CA School of Business Module Five Student Overview May 2011

Transcription

1 CA School of Business Module Five

2 Introduction This overview introduces the content and unique challenges in Module 5. For information about CASB administrative policies and advice for a successful experience as a CASB student, see the Student Resource Guide, which is available on the Module 5 course site and also on the CASB web site. Unique Challenges in Module 5 The storyboard for Module 5 is shown on the next page. Students will work on a variety of assignments that will expose them to performance measurement, assurance, finance, tax, governance, strategy and risk management (GSRM), management decision-making and pervasive issues. The main case study for weekly tasks continues to be Vision Windows Limited. At the beginning of Module 5, Vision s managers explore financial reporting, financing, taxation, regulatory and governance issues associated with a potential initial public offering. Students will address a variety of issues including the identification and audit of related parties, information technology controls, tax planning, accounting for pension plans, operating segment requirements, and accounting for financial instruments. An additional element of Module 5 includes the requirement of students to complete practice UFE prep course questions. The students responses will be submitted to facilitators as part of their weekly task assignments. Facilitators will provide feedback and request revisions when necessary. In preparing students for Module 6 and the Uniform Final Examination, facilitator expectations are elevated and task requirements are less directed than in earlier modules. See page 3 for the module storyboard and page 4 for a summary of the major roles students will play. Pages 5 and 6 list the weekly recommended resources, and Page 7 summarizes the evolution of Vision Windows Limited. Page 2 of 8

3 Module 5 Storyboard Week 1 Explain issues re: going public. Finance, GSRM Identify general and application control deficiencies for the receipts / sales/ receivables IT systems, implications of the deficiency, and recommendations to resolve. Discuss implications for the audit engagement. (IT), Pervasive (Critical Thinking) Review audit planning memo and identify planning issues to be resolved., PM Prepare UFE Prep Question user strategic objectives, financing and tax. Finance, Taxation Week 5 Explain the timing and content of interim financial reports for a public company. PM Explain audit committee composition and responsibilities. GSRM Explain planning opportunities for proposed disposition of shares of CCPC going public election to bump up the adjusted cost base and the use of the capital gains exemption. Taxation Identify and discuss user objectives, outstanding accounting and audit issues and provide recommendations valuation of tangibles and intangibles, revenue recognition, coupon liability, completion of inventory, AP. PM, Prepare UFE Prep Question prepare preliminary report on audit of personal and corporate tax returns., Personal and Corporate Taxation. Week 2 Evaluate two production options using both qualitative & quantitative aspects. Quantitative work requires a contribution margin analysis, and consideration of capacity constraints and opportunity costs. Finance, Mgmt DM, Pervasive (Critical Thinking) Complete review of a junior staff member s audit work as it relates to AR, inventory, accounts payable and revenue. Identify additional work required to perform, with reasoning provided. Percentage of completion calculations., PM Identify related parties, necessary audit procedures, and IFRS disclosures. PM, Week 6 Explain the implications of applying IFRS 8 (operating segments). PM Explain the tax consequences of selling a subsidiary, wind-up of a subsidiary, or keeping a subsidiary (with an acquisition of control). Loss denial on transfer of shares and charging of mgmt fees. Taxation Explain the financial accounting (under IFRS) and tax treatment of share issue costs. Explain the tax impacts of going public. PM, Taxation Prepare UFE Prep Question non-monetary transaction, user bias, analysis of cost schedule and procedures to perform., PM, Pervasive Week 3 Prepare AJE for pension accounting and explain pension disclosures under ASPE. Identify and explain assurance report needed for pension fund management of assets. PM, Complete self-guided online task, performing an incremental profitability analysis including 5- year NPV for products and division. Finance, Mgmt DM, Pervasive (Critical Thinking) Explain auditor s responsibilities on using actuary s report. Prepare UFE Prep Question consideration of the users and user bias, accounting policy choices, purchase price calculation and engagement options. PM, Finance, Pervasive, and Week 7 Read various handbook sections that impact public offering documents. Prepare a memo regarding P&L involvement with the public offering document. Prepare journal entry for issuance of stock options and calculate both basic and diluted EPS. PM Complete M6 outlining tutorial found on UFE prep website. Review public company financial statements on SEDAR, analyze and discuss some IFRS presentation and disclosure issues, identifying relevant items to Vision. PM Prepare UFE Prep Question identify accounting adjustments, calculation of taxable income and tax payable, cash flow analysis. PM, Taxation, Finance Week 4 Explain the audit and financial statement requirements for a public company; consider independence prohibitions for auditors of public companies., GSRM Analyze a long-term investment opportunity, including sensitivity analysis. Finance, Mgmt DM Prepare UFE Prep Question evaluation of accounting options, recognition of management bias, engagement options. Evaluation of system controls., PM, Pervasive (Critical Thinking), Mgt DM (IT) Install Securexam(CA) and submit qualification exam. Week 8 Explain accounting for convertible debentures, financial instruments, revenue recognition, assets, and capital management. Explain IFRS reporting options for PP&E. PM Calculate and explain the business and personal foreign tax credits. Taxation Explain requirements of MD&A disclosure including transition to IFRS. Discuss P&L involvement with MD&A. Analyze excerpts of a MD&A.. GSRM, Explain personal financial planning issues (budgeting, RRSP planning) and some general tax issues (dividend vs. salary). Taxation Page 3 of 8

4 Roles Two primary roles are adopted during Module 5, with the student switching between the roles of associate for Parkhurst & Loewen and assistant controller for Vision Windows. UFE prep questions are also a key element of this module, with multiple roles being presented. Associate for Parkhurst & Loewen As an associate, the student s role is to interact with both the audit firm and the client. During Module 5 the student will perform multiple tasks, including assessing an IT systems potential impact on an audit, outlining an auditor s responsibilities on using a specialist s work, reviewing a junior staff member s audit work for deficiencies and preparing a product and divisional analysis to determine the viability of product lines and divisions. The student will research and learn about various topics and communicate this information to the firm supervisor or client. If the student believes there is room for a conclusion or recommendation, this should be provided along with proper support. Although the associate s work will be reviewed prior to presentation to the client, the student should attempt to make the work as complete as possible. Assistant Controller for Vision Windows As assistant controller at Vision Windows, the student s primary interest is achieving the company s strategic objectives. The student will assist the controller and company managers with various issues including such tasks as providing the board of directors advice regarding whether to go public, analyzing expansion opportunities on both a qualitative and quantitative basis, calculating and preparing journal entries for a pension plan and preparing an analysis of the accounting changes that will occur if Vision goes public, including potential IFRS impacts. While the company s managers have in-depth knowledge of company operations, they are not as familiar with accounting regulations and terminology. Therefore the assistant controller must communicate using less technical accounting language. UFE Preparation Questions Students will have extensive exposure to UFE prep questions beginning in week one. The UFE will present many diverse scenarios that will test a student s skills to identify user needs and respond to those needs within a limited amount of time. The prep questions included in this module will provide students with examples of questions that reflect the nature and difficulty of actual questions that could be part of their actual UFE, and should prepare students to successfully tackle the exam with confidence. The student will have to perform several tasks, in various roles, such as: o o o Preparing a preliminary report on audit on personal and corporate tax returns; Evaluating accounting options available to a client; and, Analyzing engagement options available to a client, including a thorough discussion of audit procedures that could be performed. Page 4 of 8

5 Useful Resources and Readings Below is a list of readings for this module. It also outlines some additional resources that may help students in the more technically challenging tasks. Week 1 - CICA HB 3856 Financial Instruments - ASPE Guide Section CAS 200 Overall objectives of the independent auditor and the conduct of an audit in accordance with Canadian auditing standards - CAS 315 Identifying and assessing the risks of material misstatement through understanding the entity and its environment, including Appendix I, which focuses on IT aspects. - CAS 320 Materiality in planning and performing an audit - Briefing Notes: IAS 32 Financial Instruments: Presentation - CAS guide: CAS 200, CAS 315, CAS PEM - Inherent Risk Checklist - Deciding to Go Public, What CFOs Need to Know - Trust Services: A Better Way to Evaluate IT Controls - The top 10 tech issues - UFE simulation: Great Northern Sales Week 2 - CAS 200 Overall objectives of the independent auditor and the conduct of an audit in accordance with Canadian auditing standards - CAS 320 Materiality in planning and performing an audit - CAS 550 Related parties and IAS 24: Related party disclosures - CAS guide CAS 200, CAS 320, CAS IAS 19 Employee Benefits - IAS 24 Related Party Disclosures - Briefing Notes: IAS 19, IAS 24 -"Using Quantitative Analysis for Financial Decisions on the UFE" guide. Provides you with ratio and cash flow analysis, showing both qualitative and quantitative support for financial decision questions. - "Management Decision Making Library" for additional guidance on the expansion analysis in week 2 - UFE simulation: None Week 3 - CICA HB 3461 Employee Future Benefits - ASPE Guide Section CAS 500 Audit evidence - CAS 620 Using the work of an auditor's expert - CAS Guide CAS 500, CAS CICA HB 5049 Use of specialists in assurance engagements Page 5 of 8

6 Page 6 of 8 Module 5 - CSAE 3416 Reporting on Controls at a Service Organization -"Using Quantitative Analysis for Financial Decisions on the UFE" guide. Provides you with ratio and cash flow analysis, showing both qualitative and quantitative support for financial decision questions. - UFE simulation: VCL Week 4 - CAS 200 Overall objectives of the independent auditor and the conduct of an audit in accordance with Canadian auditing standards - CAS Guide CAS UFE simulation: ASAP - National Instrument Auditor Oversight - National Instrument Continuous Disclosure Obligations - National Instrument General Prospectus Requirements - CPAB, Week 5 - IAS 34: Interim financial reporting - Briefing Notes: IAS 33, IAS 34 - Tutorial: IAS 34 - ITA S.48.1 (Canadian Tax Principles, CRA Capital Gains Guide - T4037, T657)) - NI : Continuous Disclosure Obligations - Multilateral Instrument Audit committees - CRA Capital Gains guide T4037, T657 - VPL Canadian Tax Principles - IAS 17 Leases This includes guidance for - SIC 15: Operating Leases - Incentives - Tutorial IAS 17 and SIC 15 - IAS 18 Revenue - IAS 36 Impairment of Assets - IAS 37 Provisions, Contingent Liabilities and Contingent Assets - IAS 38 Intangible Assets - Briefing notes: IAS 17, IAS 18, IAS 36, IAS 37, IAS 38 - Tutorial: IAS 36 - UFE simulation: CRA Auditor Week 6 - Briefing Notes: IFRS Framework - IFRS 3 Business Combinations - IFRS 8 Operating Segments - IAS 1 Presentation of Financial Statements (specifically the section discussing accounting policies, and implications of accounting for an item without specific IFRS guidance) - IAS 16 Property, Plant and Equipment - IAS 18 Revenue - IAS 32 Financial Instruments: Presentation - Briefing notes: IFRS 3, IFRS 8, IAS 1, IAS 16, IAS 18, IAS 32

7 - Tutorial: IFRS 8 - Various ITA sections to examine tax rules impacting the non-capital losses and capital losses of a company in different scenarios. Sections include ITA 88(1.1), ITA 40(3.3), ITA 40(3.4), ITA 67 and also IT-302R3 and Canadian Tax Principles - ITA(20)(1)(e), note how it applies and what it applies to - UFE simulation: Pharmex Week 7 - IAS 33 Required to calculate basic and diluted EPS - CICA HB 7110 Auditor involvement with offering documents of public and private entities (Consent Letters) - CICA HB 7115 Auditor involvement with offering documents of public and private entities (additional auditor responsibilities) - CICA HB 7200 Auditor assistance to underwriters and others (Comfort Letters) - CICA HB 7500 Auditor's consent to the use of the auditor's report in connection with designated documents - IFRS 1 First-time Adoption of International Financial Reporting Standards - IFRS 1 publication - Chapter 20 from the 2011 version of Financial Reporting in Canada under IFRS - Briefing notes: IFRS 1, IAS Chapter 20 from the 2011 version of Financial Reporting in Canada under IFRS Complete Planning Tutorial 1: Effective Outlining - UFE simulation: Wedding Planners Week 8 - CICA HB 7500 Auditor's consent to the use of the auditor's report in connection with designated documents - CSA Staff Notice Disclosure of Expected Changes in Accounting Policies Relating to Changeover to International Financial Reporting Standards located at: - National Instrument Continuous Disclosure Obligations - VPL Canadian Tax Principles - IT-288-R2 Gifts of Capital Property to a Charity and Others Page 7 of 8

8 Evolution of Vision Windows Limited Module 1 Module 2 Module 3 Module 4 Module 5 First 10 years Next 2 years Next 3 years Next 3 years Next 2 years "The Early Years" Vision, incorporated by Hans Supeene, expands to three divisions: vinyl-clad windows, metal doors, and greenhouses and greenhouse windows. As with most companies, cash flow issues arise, and numerous personal and corporate tax matters require attention. Company and external accountants prepare and discuss adjusting journal entries as well as the presentation of selected financial matters. The company faces many decisions including hiring a new external accountant, buying or leasing assets, allocating costs to the three operating divisions, and having an audit or review engagement performed. "Sale of the business and the transition to new owners and management" Hans has received a number of offers to buy Vision. He engages a CA Firm to provide him with a valuation report and determine the tax effects of each offer. Due to the poor economy, the intended purchaser is unable to complete the transaction. Hans is approached by two of his managers (Elmer Hughes and Arnie Chan) who express interest and are successful in completing the purchase of Vision. Hans and his family contemplate the tax consequences of moving to Belgium. The new owners of Vision are eager to expand the business. A third shareholder who has experience in strategy is added, and a potential acquisition, Western Homes Centres Inc. (Western), is identified. Parkhurst and Loewen are engaged to complete the audit of Western. "Vision becomes a multinational company" The audit of Vision is completed, and the company acquires 80% of the shares of Western. Vision purchases 100% of Dante Windows Limited, a U.K. company. With the added subsidiaries there are many consolidation and foreign currency issues requiring careful attention. With an expanded accounting department, more attention is being paid to variance analysis, the need to acquire new software, and the adequacy of the company's disaster recovery plan. With a larger employee and management group, management is considering the potential tax consequences of issuing stock options. "Time for some introspection" Vision s controller, Denise Charron, moves to England to run Dante Windows Limited. The new controller's first job is finalizing the financial statements for the year-end audit. Both Western and Vision are experiencing operational and financial challenges as evidenced by Vision's loss. The three shareholders realize they will not achieve their goal of taking Vision public unless they focus more attention on governance and strategic planning. In conjunction with making improvements in governance, Vision is considering a number of new investment opportunities. As Vision is unable to secure financing with its bankers, it focuses attention on short-term cashflow management and approaches Brennan Brothers, a venture capital group, to provide additional financing. "Vision contemplates an IPO" Vision s managers explore financial reporting, financing, taxation, regulatory and governance issues associated with a potential initial public offering on the Toronto Stock Exchange. The company s internal and external accountants address a variety of issues including the identification and audit of related parties, information technology controls, tax planning, accounting for pension plans, operating segments requirements, accounting for financial instruments, and international financial reporting standards. Page 8 of 8