS 40, Investment Property (Note 2) – A
IAS 41, Agriculture – D
IFRS 1, First-Time Adoption of IFRS – C
IFRS 2, Share-based Payment – A
IFRS 3, Business Combinations B A
IFRS 4, Insurance Contracts (Note 2) – 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 C A
IFRS 8, Operating Segments – A
IFRS 9, Financial Instruments (Note 2) C A
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 15, Revenue from Contracts with Customers C B A
IFRS 16, Leases B A
IFRS 17, Insurance Contracts (Note 1) – C
IFRS for SMEs – A
Note 1: The mandatory effective date for IFRS 17 is after 1 January 2019 so it is not examinable
for the Professional Level 2020 FAR syllabus. Although the mandatory date for IFRS 17 is after 1
January 2019, due to its significance to financial reporting in the insurance industry, it is
nonetheless examinable at level A within the Business Planning: Insurance syllabus. The 2018
amendments to the Conceptual Framework have an effective date after 1 January 2019 so it is
not examinable for the Professional Level 2020 syllabus.
Note 2: Business Planning: Banking and Business Planning: Insurance cover IAS 39 and IFRS 9 in
more detail than in the Financial Accounting and Reporting syllabus at Professional Level.
Business Planning: Insurance also covers IFRS 4 and IAS 40 in more detail than in the Financial
Accounting and Reporting syllabus at Professional Level.


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The Institute of Chartered Accountants in England and Wales

ICAEW 2020 Contents iii

ICAEW 2020 Study Guide 1

2 Corporate Reporting ICAEW 2020

Professional Level exams Permitted Text

Audit and Assurance 

Financial Accounting and Reporting 

Business Strategy and Technology 

Business Planning No restrictions

Advanced Level exams

Corporate Reporting No restrictions

The exams which have no restrictions include the following:

ICAEW 2020 Study Guide 3

4 Corporate Reporting ICAEW 2020

ICAEW 2020 Study Guide 5

6 Corporate Reporting ICAEW 2020

ICAEW 2020 Study Guide 7

4.1 Help yourself study for your ACA exams

Believe in yourself Yes, there is a lot to learn. But thousands have

2 Focus on the exam

3 The right method

4 The right recap

8 Corporate Reporting ICAEW 2020

Key study steps Activity

Step 4 Proceed methodically through each chapter, particularly focusing on

Step 10 Ensure you have ticked off the Learning outcomes.

4.3 Detailed study guide

ICAEW 2020 Study Guide 9

ICAEW 2020 Study Guide 11

12 Corporate Reporting ICAEW 2020

2 role of data analytics in financial

ICAEW 2020 Study Guide 13

14 Corporate Reporting ICAEW 2020

ICAEW 2020 Study Guide 15

16 Corporate Reporting ICAEW 2020

ICAEW 2020 Study Guide 17

18 Corporate Reporting ICAEW 2020

ICAEW 2020 Study Guide 19

20 Corporate Reporting ICAEW 2020

9 Stop and think  compare the performance and

ICAEW 2020 Study Guide 21

22 Corporate Reporting ICAEW 2020

10  demonstrate and explain, in the

Specific syllabus references for this

ICAEW 2020 Study Guide 23

24 Corporate Reporting ICAEW 2020

11 What is the impact of

ICAEW 2020 Study Guide 25

26 Corporate Reporting ICAEW 2020

ICAEW 2020 Study Guide 27

28 Corporate Reporting ICAEW 2020

13 What type of events could affect  demonstrate and explain, in the

ICAEW 2020 Study Guide 29

30 Corporate Reporting ICAEW 2020

14 Sale and leaseback Specific syllabus references for this

ICAEW 2020 Study Guide 31

32 Corporate Reporting ICAEW 2020

ICAEW 2020 Study Guide 33

16 Study carefully the paragraphs on

34 Corporate Reporting ICAEW 2020

ICAEW 2020 Study Guide 35

17 What are the qualifying criteria  demonstrate and explain, in the

Specific syllabus references for this