Author: Gevorg CPA

Let’s take a look at CPA Canada’s Assurance elective module. In this post, you’ll learn about the module’s: format, assignments, topics, exams, how it’s assessed, and study tips to help you pass. 

Related readings:

• Core 1 Module Guide
  
• Core 2 Module Guide
  
• PM Elective Guide
• Finance Elective Guide
• Tax Elective Guide
• Capstone 1 Study Guide
• Capstone 2 Study Guide
• CFE Study Guide

What’s Assurance elective?

After completing both Core modules in the CPA Canada Professional Education Program (PEP), you will select two elective modules from four possible choices: Assurance, Taxation, Performance Management (PM) and Finance. Completing two electives is required before completing the Capstones 1 and 2, and the Common Final Exam (CFE). Your two chosen electives can be completed in any order.

Assurance module is designed to test on the competencies required by internal audit projects and external assurance engagements. Although this elective is taken mostly by those working in public practice, or those wishing to become sole practitioners, anyone can take it and I encourage most students to choose this module over others (you’ll know in a moment why).

The technical topics covered in Assurance are mostly Assurance and Audit (AS) and Financial Reporting (FR), and very little Finance (FN) and Strategy & Governance (SG). Of these, AS is the biggest part of the module and the exam.

Examples of AS topics include:

• Audit planning memo (Risk, Approach, Materiality, Procedures)
• Substantive procedures
• Test of control procedures
• Audit opinion / audit report
• Special reports
• WIR
• Use of internal audit
• Use of audit expert
• Going concern
• Fraud

Similar to Core modules, Assurance is held in online format, with all assignments, readings and quizzes taken on the website Desire 2 Learn (D2L). You’ll get access to D2L a week before the module start date.

How long is it?

The normal Assurance module that most students take is 8 weeks long. However, an extended version is available, allowing you to complete the module over a 5 -month period. This is good for students who have commitments or those who prefer a slower pace of study.

You can also challenge the Assurance module, where you skip the entire module and just take the exam. This is allowed only in special circumstances, such as for internationally trained accountants under MRA/MOU.

Is there an instructor?

Similar to Core modules, there is an online facilitator. Their main duties are to help you via email, provide feedback on your assignments, assist in finding information, and moderate the forums. 

Assurance module has a Module Workshop (MWS). This mandatory two-day event has presentations and activities by a session leader. The activities include review of technicals and case writing. I previously worked as a session leader with CPA Canada.

Before attending the workshop, you must complete and submit pre-work to D2L dropbox.

What are the assignments?

Assurance module has weekly assignments that consist of:

• Multiple-choice questions (MCQs)
• Integrative problems (IPs)
• Practice cases (PCs)

MCQs are small problem-based questions that test on technicals.

Below is an example of Assurance MCQ:

The IPs are short-answer problems that test the technical material learned in the weekly unit.

Below is an example of Assurance IP:

The PCs range from 80-minute to 120-minutes, they are designed to simulate the actual Assurance elective exam.

Below is an example of Assurance PC:

Majority of students find the Assurance exam to be harder than the PCs, so I suggest practicing with retired exam cases (discussed below) and mock exam simulations.

The IPs and PCs are to be completed using Microsoft Word and Excel, and uploaded to D2L weekly. The deadline is typically Friday night.  

You will also be provided with retired exam cases (actual cases from past module exams). I recommend to practice them under time-constraint to see how ready you are for the final exam.

How is it graded?

Unlike Core modules, where you had 5 AOs, Assurance module cases will have 6 to 8 AOs.

To be eligible to write the exam (discussed below), you need to get at least 75% total grade from your weekly assignments. The course is weighed as follows:

• IPs: 30%
• PCs: 30%
• Unit quizzes and MWS pre-work: 30%
• MWS participation: 10%

You should not worry about getting this 75% threshold. Most student reach the 75% mark and get to write the exam; the real challenge is passing the exam.

What’s module syllabus?

The syllabus lists the weekly readings and assignments. You can use the syllabus as a checklist and narrow down topics to study. To download the syllabus, click here.

What is the Assurance exam like?

The Assurance elective exam is 4 hours and consists of 15 MCQs and two cases for a total of 200 minutes. The maximum time for any one case will not be more than 120 minutes and the minimum will not be any less than 80 minutes.

All four electives (Assurance, PM, Finance, Tax) have this examination format (15 MCQ, 2 cases), which is different from Core modules, where you had 75 MCQs and one case. As you can see, the focus is being shifted from MCQs to case writing. In the CFE, it’s only cases.

Below is the exam blueprint that shows the weighing of the 4 technical competencies tested in Assurance MCQs, which is similar to the AOs tested in the case:

Minimum of 50% of AOs will be Assurance, and you will get 1 or 2 other competency areas (ie FR and possibly one other).

For example, your case may have 4 Assurance AOs (eg. WIR, Special Reports, Audit memo – risk/approach/materiality, Audit memo – procedures), 2 FR AOs (eg. Revenue recognition, Discontinued operations) and 1 S&G AO (eg. strategic advice).

Or it may have 4 Assurance AOs (eg. CAS 620, WIR, Special reports, Fraud) and 3 FR AOs (eg. PPE, Sale leaseback, Impairment). This changes every semester and I can provide you tips and estimates on what I think will come up in my Assurance Lessons course.

All prior learnings from Core 1 and Core 2 are still testable in your exam.

You will be provided with the CPA Canada Handbook (ASPE and IFRS), the Canadian Auditing Standards (CAS) and the Income Tax Act (ITA) during the exam.

How many tries do I get?

Similar to Core 1/2 modules, you have 3 attempts to pass.  However, unlike core modules, after 3 unsuccessful tries, you don’t get de-registered from the elective. Instead, you can switch your elective and try 3 more times in a different elective. 

What are the textbooks?

The Assurance module follows the same Learning EBooks as in Core modules. Here is more information on how to download the CPA Canada Learning eBooks.

Unlike Core modules, the “cheat sheet” given in the exam will NOT have the common ratios. You can download and compare Core and Elective cheat sheets (“Examination Reference Schedules”) here.

The EBook teaches Assurance topics in planning stages. You’ll find it helpful to learn directly the CAS standards as these are tested often.

What should I study?

Because this is an elective exam, the biggest portion is corresponding to that elective. I suggest spending most of your time studying the Assurance topics, including all EBook Assurance chapters and all CAS standards. This is necessary because electives test depth of knowledge, so the complexity of the AOs is higher than what you’ve seen in Cores. 

Another large component is FR. You will want to spend plenty of time here, studying mostly the complex FR topics (see below).

What’s the Assurance pass rate?

The Assurance pass rate is around 89%. 

Why do students fail Assurance?

Statistically, more students pass Assurance than the Core modules (see pass rate above). However, some components of Assurance can be more challenging, depending on your strengths and weaknesses. Here are the top challenges CPA students get:

1) Procedures are a heavily tested topic. It can be part of an Audit Planning Memo or separate required. Getting your procedures to a C level will require a lot of practice and understanding of the case. Here are some tips:

• Use the RAP method: Risk – Assertion – Procedure. 
• Be specific. Explain what audit evidence is needed, from who, and what this information will be used for to address the risk.
• Integrate case facts. Use case information like dollars, dates, quantity, users.
• Write at least 2 procedures per FR issue.
• Use complete sentences to ensure your procedure is clear.

2) Complex FR topics. While FR was tested at routine level in Core 1, there are more challenging, non-routine FR topics in Assurance. These topics take more time to understand. Some examples of complex FR topics include:

• Business combinations
• Sale and leaseback
• Biological assets
• Share-based compensation
• Financial instruments
• Hedge Accounting

3) Assurance is a very qualitative subject. Since qual has more ambiguity/subjectivity in how to integrate case facts and how much depth to write, you’ll find it challenging to understand why you’re not getting Cs. My recommendation is to format your answer well (e.g. use bullet points) and use “connectors” like: this means, which means, therefore, to ensure, as such, as a result. This will help to add depth. 

Additionally, being a qual heavy module, your typing speed will be a key factor to successfully answering all AOs within the time limit.

4) Applying templates. Assurance has several common topics that require a structured approach to receive full marks (e.g. RAP and VOOP for procedures, RAMP for Audit Planning Memo, WIR for control weaknesses, SAPPY for special reports). Applying these templates correctly can be challenging for many students.

5) Time management. Like other modules, Assurance is a self-lead course, which means you are responsible for managing your time, planning your readings, and understanding the material. Because the exam will have two cases, you must monitor your time effectively. My recommendation is to start with the FR and then write Assurance and any other areas afterwards. This is a good strategy because FR topics can impact certain Assurance AOs (e.g. materiality calculation and procedures) 

Overall, poor procedures, complex FR AOs, lack of structure in approach,  not applying templates correctly, slow typing in a qual heavy exam, and time management are the biggest reasons students fail.

You find additional Assurance elective tips here.

Do I need a tutor?

Hiring a tutor is a personal preference and it depends on your circumstances. A CPA tutor brings their expertise, helping to identify your weaknesses, reinforce your strengths, teach complex topics, reveal what topics are most tested through analyses of the Competency Map and exam blueprint, thus helping you speed up your study time and increase your chances of passing the exam.

If you attempt Assurance by yourself and don’t pass it, I suggest that you consider getting a tutor. But if you are successful, then you can keep doing what works for you.

Extra resources

Extra Assurance resources are available at Assurance Lessons course.

CPA Canada’s CFE Days 2 and 3 has a 4-level evaluation approach called the passing profile. Here’s an overview and some strategies to help you navigate this process, including why your role AOs should be written at the end.

Level 1: Sufficiency Level

Level 1 counts how many Cs and RCs you got from combined Days 2 and 3. Every AO is given a numerical value:

• Not Addressed (NA) = 0
• Nominal Competence (NC) = 0
• Reaching Competence (RC) = 2
• Competence (C) = 4
• Competence with Distinction (CD) = 4

Your score in level 1 is combination of RCs and Cs you got in both Days 2 and 3. Strategies for Level 1 include answering all AOs (don’t miss any), aiming for as many RCs/Cs as possible, and not aiming for CDs (because they are worth the same as C).

Level 2: FR or MA Depth Level

At Level 2, your FR and MA marks from both Days 2 and 3 are evaluated. Your goal is to get 3-4 Cs in either FR or MA. It’s not both, it has to be 3-4 Cs in either FR or MA. Only Cs count, RCs won’t help.

Strategy for Level 2 is to pick one area (FR or MA) and aim to get Cs on it in both Days 2 and 3. The other area can be RCs. For example, you can pick FR and get 2-3 Cs in Day 2 and 2-3 Cs in Day 3. You’ll have combined 4-6 Cs, which is enough to pass. 

Level 3: Role Level

Level 3 is based on your chosen role on Day 2. You need 4-5 Cs to pass. Only Day 2 counts for Level 3. Gettings Cs in Day 3 won’t help.

Strategy for Level 3 is to give enough time to your role in Day 2 to get Cs.

Level 4: Control Level

Finally, Level 4 assesses all AOs from both Days 2 and 3. To pass Level 4, you need minimum 1-2 RCs across all competencies (ie,  FR, MA, Tax, S&G, Finance, Assurance). This level is also called the “breadth” level.

Why you should write FR/MA first in Day 3

As noted above, passing Level 2 is about getting 3-4 Cs in either FR or MA in both Days 2 and 3.

Since both Days 2 and 3 are counted, you can use Day 3 to meet this level. For example, if you scored 2 Cs in FR in Day 2, you can score 2 more Cs in Day 3, thus get 4 Cs and clear Level 2. By answering FR first in Day 3 you ensure you have enough time. If you don’t write FR ahead of others, you may get NC or RC, because you’ll run out of time.

Why you should write your Role at the end in Day 3

To pass Level 3, you need 4-5 Cs in your role and only Day 2 counts. This means getting Cs in your role in Day 3 won’t count.

Let’s say a student chooses to write their role first in Day 3 and some other area, for example Tax, at the end. Due to time crunch of Day 3, they run out of time on their last AO on every case. They will score Cs in their role AOs in Day 3 (because they wrote it first), but NCs in Tax. This means they would fail at Level 4, because Level 4 requires at least 1-2 RC in all areas, but they got NCs in Tax.

Now let’s say the same student chooses to write their role at the end in Day 3 and other areas, such as Tax, first. Due to time management issues, they run out of time on their last AO on every case. They will score Cs in Tax in Day 3, but NCs in their role. They would still pass at Level 4, because they already got Cs on their role from Day 2 and now they have C/RC in Tax from Day 3.

Key to understanding this strategy is to know that your role AOs in Day 2 count towards Level 1, 3 and 4. Once you scored Cs on it in Day 2, you don’t have to worry about it anymore; the other areas take priority in Day 3.

Extra resources

Extra resources are available at CFE Review courses.

Addressing the big picture issues is crucial in CPA Canada’s CFE Day 1 exam. It’s often misunderstood by students and taught incorrectly by educators, but it’s necessary to correctly address it to successfully pass Day 1. Let’s take a look at what is big picture, how it’s tested in Day 1, and how you should address it.

What is big picture (BP) issue?

A big picture issues is a major, pervasive issue that impacts all other issues. We use several terms for it:

• Big picture issues
• Overarching issues
• Pervasive issue
• Constraint
• Strategic direction issue

All of the above mean the same thing: constraint that the company is facing which must be taken into account in your recommendations.

Examples of BP issues include:

• Cash flow constraints
• Lending constraints
• Covenants
• Management time constraint
• Strategic direction
• Upcoming IPO
• Employee morale
• Internal conflicts
• Fraud

Note that the BP issue in Day 1 is not the same as you had in Capstone 1.

Quantitative and qualitative BP issues

Historically, Day 1s had either quantitive or qualitative BP issue. Examples of quant BP issues include financial resources availability, cash flow constraint,  lending restrictions, and covenants. Examples of qual BP issues include management time constraint, strategic direction, upcoming IPO, employee morale, internal conflicts and fraud.

However, new Day 1 CFEs tend to have both types of BP issues: quant BP and qual BP.

How to formatting your response in Day 1 CFE

In the CFE Day 1 exam, you must correctly identify the BP issues and address them in all your recommendations and the overall recommendation. For example, if you have quant BP of cash availability (eg $5M), then you must write in your strategic issue recommendations how the issue impacts the cash flows (does it reduce or add to $5M? Can they afford to accept it?) and in the overall recommendation. I also recommend discussing it separately with your quant analysis.

If your exam has both BPs (quant and qual), then you must again discuss them in all your recommendations and the overall recommendation, plus you have to discuss qual BP in operating issues. For example, if the company has cash constraints of $5M (quant BP) and it’s undecided on the strategic direction (qual BP), you need to: 1) first discuss how each strategic issue impacts both of these BPs in all your recommendations, 2) then you need to create a separate section in your operating issues, titled “Strategic direction,” and discuss qual BP there.

Extra resources

BP issues are taught poorly in Capstone 2 module. In there, the practice cases don’t have both BPs, while the actual CFE exams nowadays do. I recommend reaching out to me if you need support understanding this concept.

Extra resources are available at CFE Review courses.

Let’s say you are faced with IFRS 15 revenue recognition question on the CPA Canada PEP exam or CFE, and it involves discussing Appendix B. How do you go about integrating it into the IFRS 15’s 5-step model? Let’s take a look at it in this post. 

Understanding the importance of the IFRS 5-step revenue model

In CPA Canada’s Handbook, IFRS 15 standard consists of 5 steps:

1. Identify the contract with a customer (further reading: How to Format Step  1)
2. Identify the performance obligations
3. Determine the overall transaction price
4. Allocate the transaction price to the performance obligations
5. Recognize revenue as the entity satisfies a performance obligation

Some AOs need to be solved by simply listing the 5 steps, analyzing with case facts, and concluding. However, more complex AOs require discussion and integration of Appendix B items.

What is Appendix B?

IFRS 15 Appendix B is called Application guidance. Its purpose is to help users with treatment of non-routine revenue issues. Given the complexity of revenue, knowing when to recognize revenue is not as simple as listing the 5 steps; there are many nuances and exceptions.  Appendix B was created to give additional guidance to revenue recognition.

In CPA Canada exams, you would use Appendix B when faced with non-routine revenue recognition AOs. For example, you would use Appendix B for:

• Sale with a right of return
• Warranties
• Principal versus agent
• Loyalty points (customer options for additional goods)
• Non-refundable upfront fees
• Licensing
• Consignment arrangements
• Bill-and-hold arrangements

There are more Appendix B items, which are listed in my FR technical study notes, but the above are the most commonly tested.

How do you integrate App B to IFRS 15 analysis?

There is no set rule on which IFRS 15 step you must integrate, it depends on the nature of the Appendix B item. Some items are integrated into step 2 , while others are integrated into step 4 or step 5.

For example, below is a screenshot from CFE 2015 Day 2 case K-Med, where Appendix B consignment was integrated into step 5:

 

Here is another example from CFE 2019 Day 2 case Elcar, where Appendix B customer options for additional goods (i.e loyalty points) was integrated into step 2:

Do I need to discuss the 5 steps all the time?

I recommend to discus the 5-steps all the time, including the integrated App B items into one of the steps.

Conclusion

The integration depends on the nature of the Appendix B item. Think about which step it relates the most and slot it there. Step 2 , step 4 and step 5 are the most common places to integrate.

Extra resources

Extra resources are available at FR technicals.

CPA Canada allows candidates to attempt the PEP Core 1 and Core 2 modules three times. At each unsuccessful attempt, candidates can ask for re-marking (appeal). This is done for a fee, and only within a specific timeframe outlined by CPA. In this article, I’ll discuss under what circumstances you can submit an appeal.

Look at the decile ranking

When deciding to submit your Core 1 or Core 2 exam for a remark, it’s important to understand the concept of decile rankings, as this helps to make your decision. It’s important to note that a decile ranking is only provided if you failed the exam.

Decile ranking is a statistical measure that tells writers who were unsuccessful how close they were from passing. If you received a decile ranking between 1-3, this means you were close to passing. If you received decile ranking above 7, this means you were far off passing.

This article shows how to find your decile ranking and examples are available here.

Should you ask for re-mark?

To decide, first check which exam portion you didn’t pass: MCQs, case portion, or both. If you didn’t pass due to MCQs, there is no point in asking for re-marking, because MCQs are objective.

If you did well on MCQs, but didn’t pass the case-portion, then look at your decile ranking. Decile above 2 is further from passing and submitting a remark is not recommended. If you receive a decile 1 or 2, a remark is a possible option for you.

Note that the chances are very low that your remark will be successful (~1% success rate). For this reason I don’t recommended it for most. However, below I’ve given guidelines based on my experience of successful remarks:

• If you received 3 NCs in the case, no matter what your other grades are, I don’t suggest asking for a re-mark.
• If you received 2 NCs in the case, the rest of your results are C, and your decile is 1-2, you can try asking for a re-mark.
• If you received 1 NCs in the case, the rest of your results are C, and your decile is 1-2, you can again try asking for a re-mark.

As noted, the chances are low and you’re better off re-attempting the exam with the help of a tutor.

Extra resources

Extra Core 1 and Core 2 resources are available at PEP Review courses.

In the CPA Canada Common Final Examination (CFE) Day 1, there are two versions of cases offered. The first version (V1) is the new case released in the new Capstone 1, while the second version (V2) is a repetition from the prior year’s Capstone 1. Some candidates have a choice which case to choose. Let’s explore which one to choose.

[Further reading: What Day 1 Cases Will Be Tested in 2026, 2027 and 2028 CFEs?]

Who can choose which case?

For first-time writers, you are required to choose the case in Capstone 1 you completed, unless that case is no longer available. So for the majority of first-time writers, you don’t have a choice, you must choose the new case.

On the other hand, if you were unsuccessful in the previous CFE Day 1, or you are challenging the CFE, you have the option to choose from either v1 or v2 cases available for that CFE sitting.

Which Day 1 case to choose?

There are several factors to consider while choosing between the new V1 and the V2 case:

(1) Pass rate

• • Interestingly, V2 cases have a lower pass rate, according to Day 1 statistics. This suggests that writing new (V1) provides you statistically higher odds of passing the exam.
  • Conclusion: New (V1) is better.

For example, below are screenshots from CPA Canada’s Board of Examiner’s Reports. It shows that new (V1) cases have higher number students meeting the passing standards.

Example 1:

Example 2:

(2) Future proofing

• • Choosing the new (V1) case offers a safety net. In case you don’t pass, you have the option to attempt the same case on your next try. However, the V2 case will expire next CFE, because Day 1s are offered two times only, forcing you to prepare for another new case again.
  • Conclusion: New (V1) is better.

(3) Access time and additional cases

• • Choosing V2 allows early access to Capstone 2 practice cases, since they are already available. This is beneficial because it provides extra time for preparation, compared to the new (V1) case, which you will only receive eight weeks before the CFE, when new Capstone 2 starts. Additionally, V2 offers an extra case to learn from, as the prior exam version is available.
  • Conclusion: V2 is better.

(4) Industry type

• • If you’re currently working in a specific industry, like pets, teas, fitness or toys, choosing a case in a similar industry can give an advantage. Familiarity with the industry lingo can make it easier for you to understand and tackle the Day 1 case.
  • Conclusion: Varies.

Gevorg’s final verdict

Considering the pros and cons, both versions are acceptable. If you’re still undecided, my recommendation is to choose the new (V1) case, given its overall benefits and future-proofing potential. Remember, this is not a one-size-fits-all recommendation. Your personal circumstances, your readiness, and your work experience can come into play in making this decision. It’s best to consult a professional CPA Canada exam coach before making this decision.

Extra resources

Extra Day 1 resources are available at CFE Review courses.

Let’s face it, time management is one of the biggest challenges when to comes to passing CPA Canada’s CFE.  Inevitably, you may be wondering whether you can “skip” some AOs and still pass CFE. Let’s take a look at this strategy in this post.

Understanding AOs in the CFE Days 2/3

The CFE is marked on a curve, which means the passing threshold is adjusted based on average performance. Over the span of two critical days – CFE Day 2 and Day 3 – you’ll get a total of 31-32 AOs. Specifically, Day 2 usually has 13 AOs, while Day 3 usually has 18-19 AOs.

31-32 AOs is a lot. The ideal scenario is to cover all AOs (don’t miss any), but due to time constraints, slow typing speed, or unforeseen issues, it might become necessary to prioritize certain AOs over others and “skip” some.

The Art of Prioritizing AOs

In Day 2, you must get Cs on your role AOs and either FR or MA. You don’t need Cs in all AOs, but you need it in the majority of your role and FR or MA. Note that RC won’t help you,  it has to be Cs.

As such, I suggest that you “target” either FR or MA and make sure you get the Cs (either FR or MA). Additionally, study your role really well and ensure you get at least 4-5 Cs in your role .

In Day 3, you should  get a mix of Cs and RCs, aiming to get Cs in FR or MA, depending what you decided to target in Day 2. For example, if you’re targeting FR, then aim to get Cs on FR in Days 2 and 3. This means, in Day 3, you should rank and write FR ahead of other AOs. 

How many AOs can you skip?

As noted, you should try not to skip any. However, if you have to, then:

• Day 2: You can potentially miss maximum of 2 AOs. Preferably, these missed AOs should be from the FR/MA area that you’re not targeting. For example, if you’re targeting to get Cs in FR, then you could skip 2 MA AOs.
• Day 3: You can potentially miss up to 3 AOs. I recommend missing your role AOs. For example, if your role is Assurance, you can miss 3 Assurance AOs, because you already received Cs on it in Day 2.

How many Cs do you need?

As a rough guideline, I recommend getting the following at the minimium:

• FR or MA: Get 3-5 Cs in FR or MA (not combined), in Days 2 and 3 together. For example, 2 Cs in FR in Day 2 and 2 Cs in FR in Day 3 for a total 4 Cs. 
• Role: Get 4-5 Cs in Day 2 role.
• Day 3: Get a mix of Cs and RCs, with max. 3 NC/NAs.

Conclusion

Remember, these are guidelines, not hard and fast rules. Each CFE passing threshold is adjusted based on average performance and ideally you should attempt all AOs. Your success depends on comprehensive preparation, understanding of technicals, and good time management skills.

Stay connected with me for more advice and insights on acing your CPA exams.

Extra resources

Extra resources are available at CFE Review courses.

As you’re preparing for CPA Canada PEP and CFE exams, you may be wondering about variances between Accounting Standards for Private Enterprises (ASPE) and International Financial Reporting Standards (IFRS). This post will summarize financial reporting standards that have similarities.

ASPE vs IFRS: Converged

The following standards are converged (exactly the same):

• Inventories IAS 2 / ASPE 3031

ASPE vs IFRS: Minor differences

The following standards have minor differences:

• Intangible assets: IAS 38 / ASPE 3064
• PPE: IAS 16 / ASPE 3061
• Business combination: IFRS 3, 10 / ASPE 1582, 1591

Others

All other standards have major differences and should be studied separately. The above can be grouped and studied together since they are similar.

Extra resources

Easy to read summaries of ASPE and IFRS standards are available here.

A frequent obstacle for students preparing for CPA Canada’s PEP and CFE exams is whether is an AO needs need to be discussed both quantitatively (quant) and qualitatively (qual), or just quantitatively (quant). Here’s my strategy on approaching these AOs correctly.

How to tell if both quant and qual are needed?

There are two triggers that you can use to find out whether you need to write quant, qual or both:

1. The way required is phrased.
2. Information in the appendix.

Let’s take a look at these one by one.

Look at the required’s wording

The phrasing of the required is a hint how to approach it. For example, if it says: “Please prepare a quantitative analysis and provide a recommendation”, then it’s quants only.

If it says: “Please prepare a qualitative analysis and provide a recommendation”, then it’s qual only.

When it says: “Please prepare a quantitative and qualitative analysis, and provide a recommendation.”, then it’s both.

Below is an example from CFE W2C case where they requested both:

Clearly, both quant and qual are needed.

Look at the information in the appendix

Second trigger is the type of information provided in the appendix. If the appendix contains qual data, it’s a clear hint that qual information should be incorporated into the analysis.

For example, below is a case with make vs. buy required:

The required is ambiguous and doesn’t tell us if we need quant, qual, or both. So we’ll look at the Appendix:

The first part has lots of numbers, which we’ll use for quants. The rest of the appendix is full of words such as: extremely strong, impossible to break, safer, long lasting, survey.

These are all qual terms, so the only possible reason they’ve given this information is to have us prepare a qual analysis.

Conclusion

In summary, if the required says “quant and qual,” or the information in the appendix has qual items, then you need to perform both quant and qual. However, if the required explicitly asks you not to perform qual, or there are only numbers in the appendix, then perform quants only.

Extra resources

Extra resources are available at PEP and CFE Review courses.

The CPA Canada PEP and CFE exams are designed to assess your in-depth understanding of various financial reporting standards, including IFRS 15: Revenue from contracts.

Common challenge for candidates in addressing IFRS 15 AOs is whether Step 1 needs to be discussed in detail. Sometimes, a simple statement such as: “Contract has been approved by both parties” suffices. However, in other solutions, you’ll see the answer go into depth of 5 sub-steps outlined in IFRS 15.

So what is the correct approach?

Understanding IFRS 15

First, we must understand the basics of IFRS 15. This standard is divided into 5 steps:

1. Identify the contract with a customer
2. Identify the performance obligations
3. Determine the overall transaction price
4. Allocate the transaction price to the performance obligations
5. Recognize revenue as the entity satisfies a performance obligation

Step 1 is further divided into 5 sub-steps (sub-criteria) that a contract must meet to qualify for revenue recognition:

1. Contract has been approved by the parties involved.
2. Each party’s rights in relation to the goods or services to be transferred are identifiable.
3. The payment terms for the goods or services to be transferred can be identified.
4. Contract has commercial substance.
5. It is probable that the entity will collect the consideration

Going through each of the sub-steps will take valuable case writing time. However, they are part of the standard and can’t be omitted. So what do we do?

Should you discuss the 5 sub-steps?

I recommend listing the IFRS 15 Step 1 sub-steps, but don’t discuss them one-by-one. Instead, at the end, say “MET” or “NOT MET” and explain why. For example, take a look below how CFE 2019 Elcar case handled it:

You can see it listed the Step 1’s sub-steps, then analyzed everything in one shot at the end. This is an effective way to approach IFRS 15 since it follows the standard accurately and saves case writing time.

Furthermore, the CPA Canada Feedback Guides don’t put emphasis on Step 1 of IFRS 15. Instead, Step 2 and Step 4 are the most important

As such, we must spend most of our time analyzing steps 2 and 4.

Extra resources

Extra resources are available at PEP and CFE Review courses.