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WEAKNESS OF CANDIDATES
There were isolated cases of some levels of weaknesses demonstrated by some of the candidates
in answering the questions.
The main reasons that could be deduced were:
Very short period of preparation. Most candidates allow themselves only a few contact
hours of study towards the examination.
Lack of or no apparent practical skills in the field of Information Systems in the
workplace.
Poor communication skills.
The observed weaknesses may be remedied by the candidates themselves making conscious
efforts to prepare adequately before registering to write the examination.
Q6. This was an application-type question on Computer Software which attracted the
worst answers.
Q7. This was an application question on computer networks and attracted fairly
good answers.
In each question, the amount of work required was commensurate with the allotted time and
marks. No question was loaded.
With a little bit more preparation and commitment, the entire paper should have been within the
capability of any average candidate.
6. Question 6 was on national income accounting. This question, however, was answered
well by the candidates.
7. Question 7 was on government budget. This was properly answered by the candidates
very well.
Question 6
Although only a few candidates attempted this question, some of them scored very good marks.
Question 7
Most of the candidates refrained from answering this question and most of those who did
performed very badly at (b) and (c).
The questions were neither too loaded nor were the marks allocated over-generous. The amount
of work required of the candidates was commensurate with the time and marks allotted.
The performance of candidates was quite mixed. A small number of candidates answered the
question very well. Majority of candidates could not outline the differences between
management accounting and financial accounting. This accounted for a great number of
candidates obtaining low marks.
It is therefore recommended that lecturers preparing candidates should teach them the work of
accountants in an organization as well as the differences between management accounting and
financial accounting.
Question 2
Question 2 was on Cash Flow Statement and candidates were required to prepare a statement of
Cash Flows in accordance with IAS 7. The approach to this question was really poor. Quite a
number of candidates did not answer this question and those who attempted the question scored
very low marks. Almost all candidates did not prepare for this particular question and could not
prepare the accounts required.
It is recommended that lecturers preparing candidates should let them understand the theoretical
framework as well as how to prepare cash flow statements.
Question 3
Question 3 asked candidates (a) to write short notes on the following; (i) Accounting concepts,
(ii) Debit Note (iii) Purchase Order (b) asked candidates to prepare (i) Bad Debts Account, (ii)
Allowance for Doubtful Debts (iii) Income Statement Extracts and (iv) Statement of Financial
Position Extracts.
The approach to this question was quite mixed as some candidates did very well and others
performed poorly. Majority of the candidates did not know how to prepare Bad Debts Accounts
and Provision (allowance) for Doubtful Accounts.
Question 4
Question 4 requested candidates to prepare Income Statement and Statement of Financial
Position for a sole trader. The approach to this question was very good except that some
candidates could not treat items such as discounts and returns and provisions for bad debts
correctly.
Some candidates treated Trade Payables and Trade Receivables in the Income Statement instead
of treating them in the Statement of Financial Position. It appeared that the candidates were not
familiar with these terms as being same as Creditors and Debtors.
Some candidates could not treat carriage inwards and outwards correctly. Instead of adding the
carriage inwards to the purchases figure and treating the carriage outwards as an expense, they
treated these items wrongly.
A great number of candidates were not able to calculate and treat the allowance for doubtful debt
correctly. The allowable for doubtful debt in the trial balance was 15,000 and it was stated that
due to improvement in debt recovery efforts the allowance was adjusted to 10,000. Some were
able to calculate the difference of 5,000 as a reduction in allowable doubtful debt but treated it as
an expense instead of adding it to the gross profit.
It is therefore recommended that lecturers preparing candidates for the examination should draw
their attention to the issues stated above.
Question 5
Question 5 required candidates to prepare (i) Realization Account (ii) Partners Capital Account
and (iii) Bank Account. This question was well answered except that some of the candidates
could not treat discount received from creditors in the Realization Account correctly. Some
candidates also treated the balance on the creditors account in the realization account instead of
debiting the creditors account and crediting the bank account. The treatment of winding up
expenses was also a problem for some candidates. Instead of debiting the realization account
with the winding up expenses and crediting the bank account, they rather debited bank account
and credited the realization account. However, the performance in this question was good.
CONCLUSION
Candidates and lecturers should use past question papers as a guide to future question papers, but
candidates also need to be aware that future papers, although still following the current
specification, may differ in approach and format from the current series.
SP
VC
C
Proportion
C/S
Fowls
15
9
6
G. Fowls
10
8
2
60%
3.6
40%
0.8
= 4.4
Some of the candidates could not even determine the total fixed costs by simply adding the cost
items listed in the question totaling 76,000.00
Question 2
The candidates had no difficulty preparing the Profit Statement for Option 1 where the foreign
order is rejected. However, they had difficulties in determining the various cost items using the
applicable capacity levels. These cost items at capacity levels are calculated as follows:
1. Sales at 80% capacity
At 100%
= 6,400,000
= 6,400,000 x 100/80
= x 8,000,000
= 4,000,000
= 4,000,000 (100-15)% = 3,400,000
= 8,000,000
= 2,500,000
= 800,000 x 100/80
= 1,000,000
= 400,000 x 100/80
= 500,000
= 400,000 x 130/80
= 650,000
Question 3
This question was poorly attempted by the candidates. They had difficulties in determining
which costs are relevant for the respective decision alternatives.
Material Alpha
Material Beta
Labour
Dept. A
Dept. B
Most of the candidates could not define and give the characteristics of a relevant cost. These are:
future costs, cash flows, differ between alternatives.
Question 4
About 80% of the candidates have difficulty calculating standard material price, labour rate,
variable overhead rate as well as material quantities per mint and labour hours per mint from
given variances. These made it impossible to prepare the Standard Product Cost sheet for the
company.
These are highlighted below:
Standard Material Price
Standard Labour Rate
Standard Variable Overhead Rate
Material Usage Variance
Standard Quantity for actual production
Standard Quantity per unit
=
=
=
=
=
=
450,000/300,000
256,000/64,000hrs
64,000/64,000hrs
18,000/1.5
300,000 12,000
72,000/36,000
= 1.50
= 4.00
= 1.00
= 12,000kg
= 288,000kg
= 2hrs
=
=
=
32,000/4
64,000 + 8,000
72,000/36,000
= 8,000hrs
= 72,000hrs
= 2hrs
12.00
8.00
2.00
22.00
Question 5
This question examined candidates in the preparation of functional budgets. The performance is
very satisfactory. Only few candidates have problem with the preparation of the Material Usage
Budget.
This is simply evaluating the Production Quantities Budget at the units of materials per products.
The major difficulty encountered was the definition of a Principal Budget Factor and some
examples in a financial institution. A Principal; Budget Factor is simply any limiting factor or
key factor that will limit the activities of an undertaking.
Examples in a financial institution include interest rates, reserve ratios, level of ICT, customers,
exposure limits etc.
CONCLUSION
Performance of the candidates is generally below expectations. Presentation of suggested
solutions was poor and the expression of English language below standard.
The approach to the question was above average, since most of them were able to
indicate the symptoms of overtrading and they therefore scored the maximum marks.
(b) (i) Most of the candidates were able to compute the various ratios from the Financial
Statement. However, a few candidates decided to set their own question by
changing the repetition in Receivable collection period and Trade Receivable
collection to Trade Payables which was not required and therefore got
penalized.
(ii) Most candidates were able to compute and analyze the ratios to identify the
company which sells goods as cheaply as possible to increase its volume of
sales from the one which is located at a prestigious area with strong customer
focus and charges premium on its goods.
Q2.
Q3.
The approach to the question was far below average. Most candidates showed little or no
knowledge in the preparation of a Financial Statement. Candidates at this level of the
examination should expect series of notes to work on in the preparation of a Financial
Statement. Even though the question did not request for published financial statement,
a few candidates prepared notes, getting no marks.
(a) Most of the candidates could not prepare Statement of Profit or Loss and other
comprehensive income of a limited liability company.
(b) Similarly, most of the candidates were unable to prepare the statement of changes in
equity.
(c) Also, most of the candidates were unable to prepare the statement of financial position.
Q4.
This was a two part question on Hire Purchase and Partnership. It could have been a
bonus question but it turned out to be a disaster for most of the candidates. However,
candidates whose understanding of the double entry is good scored high marks by
applying the principle to the notes in the Partnership question.
(a) Only a few candidates approach to this section on Hire Purchase was above average.
Most of them could not compute the Cost of Sales for both Cash and Hire Purchase Sales.
Hence, they could not derive the Closing Stock, and the Gross and Net Profits were all
wrong. Similarly, the computation of the unrealized profit was also a challenge to most of
them. Most candidates appeared confused and therefore could not prepare the financial
position of the company, even though most of the items in the statement of financial
position require little or no adjustment to earn them the points.
(b) The approach to this section was below average. This could have been a bonus if
candidates had taken their time to handle the adjustments required on the change in the
partnership using the basic double entry principle.
Q5.
i.
Only a few were able to handle the increase in the goodwill on the admission of a
new partner. The write off of the Goodwill from the accounts was a challenge to
the candidates. Most of them debited the Capital account with items which should
have been credited and vice versa.
ii.
This was a three part question which could have helped the candidates to score the marks
to help them improve upon their performance.
(a) (i) Most of the candidates who attempted this section of the question performed above
average as they were able to state and explain the main qualitative characteristics of
financial information.
(ii) Similarly, most of them were able to state and explain the bases of measuring assets
and liabilities subsequent to their initial recognition.
(b) Only a few were able to calculate the impairment loss, since most of them could not
compute the future discounted cash flows to determine the recoverable amount.
(c) Most of the candidates failed to explain how the oil platform should be treated in the
financial statements. They concentrated on the computation of the figures in the financial
statements, which they could also not get right.
The intentions of the syllabus and assessment of the candidates seem to suggest that there in a
structural drift of the objectives and skills of the candidates within the overall examination
scheme. Out of 966 scripts moderated only 217 candidates marginally scored 50 marks with very
few above the 50 mark. This represents 22 percentage passes. Perhaps this is not the desired
result the examiners wanted giving the fact that the questions asked were within the best practice
and assessed in pursuit of the institutes objectives. Incrementally, the percentage passes should
over the years have reached above 50 percentage passes.
RECOMMENDATIONS
In order for candidates to develop the knowledge and comprehension of Public Accounts and
Audit, there is a significant need for a certain level of educational programme in collaboration
with ICAG that would afford candidates the opportunity to obtain qualitative learning
programmes throughout the country. In the universities, polytechnics and other higher
institutions there is the need for a collaborative effort so that students are taught and tested in
Public Accounts and Audit properly aligned with ICAGs syllabus.
It has more than two inside directors: Inside directors are often said to be seeking to
influence board decisions in their favour.
ii.
The CEO has close ties with several directors. This affects the independence of the
board in making critical decisions which may not agree with the idea of the CEO.
iii.
Directors own none or just a few shares in the company. This does not tie their
interests to the fortunes of the company well enough to demand optimum
commitment from them.
iv.
Weak boards also meet occasionally instead of frequently. It is important that board
members meet as frequently as possible to assess the performance of management
and to take other critical decisions.
v.
Weak boards also do not evaluate their own performance individually and as a group.
vi.
Board members also do not evaluate the performance of the CEO because he is a
member and often has close ties with the others.
Question 3
This question was in two parts. The first part of this question required the candidate to explain
the concept of Board independence in corporate governance. The second part of the question
asked candidates to advance arguments for the usefulness of corporate governance. It was a
popular question and the performance was good.
Question 4
This question was in two parts. Part (a) of this question asked candidates to explain three reasons
why investors prefer to invest in organization that practice good corporate governance principles.
In Part (b), the candidates were required to explain the basic approaches to ethnical behaviour.
A good number of the candidates attempted this question and the performance was good in part
(a). However, a good number of the candidates demonstrated lack of knowledge in part (b) of
the question. Some of the points expected from the candidates to part (b) of the question include:
i.
Utilitarian Approach: This approach proposes that actions and plans should be
judged by their consequences. People should therefore behave in a way that will
produce the greatest benefit to society and produce the least harm or the lowest cost.
A problem with this approach is the difficulty in recognizing all the benefits and
costs.
ii.
Individual Rights Approach: This approach proposes that human right have certain
fundamental rights that should be respected in all decisions. A particular decision or
behaviour should be avoided if it interferes with the rights of others. A problem with
this approach is in defining fundamental rights.
iii.
Justice Approach: it proposes that decisions makers be equitable, fair and impartial
in the distribution of costs and benefits to individuals and groups. It follows that the
principles of distribute justice (people who are similar on relevant dimensions such as
jobs seniority should be treated in the same way and fairness (liberty) should be
equal for all persons).
The Justice Approach can also include the concepts of retributive justice
(punishment should be proportional to the offence) and compensatory justice
(wrongs should be compensated in proportion to the offence).
Affirmative action issues such as reverse discrimination are examples of conflicts
between retributive and compensatory justice.
Question 5
In the first part, the candidates were asked to prepare a TOWS matrix and generate four
alternative strategies based on information given in the question. The second part asked the
candidates to comment on Companys performance with respect to its external environment.
This question was not popular with the candidates. A few of the candidates demonstrated
understanding of TOWS Matrix. Some of the candidates lost marks because they confused it
with SWOT Analysis.
Question 6
The candidates were asked to assume the position of a Chief Finance Officer of a recently listed
company by identifying stakeholders of a company, their respective expectations and make
recommendations as to how the company can manage them to its benefit. This question was
answered by a good number of the candidates and the performance was very good.
Question 7
This question was in three parts. In the first part, the candidates were asked to explain the
technological environment of a business. The second asked for ways that technology assist
organizations to achieve their goals. The final part of the question required candidates to give
reasons why it is important for organizations to brand their products. The question was not
popular but the few who attempted did well.
Question 1 (c)
The question required candidates to determine the source from which an auditor of an insurance
company could obtain knowledge of the Insurance Industry of the clients business. Many
candidates answered the question correctly.
Question 2 (a)
Circumstances in which change of accounting policies is permissible as required by the question
were correctly given by many candidates.
Question 2 (b)
Candidates were to describe ten issues to consider when reviewing audit working papers.
Candidates were not familiar with the issues but rather demonstrated the review of financial
statements instead of audit working papers.
Question 2 (c)
Matters an auditor should consider before accepting to act as a Principal Auditor of a holding
company were demanded of candidates. Many candidates lacked the required knowledge and
provided answers relevant to general acceptance of an audit engagement.
Question 2 (d)
Candidates were to assess five inherent risks and draft a risk register for the parent company.
Some candidates could not distinguish inherent risk from other components of audit risk and
therefore gave muddled answers.
Question 3 (a)
Analytical procedures during the planning stages of an audit were treated as the whole planning
procedures themselves by some candidates. A few candidates however gave the right answers.
Question 3 (b)
Candidates were to discuss six controls management should implement before the introduction of
an online sales system. The question received mixed treatment by candidates as both correct and
wrong answers given freely.
Question 3 (c)
Six situations where social and environmental issues could potentially impart financial
statements were fully and correctly discussed by many candidates. Some candidates were able to
mention the issues but could not spell the impact on the financial statements.
Question 4 (a)
Candidates were to explain expectation gap in auditing and provide examples of the public
expectation of an audit. Expectation gap is a topic in auditing one syllabus and some candidates
seemed to have forgotten it. Many candidates could not explain the concept very well but were
able to give the examples of public expectation of an audit.
Question 4 (b)
Candidates were to describe outline audit procedures to verify opening balances because some
balances were given in the preamble to the question. Some candidates outline procedures to
verify each of them rather than demonstrating the procedures to review opening balances as a
whole. This question was poorly attempted.
Question 4c (i & ii)
Immediate action to take when it was discovered during an audit that the client has going
concern difficulties and identification of going concern during the review of an audit were
correctly done by many candidates.
Question 5a (i & ii)
These three sub-questions were on fixed assets register; matters to which an auditor will direct
attention when examining the register, how useful the register is to both the client and the auditor
and the contents of the register. To a large measure, the correct answers were given by many
candidates.
Question 5b
Candidates were to explain safeguards to implement to ensure that conflict of interest is properly
managed when auditing two clients who are competitors. This question was well answered.
CONCLUSION
The performance was generally good. Those who passed did so on merit as there was no sign of
copying from one another. There is however more room for improvement.
was correctly given in most cases but the inefficiency and ineffectiveness of the approach were
not clearly spelt out.
Question 2b
Explanation of Internal Control Systems required in computerized environment presented
difficulties to many candidates as only few candidates could identify General and Application
Controls. Three examples of specific control activities and objectives for each control were no
go area for candidates.
Question 2c
CAATS were well explained but their uses in the auditing process were not properly treated.
Question 3a
This question demanded knowledge of the role of Internal Audit Department in an organization.
Many candidates were able to give the right answers.
Question 3b
Candidates were to state five tests to confirm ownership of freehold land and buildings. While
some candidates rightly restricted their tests to confirmation of ownership, other candidates went
the full hog of verification of the asset.
Question 3c
Differences between a Letter of Engagement and a Management Letter received mixed treatment
from candidates. While many candidates were able to distinguish the Letter of Engagement, the
same cannot be said of the Management Letter. In fact, many candidates did not know what the
Management Letter is.
Question 3d
Disclaimer of opinion and adverse opinion also received mixed response from candidates. Some
candidates were able to spell out the circumstances and their effects giving rise to the two
opinions, others confused one for the other.
Question 4a
Candidates were to describe five tests to audit stated capital. Stated Capital falling on the liability
side of the balance sheet seemed to be beyond the comprehension of many candidates. Answers
provided showed clearly that many candidates did not know what stated capital is. They
confused it with a capital asset.
Question 4b
Five advantages and five disadvantages of using scientific sampling as against the use of nonscientific sampling were correctly discussed. However, some candidates gave the advantages and
disadvantages of both approached to sampling instead of only the scientific approach.
Question 5a
Many candidates were able to state three control procedures or activities each for (i) sales, (ii)
receipts of cash and (iii) stores management.
Question 5b
Candidates were to list five tests of control to assess control systems over acquisition and
disposal of an item of plant. Some candidates were able to provide the correct answers but other
candidates drew up internal control questionnaire for plant.
Question 5c
Many candidates could not outline three financial and operational indicators of going concern
difficulties of a company. They could not be blamed because this question is outside the scope of
the syllabus.
Question 5d
Quality Control is another topic outside the scope of the syllabus and rightly candidates could
not explain it in relation to auditing. Those who ventured defined it in relation to the manufacture
of a product.
CONCLUSION
The paper can be graded as good based on the performance of candidates generally. However, it
must be said that some candidates exhibited levels of maturity in their approach to answering
questions beyond expectation.
For once, correct spelling and good grammar were amply displayed by many candidates.
Handwritings were good and candidates are commended for that.
Question 1c
Some of the candidates did not use the required regression line of Business Management
against Economics to answer the question.
Question 2a
This question was fairly attempted.
Question 2b
Most of the candidates could not interpret and solve the question as required.
Question 3
This question was so difficult for the candidates. Almost all who attempted this question
performed poorly. The candidates could not draw the decision tree diagram and therefore, could
not successfully answer the question as expected.
Question 4
This question was not so well attempted by the candidates. Most of the candidates who attempted
this question performed so well.
Question 5
This question was so well attempted and this question appeared to be tough.
Question 6
This question was very well patronized and majority of the candidates was poor. Most of the
candidates could not see the relevance of the use of the regression line to do the estimates.
CONCLUSION
All in all, the questions were very well within what the candidates are expected to know.
Preparation by the candidates was not adequate.
particular centre. There were also no signs of copying. To sum up the performance reflected on
the level of preparedness of each candidate.
The standard of the paper was the same as previously administered ones. There were no
ambiguities or typing errors in the paper. The mark allocation conformed to the weightings in the
syllabus and was fairly allocated to each sub-question. The questions were also evenly spread
over the topics in the syllabus.
STRENGTHS OF CANDIDATES
On the whole, one cannot mention any notable strengths in the performance of candidates. The
few who exhibited high performance was reflective of their preparedness for the examinations. I
believe that the only way to enhance performances would be for candidates to prepare adequately
for the examinations.
WEAKNESSES OF CANDIDATES
Some candidates failed to read the rubrics well. Thus instead of completing one question before
going on to the next, they would answer a sub-question then jump over to the next question and
then later answer the sub-question. This made the marking very difficult.
In an examination, it is preferable that one question is fully dealt with before the candidate
tackles the next question. In some instances, the handwriting of candidates were so illegible that
it put a lot of strain on examiners. It is important for candidates to realize that the examiners are
also human and one does not expect an examiner to spend about an hour on a script trying to
decipher the handwriting especially when that is coupled with wrong points.
However, most of the candidates who were weak lacked fundamental knowledge of the subject.
In some instances, instead of stating legal principles, candidates were putting up points as if they
were arguing on social subjects. In some instances instead of answering the question, candidates
would set their own questions and answer them. This could be attributable to candidates lack of
preparedness for the examinations. In some instances, candidates spelling were awful. They
wrote the words as they heard them pronounced. For instance words like practice and practise
denotes different meanings. The one with c denotes a noun whereas the one withs denotes a
verb. The same goes for advise and advice. Candidates may well be advised to beware of such
slips. To sum up the only way for candidates to overcome these petty weakness is for them to
have control over the English language.
i.
ii.
(c) Where the employee has at anytime represented to the employer that the employee was
not suffering or had not previously suffered from that or similar injury, knowing that the
representation was false.
Reference should be made to section 2, sub-sections 5, 7 and 8 of PNDC Law 187.
Question 3
(a) Those who answered this question were asked to describe protected goods except that
they failed to add the point that protected goods could only be recovered from the hirer
by an action in court.
(b) This part was fairly well answered. However, candidates failed to touch on the point that
a guarantor would also be entitled to recover any sums paid or any security given.
Furthermore, candidates failed to bring out the fact that the hirer may make an
application to the court for the return of the goods and for the rescheduling of the
payments under the agreement.
Question 4
Candidates decided to set their own questions. The answers to this question was a typical
example of such pitfalls. Most of the candidates who answered this question rather talked on the
qualification of the auditor. The question demanded:
(a) The nature of the relationship between the auditor and the company and
(b) The rights of the auditor
For the avoidance of doubt, the auditor is not an officer or an agent of the company. The auditor
stands in a .relationship to members of the company. In this wise, he should be faithful,
diligent, careful and exhibit the ordinary skill required of a professional and the auditor shall not
be relieved of his duty to maintain appropriate professional standards. Neither will he be relieved
of any liability as a result of breach of those standards.
Turning to his rights, he has a right of access to all books, accounts and vouchers of the company
and may require from officers of the company any information and explanations deemed
necessary. He also has the right to attend any general meeting and receive .reality to such
meetings. He has a right to be heard at the general meeting on any business which concerns
auditors. He may also apply to the court for directions in relation to his functions.
Question 5
(a) A lot of the candidates had a fair idea of the veil of incorporation and were able to
explain themselves well.
(b) This part of the question appeared to have posed a problem for candidates as most of the
candidates rather used the requirements of question 6 to answer the question. The
circumstances under which the corporate veil would be pierced are as follows:
i.
ii.
iii.
iv.
Question 6
(a) This did not pose any problems.
(b) This did not also pose any problem but as mentioned earlier a lot of candidates who
answered question 5 used the requirements of question 6 to answer that question even
though the wording of the questions were very clear.
Question 7
(a) This question was poorly answered. It appeared those who answered it were thinking of
the definition of a partnership and therefore defined a partnership as contained in section
1 of the Incorporated Private Partnership Act 1962 (Act 152). Simply put, candidates
were expected to explain how one can identify an institution as a partnership. The need
for publicity of a partnership is contained in section 17 of the Act.
The first requirement of publicity is the painting or fixing the firms name at a conspious
place at its offices. The second requirement is the firms name should appear on all letter
heads and the names of the partners should also appear on the said letter heads. The third
requirement is that the firms current certificates should be exhibited at any conspious
place at the offices of the firm.
(b) A lot of candidates who answered this question also missed the matters in issue. They
wrote about the qualification of membership of the firm, the contributions from members,
the management of the firm by the members but the question required the artificial
personality of the firm. Under section 10 of the Act, once registered, a firm becomes a
body corporate distinct from its members and it is capable of exercising the powers of a
natural succession until otherwise dissolved.
However, notwithstanding the firms corporate nature, each member of the firm is liable
without limit to the debts of the firm in practice therefore even though a judgment may be
obtained against the firm as a corporate body, the judgment could be enforced against the
individual members who constitute the firm.
Question 8
This question was fairly well answered by the candidates.
Some candidates lacked adequate preparation for the examination and scored very
low marks. Some of them filled in their index numbers, wrote the question numbers
on the answer sheets without answering any of the questions; apparently they were
not ready for the examination.
ii.
Some candidates spent too much time on questions they believed they could handle;
this left them little time to tackle other questions satisfactorily. As a result, they
performed poorly. Candidates should be taught effective time management.
iii.
Some candidates failed to attempt all questions and therefore drastically reduced their
chances of passing.
iv.
A number of candidates did not plan how to tackle the questions in a strategic
manner. They answered the same question on several non-consecutive pages without
cross-referencing the pages.
v.
Some candidates wrote so illegibly that it was difficult to read and mark what had
been written on the script. It is undoubtedly, in the candidates interest to write clearly.
Question 4
Question 4 involved techniques in handling a scheme of re-construction. It was generally well
answered. However, some candidates
i.
ii.
Wrote elaborate reconstruction scheme, which was not a requirement of the question
iii.
iv.
v.
Brought both liquidation expenses and reconstruction expenses into the same
calculation, not knowing exactly how to handle each of them.
Question 5a
Question 5 involved the calculation of a range of prices for an ordinary share using the net assets,
price-earnings ratio and earning yield methods. The question was poorly answered by many
candidates even though this topic appears regularly in recent examinations. Candidates simply
are not able to master the basic techniques involved in this area of financial accounting. Common
errors included:
i.
Failure to adjust the net assets or the earnings with the information provided and
ii.
Some candidates did not read the question requirement clearly and therefore gave
relevant answers which scored few (if any) marks.
Poor time management between questions: for example, some candidates wrote too much
for the marks on offer.
Question 2(a)
The requirement here was for candidates to determine whether there should be a change in the
companys credit policy. Answers to this question demonstrated lack of understanding of debtors
management. Most candidates failed to compute the current and proposed levels of debtors. The
savings on reduction in debtors was also poorly handled and majority of candidates could not
also determine the impact of the change in policy.
Question 2(b)
This part of question 2 required candidates to explain why most firms invest their temporal cash
in treasury bills. Most candidates gained marks on this question by providing very good answers
to the question.
Question 2(c)
The final part of question 2 required candidates to identify the market participants in the foreign
exchange market. Most candidates were able to identify the market participants in the foreign
exchange market.
Question 3(a)
The requirement here was for candidates to compute the gain from the merger, cost of the cash
offer, cost of the stock alternative, net present value of the acquisition under cash offer and the
net present value under the stock offer. Most candidates performed creditably well while a few
had no knowledge on mergers and acquisition.
Question 3(b)
Candidates were asked to determine whether the companys share price is overvalued. Most
candidates were able to compute the dividend per share while few concentrated on computation
of earnings per share which was not relevant to the question. Some candidates had difficulty in
calculating the growth rate using the dividend per share computed. Some candidates were able to
determine the share price of the company using the dividend growth model while others were not
aware that this model is required to determine the price of the company. Candidates need to be
familiar with this model and its variants.
Question 4(a)
The question required candidates to compute the portfolio expected return and the expected risk
premium. Some candidates were able to compute the portfolio expected return and the expected
risk premium though significant number of candidates did not understand the portfolio theory
question.
Question 4(b)
The requirement here was for candidates to compute the appropriate cost of capital to be used in
appraising new projects with the same operating risk characteristics. The question provided a
hint to candidates to use the Weighted Average Cost of Capital (WACC) since the new project
has the same operating risk characteristic. Most candidates failed to compute the WACC though
some were able to compute the cost of equity capital using the Capital Asset Pricing Model
(CAPM) and the cost of debt.
Question 5(a)
This part of the question required candidates to distinguish between Call option and Put option.
Most candidates performed creditably well on this question though some few candidates did not
understand the concept of option in finance theory.
Question 5(b)
The requirement here was for candidates to compute the value of various offers and select the
best option. Most candidates found it difficult to compute the time value of the various offers
especially the offer that involved annuity.
Question 5(c)
The final part of question 5 required candidates to outline the advantages and disadvantages of
bank overdraft. Answers to this question were of variable quality, indicating that some
candidates were lacking on knowledge in this area of the syllabus. A number of answers, for
example, showed limited understanding of overdraft while some candidates wrote too much for
the mark on offer.