EXAMINERS’ COMMENTS

SPRING 2019 EXAMINATIONS

Examiners’
FINANCIAL Comments
ACCOUNTING – MANAGERIAL LEVEL-2 M4
Question No. 2
(a) Reportable Segments:
In this part of question, examinees were required to identify which operating segment is reportable segment. It was
observed that majority of the examinees had vague concept in this topic and no examinee could calculate correct
profitability of the company. Furthermore, examinees could not succeeded to calculate the correct percentage of
93% to check the satisfactory level of ‘75% quantitative threshold’.
(b) Calculation of Revised Profit:
In this part, examinees were asked to calculate the revised profit of Al-Jawda Limited (AJL) after taking into
account the impact of events after the reporting period. Overall, below average performance was observed in this
part as few examinees calculated the correct figure of revised profit. As far as the impact of events are concerned,
majority of the examinees failed to identify correct adjusting and non-adjusting events.

Question No. 3
Statement of Cash Flows:
In this question, examinees were required to prepare statement of cash flows. Above average performance was
observed in this question. Majority of the examinees successfully attempted the question as they had worthy
comprehension of this topic. However, few examinees committed following mistakes while attempting the question:
 Amount for the profit on sale of property, plant and equipment was not correctly calculated.
 Opening cash and cash equivalent was wrongly calculated.
 Incorrect categorization of items was also observed, for example, dividends were classified alternatively in
operating activities instead of financing activities. As well as, payment of interest is an operating activity, which was
classified into financing activity.
 Disclosure of cash and cash equivalent was given by very few examinees.
 T-account of share capital, share premium and property plant and equipment were not made accurately.

Question No. 4:
In this question, examinees were given a trial balance along with additional information to prepare the following
financial statements:
(a) Statement of Profit or Loss:
In this part, examinees were required to prepare statement of profit or loss. Almost, all the examinees attempted
this part but could not arrive at the correct figure of profit after-tax. Nevertheless, following common mistakes were
committed by most of the examinees.
 Figure pertaining to revenue was identified correctly from the trial balance while rest of the figures of profit or
loss statement were not calculated correctly.
 Examinees did not arrive at the correct figure of closing inventory as a consequence, incorrect cost of sales
was determined.
 Examinees could not get the point to equally distribute relevant expenses of profit or loss statement between
distribution cost and administrative expenses.
 Other income was not accounted for and examinees could also not identify the correct amount of income tax
expense.
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SPRING 2019 EXAMINATIONS
(b) Statement of Financial Position (Balance Sheet):
In this part, examinees were asked to prepare statement of financial position (balance sheet). Below average
performance was observed in this part. Majority of the examinees committed following errors due to which, no
examinee was succeeded to balance the total assets and total equity and liabilities:
 In the calculation of depreciation schedule, it was observed that examinees performed calculation in an
unstructured and incomplete manner resulting in incorrect figure of property, plant and equipment.
 Allowance for doubtful debts amount was not determined accurately resulting in incorrect figure of trade
receivables in current assets heading.
 Most of the examinees did not account for the correct effect of share issue. They added all the amount
received, in share capital account instead of adding the part of amount at par value in share capital account
and the additional amount received, in share premium account.
 Majority of the examinees could not reach the accurate figure of running finance. It was observed that examinees
had lack of understanding in identifying which amount should be included to arrive at the final figure of running
finance.

Question No. 5:
(a) Value of Drilling Platform:
In this part of the question, examinees were required to determine the value of drilling platform that should be
included in statement of financial position and to calculate impairment loss. This part was poorly attempted as it
was observed that most of the examinees had lack of understanding of this topic due to which they could not
comprehend the requirement of the question and made irrelevant calculations.
(b) (i) Total Value of Closing Inventory:
In this sub-part of the question, examinees were required to calculate the total value of closing inventory.
Excellent performance was observed in this part, which showed that examinees had strong command and
adequate understanding of this topic.
(ii) In this sub-part of the question, examinees were asked to briefly discuss the situations in which net realizable
value (NRV) is likely to be less than the cost of inventory. This was a very simple and straight-forward
question but due to lack of interest of examinees in theoretical part of the syllabus, most of the examinees
could not answer the question and a below average performance was remained in this sub-part.
(c) In this part, examinees were asked to determine the value of closing inventory after making necessary
adjustments. Overall, below average performance was remained in this part, as majority of the examinees did not
work out the accurate written down value (WDV), which resulted in incorrect value of closing inventory.

Question No. 6:
(a) Elements of Measuring Performance and Financial Status of a Business Enterprise:
This part was based on enlisting and explaining the elements of financial statement but majority of the examinees
perceived it wrongly and wrote irrelevant answers. Furthermore, few examinees were able to identify the elements
but they only listed the items rather than explaining each of the item. In spite of being a marks scoring question,
examinees could not perform well in this part and showed below average performance.
(b) (i) & (ii) Taxable and Deductible Temporary Differences:
This part was based on the requirement of explanation of ‘taxable temporary differences’ and ‘deductible
temporary differences’. Below average performance remained in this part, as majority of the examinees did not
define the concepts completely, moreover, they also did not answer by giving examples, which was a significant
part of the requirement.
 –x– 
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS
MANAGEMENT ACCOUNTING – MANAGERIAL LEVEL-2 M5
Question No. 2
Activity Based Costing (ABC):
The examinees were expected to calculate and apply the clear understanding of activity based costing (ABC) and the
steps of calculating allocable costs for each division. The bases chosen and rates applied to solve this question served
as one core area to be tested from the examinees. The overall performance of the examinees was average based on
the following observations as mentioned below:
(a) Allocation of Overhead Costs to Activity Costs Pools:
This part of the question required allocation of total costs to its respective cost centre by applying the percentages
already provided in the question. Majority of the examinees have taken the right approach and appropriately
allocated the costs while some of the examinees failed to solve this part.
(b) Activity Rates for Activity Costs Pools:
It was a very easy part of this question as the cost was already computed in part (a) and only required to be
divided with the total value of activity bases. The average number of examinees understood the requirement of this
part and correctly calculated the activity rates while some of the examinees failed to choose the appropriate base
for calculating particularly Support Division.
(c) Overhead Costs for Ordered Quantity of NZ Enterprises (Do not include Support Division cost):
Majority of examinees failed to understand the question and how to calculate the activity based cost and
incorrectly calculated the bases to be multiplied by the rates already calculated in part (b).
(d) Product Margin and Customer Margin for NZ:
This part required computation of margins for the product and customer by calculating total allocable costs to the
order received. Few examinees were able to understand this part and solve it properly. While rest of examinees
just worked out on sale, direct material cost and labour cost.

Question No. 3
Standard Costing and Variance Analysis:
The examinees were required to show their understanding of variance analysis by ascertaining correct values from the
data provided and apply the formula for the variance tested along with simple standard cost theory having low weight
age . The overall performance in this question on variance analysis good, majority of the examinees performed well in
this part. Following observations were made during the review:
(a) Difficulties of Applying Standard Costing in Service Industries:
This part of the question were made to ask simple theoretical aspect of the costing methods from the examinees,
which was not answered satisfactorily by majority of the examinees. It was mostly answered in a generic manner
which was not upto the mark.
(b) Variance Analysis:
This part was further divided into three sub-parts, requiring examinees for three different variance analysis
discussed separately. Calculation of variances required bookish knowledge and formulae to achieve the results.
(i) Material price and quantity variances:
The examinees efficiently calculated the required variances correctly. However, some of them made minor
mistakes by calculating incorrect standard and actual quantities to solve the part.
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SPRING 2019 EXAMINATIONS
(ii) Labour rate and efficiency variances:
The overall performance of the examinees was good and has applied correct formula using appropriate
values from the question while few of them did miscalculation by using incorrect hours that was required to be
calculated to solve the part.
(iii) Variable manufacturing overhead spending and efficiency variances:
Majority of the examines performed well in this part and secured good marks having appropriate knowledge
required for usage of the formula. Very few of them failed to answer it by applying incorrect standard and
actual rates and standard hours to solve the question.

Question No. 4
Capital Budgeting:
This question was designed to test understanding of capital rationing by providing the NPVs and IRRs of the projects
which turned out to be worst attempted part of the whole paper. Examinees were deficient in reflecting the
understanding of the capital rationing technique. The question had two parts and the following observations were made
on review:
(a) Setting priorities of investments:
This was the most difficult question to attempt for the examinees. It involves some decision making and need
strategic thinking which unfortunately the examinees lacked. Hardly, few of the examinees set the correct priorities
of investment while majority of the examinees left the question unattempted. Examinees must enhance their
knowledge in order to analyze the data properly and apply appropriate technique accordingly.
(b) Calculating net present value (NPV) and internal rate of return (IRR) of the plan.
This part was also difficult to approach by the examinees and was linked with part (a). It required calculation of
NPV and IRR by just adjusting the NPVs according to the proportion of the projects selected which examinees
failed to understand and performed badly showing vague understanding of the techniques to opt and the related
suitability criteria of each technique.

Question No. 5
Forecasting (using marginal approach):
This was an average question requiring understanding of the forecasting technique to be applied by bi-furcating the
products from the consolidated data provided in the question. However, the examinees found it a difficult task to
perform which showed lack of strategic thinking and knowledge ultimately resulting in poor performance in this
question. Some of the examinees only calculated the contribution margin correctly in total but they didn’t calculate the
product wise figure correctly. Except some of the figures, the majority of calculations were found incorrect. The overall
response for this question is below average.

Question No. 6
Break-even Analysis:
In this question examinees were required to calculate monthly breakeven point in units and value for the new product.
The performance of the examinees was overall average and the following observations were made with respect to each
part:
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS
(a) Monthly break-even point for the new product and number of bags required to achieve a target profit of
Rs.250,000:
In this part, majority of examinees correctly calculated the contribution margin of first 100,000 bags & over 100,000
bags; however, vague understanding with regard to step fixed cost was noticed in the examinees that resulted in
loss of marks. All in all, this part was well attempted.
(b) Bonus of Rs.2 for each bag sold in excess of breakeven point and units must be sold each month to earn a
return of 20%:
This part was not attempted in that manner which was expected from the examinees. Average number of
examinees just worked out correctly for revised contribution margin and desired monthly profit but failed to answer
the remaining portion of the question.

Question No. 7
Working Capital:
The question had simple calculations to determine the working capital requirement of the company with clearly stated
figures and relevant data in the question. Most of the examinees only calculated Cash in hand, Raw material value,
finished goods value, creditors, wages & expenses payable but failed to attempt the statement of net working capital.
 –x– 
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS
CORPORATE GOVERNANCE, BUSINESS LAWS & ETHICS – MANAGERIAL LEVEL-2 M6
Question No. 2
(a) Qualifications for members in payment of debts and liabilities and the costs, charges and expenses of the winding
up in accordance with the provisions of provisions of section 295 of the Companies Act, 2017:
(i) Debts and Liabilities of past members and directors whose liability is unlimited in nature:
In this sub-part, the examinees were asked to mention the exceptions available to past members against any
liabilities and debts that accrue at the time of winding up of a company as well the liabilities of directors
whether present or past whose liabilities is of unlimited nature in similar scenario. It was one of better
answered questions, in which examinees showed understanding of underlying concepts; however, few were
able to secure full marks.
(ii) Liabilities of every member of company limited by guarantee in case of winding up:
Examinees were asked to reflect their concepts regarding confirming the liability of the members as well as
the extent to which such liability can be imposed. The overall performance of the examinees was average.
The examinees delivered in the direction required in this area but lacked in reflecting their full knowledge
required resulting in loss of marks.
(b) Other companies classified as PIC in Third schedule and section 224 of the Companies Act, 2017:
This part was relatively uncommon that was tested from the examinees. The concepts were straight and easy but
majority of the examinees did not attempt this part of the question. However those who attempted lacked in
grasping the relevant topic.
(c) Record keeping of the minutes and resolutions, Retention time and place of record keeping as specified
under specified under sections 178 and 179 of the Companies Act, 2017 and regulation 12 of the Listed
Companies (Code of Corporate Governance) Regulations, 2017:
It was an easy part of the question (2) but examinees displayed low level of conceptual understanding. Despite
some very good answers, most candidates rely on memory and had difficulty when applying legal principles in
different situations.

Question No. 3
(a) Circumstances under which Single member company converted into a private company in accordance
with the provisions of the Single Member Companies Rules, 2003:
Examinees, in this part, were asked to give their opinion regarding the possibility of conversion of SMC into private
company and also the situations under which it can be done. This part was well attempted by the examinees
attaining full marks while some the examinees did not exhibit clear understanding of concept.
(b) Requirements to be complied for materializing the proposal in accordance with the investments in
associated companies or undertakings as described under section 199 of the Companies Act, 2017:
This part required understanding of the examinees with respect to the investment and modes applicable for
associate companies. The examinees showed vague understanding in this area displaying rote learning rather
than grasp of concepts, ultimately leading to poor performance in this part. Few of the examinees were able to give
satisfactory answers.
(c) Roles and responsibilities of the Chairman during the meeting, under section 192 of the Companies Act,
2017, and relevant regulation(s) of the Listed Companies (Code of Corporate Governance) Regulations,
2017:
In this part, examinees were required to mention the roles and responsibilities that Chairman during the meeting.
They were required to either negate or accept the declaration of the roles of the Chairman in the meeting to which
they gave average answers and repetition of concepts rather than clear understanding of the requirement being
tested.
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SPRING 2019 EXAMINATIONS
Question No. 4
(a) (i) & (ii) Short Selling and selling of share through broker under unconditional contract:
The requirement of this sub-part was to define the meaning of short selling and later explain the viability of selling
share through brokers in unconditional contract. Majority of examinees have attempted this sub part but delivered
low level of understanding of underlying concepts.
(b) Composition and reporting procedure of an Audit Committee as described under regulation 28 of Listed
Companies (Code of Corporate Governance) Regulations, 2017:
In this part, examinees were asked to explain the composition of audit committee and reporting procedure to
circulate the minutes of the Committee. Overall, average performance of the examinees was observed. However,
majority of the examinees were unable to write about the Circulation Procedure the minutes of the Committee.
(c) Legal requirements that a public company as under the provision 170 and regulation 18 of the Companies
Act, 2017 and the Listed Companies (Code of Corporate Governance) Regulations, 2017:
(i) Payment of Rs.300,000 as minimum remuneration to the ordinary Directors in a financial year when
the company has suffered loss:
The examinees were asked to illustrate the legal aspect in the light of Companies Act 2017 and Listed
Companies (Code of Corporate Governance) Regulations, 2017 above the above mentioned scenarios.
Deficiency with respect to the conceptual and practical thinking of examinees was noticed on review. Majority
of the examinees skipped this part of the question due to lack of understanding.
(ii) Payment of minimum remuneration to a whole time Director in a financial year, when the company has
suffered loss.
This sub part was again scenario based on the regulations and provisions mentioned as per law. However,
the examinees performance was poor in this area; many of them did not attempt this part showing lack of
practical thinking.

Question No. 5
(a) Procedure of implementing Board’s decision regarding removal and appointment of CEO in the light of the
Non Banking Finance Companies and Notified Entities Regulations, 2008:
In this question, the examinees were required to explain the procedures of removal and appointment of CEO as
mentioned in Non Banking Finance Companies and Notified Entities Regulations, 2008. Majority of the examinees
did not attempt this part of the question due to selected study pattern and the ones that attempted the question
answered it inadequately.
(b) E Services:
It was one easy question to attempt having straight forward concept concerning the concept of eServices,
accessibility and eligibility criteria for it. However, the examinees showed lack of preparation in this sub part and
performed unsatisfactorily.

Question No. 6
(a) Suspicious transactions and how these transactions are reported to FMU:
In this question examinees were required to explain how the suspicious transactions are identified and reported as
defined under the provisions of the Anti-Money Laundering Act, 2010. Majority of the examinees not attempted this
part of the Question and those who attempted lacked understanding as per law thus generalizing it. The overall
standard of the answers was not up to the mark.
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SPRING 2019 EXAMINATIONS
(b) Confirmations for certificate from ‘Consultants to the Issue’ under regulation 5 Public Offering
Regulations, 2017:
This part was relatively new to test the understanding of the examinees and required them to mention the criteria
of confirmations of certificate from ‘Consultants to the Issue’ for initiating ‘Green Field Project’. Thorough
understanding of the examinees with regard to the regulation was tested but the examinees performance remained
unsatisfactory in this area and majority preferred skipping this part.
(c) Fundamentals of ICMA Pakistan Code of Ethics:
In this part, examinees were asked to write the fundamental principles of code of ethics issued by ICMA Pakistan.
Majority of the examinees well attempted this part. but as this was a very straight-forward question, not as well
answered as one would expect lacking in proper explanation of each principles.

Question No. 7
(a) Draft of notice and agenda:
This question was the easiest part to attempt in this paper and easy marks gaining. The examiners were asked to
draft a notice for Annual General Meeting announcing the retirement of the Directors and subsequent election and
related routine matters. It was the best performed question out of all and the majority of the examinees drafted the
notice in the prescribed manner and secured good marks.
 –x– 
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS

ADVANCED FINANCIAL ACCOUNTING & CORPORATE REPORTING – STRATEGIC LEVEL-1 S1

Question No. 1
(a) Journal Entries and Extracts of Financial Statements:
Examinees were required to prepare journal entries and extracts of financial statements in relation to 8%
convertible loan and investment in 10% bonds. Performance of examinees was below average in this question.
8% Convertible Loan:
 Most of the examinees were not able to comprehend the exact requirement of the question with respect to year
and prepared journal entries for different years.
 Many examinees could not correctly work out the ‘interest charged’ to profit or loss and ‘interest paid’.
Similarly, the majority of the examinees could not find out the accurate amounts of share capital and share
premium.
 The equity portion of the loan was already given in the question. However, some examinees unnecessarily
produced workings to recalculate this figure and wasted their precious time.
Investment in 10% Bonds:
 The majority of the examinees who attempted this part, could not calculate correct carrying value of the
investment in bonds at year-end and consequently were unable to work out the gain on re-measurement of the
investment.

Question No. 2
Preparation of Consolidated Statement of Profit or Loss:
Examinees were required to prepare above statement for a group comprising a parent company and its subsidiary and
associate companies. Examinees were well prepared for this type of question and it was attempted by almost all the
examinees and they scored above average marks in this question. Overall, the question was attempted with
professional skills and examinees showed their grip on this part of the syllabus. However, some errors were committed
by the examinees as given below:
 Many examinees failed to reverse the impact of intra-group sales and purchases while preparing statement of profit
or loss.
 Similarly, value of the non-controlling interest (NCI) at reporting date was not accurately calculated due to
miscalculations of/ not considering the impacts of NCI’s shares of impairment, unrealized profit or excess
depreciation, the amounts of which were to be subtracted from the value of NCI at acquisition.

Question No. 3
Group Statement of Financial Position:
Examinees were required to prepare group statement of financial position in relation to a local company and its foreign
subsidiary. Performances of the examinees remained unsatisfactory in this question as they seemed unprepared for
foreign currency related questions. Following mistakes were committed:
 The majority of examinees was unable to compute post-acquisition profit of the subsidiary, which resulted in its
wrong distribution to the parent and NCI.
 Many examinees could not compute correct value of goodwill at acquisition mostly due to wrong treatment of
‘deferred’ payment. This mistake also affected accurate calculation of impairment of goodwill, which was 20% of
the goodwill at acquisition.
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SPRING 2019 EXAMINATIONS
 The majority of the examinees could not apply the correct foreign currency exchange rates (provided at different
dates in the question), which led them to produce different and wrong calculations / answers.
 Many examinees failed to consider the upward adjustment of AED 1,000 on plant and machinery in statement of
financial position and in consequence, missed the impact of resultant extra depreciation.
 Unrealized profit on intra company sales was not taken care of while calculating current assets by many of the
examinees.

Question No. 4
(a) Comparison of Performances of Companies:
The examinees who attempted this part of the question performed reasonably well with the exception of following
shortcomings:
 Some of the examinees failed to determine ‘return on shareholder’s equity’.
 In addition, the analytical part of the question was poorly attempted.
(b) Basic and Diluted Earnings per Share (EPS):
Examinees were asked to calculate the basic and diluted earnings per share (EPS) of a company for the third
quarter of its accounting period:
 The most commonly committed mistake was the inability of the examinees to correctly work out the number of
shares for the purpose of calculating basic/ diluted earnings per share and for this reason they mostly
produced inaccurate answers.

Question No. 5
Barriers to International Harmonization:
The question was attempted by many examinees. However, the answers were not focused on the subject and hence,
they could not score good marks. Many examinees compared IAS / IFRS with GAAP, whereas, some of them
mentioned the causes as political instability, the financial position of a company, prejudice etc., which were not the core
answers of the question.
 –x– 
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS
AUDIT & ASSURANCE – STRATEGIC LEVEL-1 S2
Question No. 1
(a) Presumed fraud risk factors:
In this part of question, examinees were required to explain presumed fraud risk factors and required audit
procedures in the context of ISA 240 “The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial
Statements”. Examinees were expected to write details that auditor shall, based on a presumption that there are
risks of fraud in revenue recognition, evaluate types of revenue, revenue transactions which give rise to such risks,
etc. but examinees did not focus on the requirement of the question and provided insignificant details due to which
performance remained unsatisfactory.
(b) Legal considerations under section 246 of the Companies Act, 2017:
In this part examinees were required to explain legal considerations relating to fulfillment of casual vacancy of the
auditor and appointment of the first and subsequent auditor of the company under section 246 of the Companies
Act, 2017. Almost all the examinees attempted this part and, overall, performance was found considerably
adequate as examinees provided the expected fine points.
(c) Terms of audit engagement:
This part required examinees to list down the terms of audit engagement in accordance with ISA 210, “Agreeing
the Terms of Audit Engagements”.. Majority of the examinees succeeded to professionally explain the requirement
which showed that they had adequate knowledge regarding this topic.
(d) Responsibilities of the Engagement Partner:
This part required examinees to provide details regarding responsibilities of engagement partner in accordance
with ISA 220, “Quality Control for an Audit of Financial Statements”. Examinees should have elucidated that the
engagement partner shall form a conclusion on compliance with independence requirements that apply to the audit
engagement etc. Overall, poor performance was observed as only few examinees were able to give relevant
answers and elaborate the desired concept.

Question No. 2
(a) Audit Procedures to be performed before Using the Work of Management Expert:
This part required examinees to describe audit procedures to be performed before using the work of management
expert as per ISA 500, “Audit Evidence”. Overall response from the examinees was satisfactory as they provided
reasonable details of evaluation of the competence, capabilities and objectivity of that expert, obtain an
understanding of the work of that expert etc.
(b) Conditions for Using Negative Confirmations as a Sole Substantive Procedure:
In this part, examinees were required to explain the conditions, which must be present before using the negative
confirmation as a sole substantive procedure in accordance with ISA 505, “External Confirmations”. Overall poor
performance was observed in this part as examinees failed to correctly describe the conditions required.
(c) Audit Procedures to be Performed as per ISA 540:
Examinees were required to explain the audit procedures to be performed as per ISA 540, “Auditing Accounting
Estimates, including Fair Value Accounting Estimates and Related Disclosures”, to test the fair value of marketable
securities. It seems that examinees had vague concept about this topic as most of the examinees did not
understand the question and provided irrelevant answers.
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Question No. 3
(a) (i) Matters to be considered in establishing the overall audit strategy:
In this part examinees were required to explain the matters that should be considered in establishing the
overall audit strategy, in accordance with ISA 300, ‘Planning an Audit of Financial Statements”. Almost all the
examinees well attempted this part of question and overall performance was found satisfactory.
(ii) Areas that will be considered at planning stage of the audit:
This part was based on the requirement to discuss the areas that should be considered at the planning stage
in the context of ISA 315 (Revised),”Identifying and Assessing the Risks of Material Misstatement through
Understanding the Entity and its Environment’. It was observed that examinees had adequate knowledge of
this concept and showed impressive performance.
(b) Factors that may affect the identification of an appropriate benchmark:
Examinees were required to explain the factors that may affect the identification of an appropriate benchmark in
the context of ISA 320, ”Materiality in Planning and Performing an Audit”, However, it is observed that most of the
examinees did not understand the question and overall poor performance was witnessed as only few examinees
were able to provide correct details regarding the elements of the financial statements, relatively volatility of the
benchmark, entity’s ownership structure and the way it was financed etc. While majority of the examinees
provided irrelevant and self-produced answers.

Question No. 4
(a) Elements to be included in the section with the heading, Auditor’s Responsibilities for the Audit of the
Financial Statements:
Examinees were asked to explain the elements to be included in the section with the heading Auditor’s
Responsibilities for the Audit of the Financial Statements in accordance with ISA 700 (Revised), “Forming an
Opinion and Reporting on Financial Statements”. Most of the examinees had good understanding and wrote
relevant answers.
(b) Difference between an ‘Emphasis of Matter Paragraph’ and ‘Other Matter Paragraph’:
In this part examinees were asked to explain the difference between an “Emphasis of matter paragraph” and Other
Matter Paragraph” as per ISA 706 (Revised), “Emphasis of Matter Paragraphs and Other Matter Paragraphs in the
Independent Auditor’s Report”. Examinees well attempted this part and covered all major aspects relevant to the
topic.
(c) Impact on the auditors’ report of current period’s financial statements:
In the light of ISA 710 (Revised), “Comparative Information-Corresponding Figures and Comparative Financial
Statements” examinees were required to explain impact on the auditor’s report of current period’s financial
statements, if the auditor’s report on the prior period included a qualified opinion, a disclaimer of opinion, or an
adverse opinion and the matter which gave rise to the modification is unresolved, it was observed that most of the
examinees did not have clear concepts about the aforesaid ISA and discussed inappropriate matters, as a
consequence examinees could not secure the allocated marks..

Question No. 5
(a) Supervision Responsibilities in relation to Cost Audit::
In this part of question, it was required from the examinees to explain the supervision responsibilities in relation to
cost audit. Overall poor performance was witnessed as only few examinees were able to provide correct answer
while rest of the examinees wrote self-produced and general answers.
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(b) Audit Program for conducting the Cost Audit of ‘Labor Cost’:
This part required from the examinees to prepare an audit program for conducting the cost audit of “Labour Cost”.
Overall performance of almost all the examinees were adequate and they explained the contents in the right
direction and explained the required details of comparing the labour cost amount, labour cost per unit of
production, labour hours per unit of production for current year with prior year etc.
(c) Persons who shall not be appointed as Cost Auditor of the company:
In this part, examinees were required to define who shall not be appointed as cost auditor of the company under
rule 3 (iv) of the Companies (Audit of Cost Accounts) Rules, 1998, this was a simple question, in spite of that, most
of the examinees failed to understand the basic requirement and were unable to properly describe the required
details and due to this performance remained below average.

Question No. 6
(a) Objectives of the audit engagement to the engagement team:
This part asked examinees to explain at least three objectives of the audit engagement to the engagement team in
accordance with international standard on assurance engagements ISAE 3000 (Revised),”Assurance
Engagements other than audits or reviews of historical financial information”. Below average performance was
observed in this part as examinees were unable to understand the exact requirement and did not perform as was
expected.
(b) Procedures to be performed to obtain an understanding of the design and implementation of the controls
at the service organization:
This part required the examinees to describe procedure that should be performed to obtain an understanding of
the design and implementation of the controls at the service organization in the light of ISA 402, “Audit
Considerations Relating to an Entity Using a Service Organization”, it was observed that most of the examinees
had inadequate knowledge of the aforesaid ISA and only few examinees were able to provide nearly correct
details.
(c) Information to be obtained about the component audit team to obtain an understanding of the component
auditors:
In the context of ISA 600, “Special Considerations”- Audits of group financial statements (including the work of
component auditors)” examinees were required to provide the information about the component audit team to
obtain the understanding of the component auditors. It was observed that examinees were not prepared for this
topic as a consequence wrote general and irrelevant answers and the performance remained substandard.
(d) Evaluate the adequacy of the work of auditor’s expert for the audit purpose:
In accordance with ISA 620,” Using the Work of an Auditor’s Work” examinees were required to explain that how to
evaluate the adequacy of the work of auditor’s expert for audit purpose, In this part of question, examinees were
expected to provide details regarding that auditor shall evaluate the adequacy of the auditor’s expert work for the
auditor’s purpose including the relevance and reasonableness of that expert’s findings or conclusions and their
consistency with other audit evidence etc., most of the examinees did not understand the requirement and not
provided the response as was expected.
 –x– 
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS
BUSINESS TAXATION – STRATEGIC LEVEL-1 S3
Question No. 1
(a) Increasing Tax Net:
In this part examinees were required to comment on obstacles of ‘tax avoidance culture’ and ‘cash economy’ and
what can be done to achieve better tax collection. Majority of the examinees could not perform well in this part very
few examinees were able to give useful suggestions for increasing the tax net.
(b) Power of the Commissioner to Call Upon the Record:
This part was based on the requirement of explaining the power of commissioner to call upon the record under
section 177(1) of the Income Tax Ordinance, 2001. Poor performance was observed in this part as examinees
misunderstood the question and narrated all the powers of commissioner, instead of explaining specific powers to
call upon the record under the aforesaid section of the Act.

Question No. 2
(a) Resident Company:
In this part examinees were required to state law of resident under Income Tax Ordinance, 2001. Overall response
to this part of the question was good. Examinees were able to define the status of a resident company. But few
examinees explained the characteristics of a resident person instead of a resident company.
(b) Computation of Taxable Income and Tax liability:
In this question, examinees were required to calculate the taxable income and income tax payable under normal
tax regime (NTR) and final tax regime (FTR) for the tax year 2019 for Hamdan Cement Limited (HCL). All the
examinees attempted this question but few examinees completely address each item given in the question, as a
consequence, overall average performance was observed in this part. Examinees committed following mistakes
due to which they failed to arrive at the correct figure of taxable income and the tax liability.
 Some examinees picked up profit after tax as a starting point.
 Miscalculation of depreciation in respect of computer hardware
 Useful life of intangible asset was not accounted for correctly resulted in inaccurate figure of amortization of
intangible asset.
 Tax credit for enlistment in stock exchange was ignored by majority of the examinees
 The other common mistake was to ignore giving notes related to treatment of every single adjustment which
resulted in deduction of marks.

Question No. 3
(a) Filing of Foreign Income and Assets Statement and Notice of Discontinued Business:
In this part examinees were asked to state requirement to file foreign income and assets statement and steps to be
taken for notice of discontinued business under section 116A and 117 of the Income Tax Ordinance, 2001. Majority
of the examinees skip the first requirement of filing foreign income and asset statement while the rest of the answer
was also not correctly attempted which showed lack of understanding of examinees regarding this topic.
(b) Computation of Advance Tax Liability and Due Dates for Payment of Advance Tax by a Company:
In this part examinees were required to compute advance tax liability and enlist due dates for payment of advance
tax by a company. This was a marks scoring question but below average performance remained in this part, the
common mistake observed was to put value of tax deducted at source during first quarter in the formula in place of
tax liability of latest tax year as a result incorrect figure of advance tax liability was determined.
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS
Question No. 4
(a) Reconciliation Statement of Wealth:
In this part examinees were asked to prepare reconciliation statement of wealth under section 116 of the Income
Tax Ordinance, 2001. This part was relatively an easy one and majority of the examinees attempted it correctly
and scored good marks. The inflow and outflow of amount was represented differently but overall the concept was
clear.
(b) Definition of Filer and chargeability of advance tax:
This part was based on the requirement of defining who shall be considered as a filer and its verification. This part
was well attempted by majority of the examinees while the other part concerning deduction of advance tax from a
diplomat was answered incorrectly representing ambiguous concepts of examinees regarding advance tax
deduction.

Question No. 5
Computation of Sales Tax Payable/ Refundable:
In this question examinees were required to compute sales tax payable/ refundable for the month of May, 2019 for
Obaid Limited. All the examinees attempted this question but overall performance of examinees was not up to the
mark. Following mistakes were committed by majority of the examinees:
 Examinees ignored the point that amount of payment for purchases were inclusive of sales tax which was clearly
mentioned in the question but examinees applied 17% rate instead of 17/117 %,
 Payment from a personal bank account of a director is not an admissible expense but examinees took it as
admissible deduction.
 Few examinees did not take effect of adjustment for debit and credit notes issued.

Question No. 6
(a) Promissory Notes:
In this part examinees were required to discuss salient features of promissory notes. Examinees either skipped this
part or wrote incompletely irrelevant answers. Overall performance remained below average in this part.
(b) Registration & Refund of duty:
In this part examinees were asked to explain the conditions under which a person is required to obtain registration
and circumstances in which a person can apply for refund of duty under Federal Excise Act, 2005. This was a very
basic question but majority of the examinees wrote general answers and failed to explain the requirements in the
context of the Act.
 –x– 
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS

STRATEGIC MANAGEMENT ACCOUNTING – STRATEGIC LEVEL-2 S4

Question No. 1
(a) Full-cost Pricing:
In this part of the question, examinees were required to calculate the total sales price of the new product by using
suitable assumptions taking into account the available data. Overall, the performance of the examinees was
average. Most of the examinees did not evaluate the cost using other assumptions while others reflected lack of
understanding with regard to full cost using only under estimated direct and indirect costs as Full cost can only be
estimated using highest possibilities of costs rather than lowest side thus over estimation was inappropriate
method for valuation. Only few of the examinees followed the right method to solve this part and attained full
marks.
(b) Problems of using full cost plus pricing method:
This was the theoretical part of the question to test the limitations of usage from the examinees. However, the
examinees did not answer the part satisfactorily and many of them skipped it to answer.

Question No. 2
(a) Problems of using full cost plus pricing method:
Examinees, in this part, calculate the profit of all the three products to evaluate the best for export by adjusting the
currency fluctuations accordingly and determining the Expected Value using probability provided in the questions.
Most of the examinees made a common mistake of not aligning the cost with the sales price and calculating the
profit which is high unacceptable procedure to follow. Similarly, they took the average of the current currency value
and the expected change in the currency and solved the problem which was too not an appropriate method. The
decision making of the stakeholders was based on the results and risk and uncertainty rules which remain a
deficient area for the examinees as well resulting in very poor performance in this part.
(b) Problems of using of risk and uncertainty:
This part of the question required examinees to analyze the shortcomings of the risk and uncertainty techniques in
the scenario provided in the question. Majority of the examinees skipped the question whereas few of them
attempted but the answers were not to the desired level required.

Question No. 3
(a) Learning Curve:
This question had two main parts and one sub-part, requiring examinees to determine the learning curve rate at
first using the data provided in the question and the formula given. The overall performance of the examinees was
average in this area and examinees were able to apply the formula appropriately scoring full marks. However,
improper application of the formula and usage was too observed in many answer scripts.
(b) (i) & (ii) Work for normal working days or avail weekends:
The examinees in this part were asked to calculate the number of days required to fulfill the order and the variation
therein if the number of pieces are forgone. It was observed that majority of the examinees have attempted this
part and tried solving this question using full costing, however, the cost chart provided was same for all cases
hence indifferent for the outcome. The performance of the examinees remained unsatisfactory in this area as they
were unable to determine the total cost for each alternative especially due to wrong calculations made to calculate
the days required.
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS

Question No. 4
(a) Transfer Pricing:
Full manufacturing cost per tonne and at market price of comparable imports.
Examinees in this question were asked to calculate the after tax income from company’s local and foreign division
using full manufacturing cost per tonne and at market price of comparable imports. The examinees performed well
in this part and appropriately calculated the after tax income from both methods required scoring goods marks.
Few of the examinees failed to determine the after tax income from full manufacturing cost method in Local divisor
by confusing the other methods and data provided
(b) Transfer price the company should select to minimize the total of its import duties and income taxes:
In this part, it was expected from the examinees to explain with necessary calculation the differential price from the
transaction between two divisions. Few of the examinees were able to perform in the direction required to solve
this part but unable to reach the conclusion while the others preferred skipping this part.

Question No. 5
Budgeting:
It was the most poorly attempted question of the paper. The question was to prepare the budget using the data
provided and adjust the relevant costs and price accordingly. The examinees showed lack of preparation to solve this
question reflecting deficiency in this area and were unable to determine the costs correctly. At most the sales figures
were found correct in few of the answer scripts.
 –x– 
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS
STRATEGIC FINANCIAL MANAGEMENT – STRATEGIC LEVEL-2 S5

Question No. 1
Merger and Acquisition:
This question had four parts covering the major areas associated with business valuation process to assess the
feasibility of the acquisition willing to be adopted attached with suitable proposals forwarded to the acquire. The
performance of the examinees for this question was observed to be unsatisfactory as deficiency in calculations of basic
ratios were found defective resulting in poor performance aggregately. Only few examinees managed to solve the
question to an extent but failed to high marks.
(a) P/E ratios of Beta Limited (BL):
The requirement of this part was to calculate the P/E ratios with respect to all the options along with the rejected
offer to be calculated in order to compare the options that results in high P/E ratios. The examinees failed to
understand the requirement made wrong calculations some of which are as under:
(i) Wrong calculations of Earning Per Share of Beta Limited
(ii) Wrong calculations of Market value of Alpha Steel Mills Limited
(iii) Wrong calculations of Market value of BL under the Scenarios of Option 1 to Options 3
(iv) Wrong calculations of Price Earnings Ratios of BL Limited in all Scenarios i.e. Options 1 to Option 3
(v) The examinees made a common mistake of taking P/E ratio of BL Limited instead of Alpha Limited to
calculate the Market Price, thus resulting in loss of marks.
(b) Funds required by Alpha Steel Mills Limited (ASML):
In this part, the examinees were tested to determine the additional funds required undertaking the acquisition
process and which one of the options ASML is considering to offer would be viable to be communicated to Beta
Limited. Some examinees correctly worked out Funds required in all Scenarios i.e. Options 1 to Option 3.
However, other Examinees showed the following mistakes:
(i) Wrong calculations of extra funds required under each option
(ii) Wrong calculations towards the number of shares under the each option
(c) The impact on earnings per share (EPS) and gearing of ASML:
Examinees in this part were asked to calculate the impact on earnings per share and gearing of all the three
options under review. Overall performance of the examinees remained unsatisfactory in this part reflecting lacking
in conceptual thinking and procedures to follow leading to common errors mentioned below:
(i) Examinees did not consider the synergy impact under the each options i.e. Option 1 to 3
(ii) The examinees omitted the finance costs associated with the funds the companies already have to calculate
the impact on the earnings in Option 2 and 3.
(iii) Wrong calculations of New earnings of all the options
(iv) Wrong calculations towards the number of shares as well as earning per share under each Scenario i.e.
(Option 1 to Option 3)
(v) Examinees do not have the concept of gearing at all as they did not work out to calculate the Gearing for all
the options.
(d) Comment on the viability and impact of each option:
This part of the questions was to test the analytical and decision making skill of the examinees in the given
scenario and how they will weigh all the options and ultimately decide the most suitable for the companies. Majority
of the examinees skipped this part and some of them which tried attempting this part failed to give an opinion in a
prudent way.
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS
Question No. 2
(a) Cost of capital:
This question required to estimate the cost of capital of Multilevel Limited which may be used as the discount rate
for the proposed cement plant in the South Africa. Overall the performance of the examinees in this question was
average. Most of the examinees were able to tackle the question in the direction required but some of the common
errors that were found are mentioned as under:
(i) Examinees did not calculate the South African un-geared equity beta
(ii) Majority of the Examinees did not show the proper calculations of Market value of Equity, Debt and bonds.
(iii) Examinees did not calculate re-geared beta calculations which was further used in the calculations of cost of
equity under Capital Asset Pricing Model
(iv) Since the wrong calculations and lacking of correct calculations were made of Cost and value of equity, cost
and market value of debt – Syndicated term finance loan and Market value and cost of bonds, hence correct
calculations of Weighted Average cost of capital was close to impossible.

Question No. 3
Weighted average cost of capital (WACC) value, its equity, using the Free Cash Flow to the Firm (FCFF) Model:
The examinees were tested to evaluate the Fee Cash Flows of the company using FCFF model. The examinees
reflected lack of conceptual thinking and understanding with regards to FCFF Model and performed unsatisfactorily.
The following observations were made on review:
 Wrong calculations towards the interest rate on debt
 Cost of equity was correctly calculated by some of the examinees.
 The examinees failed to inflate the cash flows as per the required and stated trend and estimate the year from
which cash flows were required to be inflated.
 Wrong calculations towards the Weighted Average cost of capital, Interest, Depreciation, Fixed Capital Investment.
 No calculations have been found for the Terminal Value.

Question No. 4
Bond Issue:
This question had two parts and required sound understanding from the examinees to solve the current coupon rate,
market value and change in effective cost of capital of the bonds. This question proved out to be one of the poorly
attempted questions. Very few of the examinees tried attempting this part but failed to tackle the question properly and
score reasonable marks.
(a) Coupon rate of new debt issue and advise criteria of setting the spread:
The examinees failed to differentiate between the prevailing market price of similar bond and the coupon rate of
the existing bond of the company and determine the usage of spread in order to adjust the coupon rate with the
current market conditions. Therefore, defining criteria of the spread was high unlikely to be projected by the
examinees in the question.
(b) Current and revised market valuation and change in effective cost of capital:
Examinees had to evaluate the current and revised market valuation of the company’s debt and change in the
effective cost of capital. The poor performance of the examinees suggests that they lacked in the key concepts of
the bonds. Only few of the Examinees could calculate the Market value of Debt. No correct working towards the
change in the effective cost of capital was found.
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS
Question No. 5
Derivatives:
In this question, the concepts of derivatives and its related products were tested in which the examinees has required
to project their understanding in respect of the options decision making and forward market susceptible to currency
fluctuations. It was one better answered question amongst of the other questions tested in the paper and examinees
scored reasonable marks in this question but reflected vague concepts in this area as well.
(a) Call Options:
The examinees were tested to deliver their understanding concerning the American and European options and the
applicability of the two in the scenario provided. The examinees did well in this area and calculated the gain as the
outcome of the transaction but many of them failed to mention the transaction process and also understand that
the option was near to expiry therefore, both of the call options were indifferent.
(b) Forward Contract Transactions:
This sub question of Question number 5 required the Gain/ (Loss) in Pak Rupees (PKR). The examinees failed to
use the interest power parity formula in order to determine the conversion rate. Most of the examinees applied the
interest rate directly on the value of the transaction and calculated the net amount which was not an appropriate
method to solve the question. However, this question was averagely performed well resulting in scoring legible
marks for the examinees.

Question No. 6
(a) External Funds Required:
In this part, the performance of the examinees was highly unsatisfactory. In sub part 1 and 2 the examinees were
totally unaware about the concept of External Funds Requirement (EFR). Examinees worked out on the basis of
Profit and Loss Account statement but too failed to reach the correct figure and evaluate the funds required which
restricted them to solve the part 2 of the same question as it was inter-related
(b) Importance of Inflation in decision making:
It was a theoretical based question which was made to test examinees’ judgment regarding incorporation of
inflation rate while evaluating the budget. The overall performance of the examinees was average in this part as
they gave generic answers and attain few marks while many of them did not attempt this part.
 –x– 
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS
STRATEGIC MANAGEMENT – STRETEGIC LEVEL-2 S6
Question No. 1
(a) Benefits of being a Conglomerate in achieving economies of scale and competitive advantage:
In part (a) the examinees were required to bring forth their understanding related to the benefits that accrue to the
company of being a conglomerate helping it achieve the economies of scale and competitive advantage. Most of
the Examinees attempted the question with accuracy illustrating the key points reflecting clear concepts while
answering this part. However, few of the examinees merged the concept of concentric diversification and
conglomerate diversification and mentioned the negative impacts the company would have being a conglomerate
which resulted in loss of marks.
(b) Ways that can be undertaken by Apparel 360o Pvt. Limited to get benefit from E-marketing mechanism
and importance of implementation of an appropriate marketing concept in textile industry::
Examinees were asked to recommend techniques that the company can opt from E-marketing mechanism in
order to revive its sales and market share in the market and also the importance of implementing an appropriate
marketing concept in textile sector. All in all, the examinees answered the question in generalized manner and
failed to understand the actual requirement of this part that restrained in scoring good marks for this portion, while
some of the examinees answered the question delivering the concepts required for this part.
(c) Risk(s), Damages and Procedures for revamping the corporate image as the consequences of litigation
imposed on Glasgow Corporation:
This part had three inter-related sub requirements that were asked to test the understanding of the examinees
regarding the risk exposure of the company as the outcome of litigation imposed, the damages inflicted over it and
the procedures the company could adopt to stabilize itself. The examinees’ performance in this part was average
as they failed to answer widening their thinking horizon bringing forward all the possibilities and adoption of
sustainability and corporate social responsibility in this part. The examinees attempted this part taken correct
direction but not to the extent of achieving legibly high marks. Many of the examinees too failed to understand the
requirement as it was expected to mention the possible risks the company is exposed too rather than mentioning
risks and areas that have already been addressed like going concern risk.
(d) Methods to cope with changing political and economic environment:
This part was designed to test the practical aspects of macro environment from the examinees. The question
required methods that company can adopt which is having considerably large market share to sustain itself in the
market. Mostly examinees answered the question in right direction, but very few consider the point of depreciation
of currency.
(e) Importance of synchronization and harmony amongst the team members in bringing synergic effect in
decision making:
Examinees were asked to discuss the importance of building synchronization and harmony amongst team
member in order to have sound decision making. Overall performance of the examinees was satisfactory in this
part with least conceptual errors. The examinees answered this part by mentioning the common and repetitive
points but did not think out of the horizon like emotional intelligence, role of leadership and individual working
space and expertise.

Question No. 2
(a) Difference between CEO and Director in terms of position and responsibilities:
The performance of the examinees was not up to the mark in this part. Few examinees have completely
understood the question and answered as per laws and regulation and in line with requirement of question.
Conceptual errors have been found in most of the answer scripts.
 EXAMINERS’ COMMENTS
SPRING 2019 EXAMINATIONS
(b) Commercial risk of the international business:
This part required understanding of the examinees regarding the timing of entry, timing of entry, weak partner,
operational problem, poor execution of strategy and competitive intensity .While attempting this question, every
examinee used his/ her general perception regarding commercial risk of the international business, which one
cannot be termed as in appropriate but is also not up to the mark as prioritizing of important areas were found
missing in this part.

Question No. 3
(a) Challenges faced by an organization when managing the project:
Examinees, in this part, were required to mention the challenges the company could encounter during the
management of projects. Most examinees have shown good concept regarding challenges face by the
organization while managing projects but due accuracy still missed.
(b) Roles of scenario planning in ‘strategic planning’ and ‘decision-making that provides edge over other
planning techniques:
Overall performance of the examinees was average as majority of the answers provided by the examinees
revolved around few points mentioned with different angles and lacked in illustrating why this technique is
preferred over other planning techniques. Most of the examinees just rephrased the question part and circulated
their answers round the statement provided. The examinees mixed up the scenario planning with strategic
planning and replied in the context of strategic planning. Vague concepts of the examinees to justify the statement
were found on review. Few of the examinees were able to grab the gist of the requirement and answered
accordingly. Overall performance of the examinees was average as majority of the answers provided by the
examinees revolved around few points mentioned with different angles and lacked in illustrating why this
technique is preferred over other planning techniques. Most of the examinees just rephrased the question part and
circulated their answers round the statement provided. The examinees mixed up the scenario planning with
strategic planning and replied in the context of strategic planning. Vague concepts of the examinees to justify the
statement were found on review. Few of the examinees were able to grab the gist of the requirement and
answered accordingly.

Question No. 4
Information technology role in managing transactional costs of an organization:
While marking this question it has been observed that, the examinees concentrated on saving of transactional cost
between sellers and consumers’ transaction, the concept of Electronic Data Interchange (EDI) has not been
considered by the examinees, which form the major part of the answer. Most of the students could not understand the
concept of transactional cost and briefed about information technology only

Question No. 5
Limitations that must be addressed Big data in achieving its full capacity:
Examinees were expected to answer this question considering the constraints that the data infrastructure is exposed.
Very few examinees answered this question in right direction; most of the examinees have skipped the question. Even
basic concepts have not been properly communicated.
 –x– 