Lecture 2.docx - Lecture 2 Comprehensive case Cover at least 4 competency areas Require candidates to recognize the central issues o Decision-oriented

Lecture 2.docx - Lecture 2 Comprehensive case Cover at...

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Lecture 2 Comprehensive case - Cover at least 4 competency areas - Require candidates to recognize the central issues o Decision-oriented question - Require candidates to recognize specific accounting concepts & information to be applied in solving the business problem - Test the candidates ability to evaluate the relevance of information Integration & analysis skills - Allocate time to planning (25-30% of total time) - Read the narrative (once or twice) - Scan & read the exhibit - Take a step back and pause - Plan what you are going to do - Rank and order the issues - Allocate your time - Rank the topics Differences from multi-subject questions - 5 hrs vs 2 hrs - Comprehensive question emphasizes the ability to identify, define, and rank case issues - More irrelevant information is given in the case How to approach a comp case - Reading/planning phase generally takes 25%-30% of the available time in an exam setting Hypothetical case - Expand internally o Development costs o Need equipment ($$) o Need training ($$) (expertise?) - Purchase XYZ – need to determine if the purchase price is reasonable - Purchase investigation o Normalized operating profit Before new product line o Recognize earnings multiple What is a reasonable multiple? Consider cost of financing, industry, and any other relevant indicators o Compare normalized earnings x multiple assumption Is the purchase price reasonable? - Finance issues o Bank o Sale of land o Injection of cash by John Doe - User of report o John Doe, owner of ABC o Jane Smith, partner - Scope of report(s) o Purchase investigation report o Audit planning memo - Your role o Audit supervisor in charge of purchase investigation and audit - Role hints???
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- Opportunities o Availability of XYZ for purchase instead of expanding internally - Threats o ABC’s banker o Funding may be a problem - John Doe o “long-term goal to expand product lines” o Other objectives could be Tax minimization Income maximization Stewardship - Identify what is critical to the decision maker given his objectives and the environment o Critical means the DM’s successor or failure is hinged on this factor o Whether the business owner should take out the loan from Ventura - What is the critical issue/decision facing DM? - CPA way is critical in your analysis o Issue identification o Analysis o Recommendation - Recommendation – no “right” answer o Must link to objectives, environment, CSF o Judgement: what time should it be recognized and at what value? Communicate in writing - Writing mechanics - Organization and format - Conciseness and clarity - Audience orientation - Professional tone - When writing a report, always use: o To: user o From: role o Re: Required - * use lots of subheadings o Issue o Recommendation Practical points - Use lots of sub-headings - Put all quantitative analyses in appendices o Must have: A title Purpose Conclusion - Place qualitative discussion and recommendation in the body of the report and reference the appendices - Watch your time - Reference the exhibit in your report Heart Wine Case - Required:
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  • Spring '16
  • ElisaZuliani

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