EXAMINERS’ COMMENTS ON THE PERFORMANCE OF CANDIDATES

PAPER – 1 : FINANCIAL REPORTING

Specific Comments
Question 1.(a) Most of the examinees have correctly calculated the amortisation amount
for original life of the asset but some of the examinees failed in the calculation of
amortisation amount for additional life.
(b) Some of the examinees erred in the calculation of the cost of production on account of
allocation of fixed overheads where actual and rated productions were different. Many
students have failed to calculate the fixed overheads correctly.
(c) Most of the examinees have done the workings on piecemeal basis. They were not
able to present the answer as per the disclosure requirements given in the standard.
(d) A few examinees stated that discount can be adjusted against the sale value in the first
part of the question.
Question 2. Some of the examinees erred in arriving the purchase consideration of Hind
Ltd. and consequently made mistake in the calculation of goodwill and capital reserve.
Some of the examinees added 100% value of the assets and liabilities of joint venture entity
to the respective assets of the entity preparing the e consolidated balance sheet, instead of
50%.
Question 3.(a) Some of the examinees did not split the interest strip and service asset
while left out the apportionment of the carrying amount.
Question 4.(a) Examinees were not able to segregate correctly the principal and interest
portion (using IRR) within the instalment amount. Due to this wrong calculation, other two
requirements could not be found out correctly.
(b) Many examinees failed in the correct calculation of asset backing position and payout
ratio. Therefore, they were not able to arrive at probable market value of the equity shares
correctly.
Question 5.(a) A little of the examinees erred in the calculation of change in the market
share of S Ltd.
(b) Majority of the examinees committed mistake in calculating the difference in valuation
had there been no merger. This requirement was overlooked by most of them. Some of the
examinees had not correctly found out the valuation of Children Wear Ltd ignoring merger,
which was also part and parcel of the answer.
Question 6. Most of the examinees erred in the calculation of exchange rate variation of
receivable and its tax effect. This led to wrong calculation of capital employed, future
maintainable profit and ultimately goodwill.

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Question 7.(b) Most of the examinees have not discussed the applicable AS and failed to
draw their conclusion correctly.
(c) Most of the examinees overlooked the second part of the question i.e., remaining
balance at the end of 8th year and hence left it unanswered.

PAPER  2: STRATEGIC FINANCIAL MANAGEMENT

Specific Comments
Question 1.(a) The overall performance of the candidates in this question was poor to
moderate. Though most of the candidates have correctly calculated current portfolio beta but
could not calculate portfolio beta after four months. It seems that concept of beta is not clear
to most of the candidates.
(b) In this question, overall performance was average. Earnings per share were calculated
correctly by almost all the students. However, while answering the question they failed to
mention that dividend payout ratio is 1.8 or 180%. They left the question with putting values in
the formula.
(c) In this question, overall performance was poor. Several students attempted to arrive at
the present value of project instead of present value of put option.
(d) Overall performance in this question was average. Many candidates showed lack of
conceptual clarity in withholding tax. The common mistake committed by candidates was to
arrive at the manpower cost at ` 34.56 crore due to wrong calculations or assuming 365 days
in a year in spite of clear assumption of 360 days mentioned in the question. Further, few
candidates have wrongly assumed the revenue in India on the basis of $240 lakhs.
Question 2.(a) In this question, overall performance of the candidates was poor. Only a few
candidates could correctly give the amount of Dirty price adding accrued interest to Clean
Price.
(b) In this question, overall performance was good. Majority of the candidates attempted the
question very well except few which could not answer correctly the concluding part of
Standard Deviation due to lack of conceptual knowledge about Standard Deviation.
(c) In this question, overall performance was average. Cost of funds available by issue of
commercial paper for 4 months (net of tax) could not be answered correctly. Few candi dates
have even applied tax shield to minimum retained balance of Rs. 2 lakh instead of only
opportunity cost i.e. loss of interest gross or net of tax adjustment.
Question 3.(a) The question has been well attempted by most of the candidates and turned
out to be a good scorer. However, following observations were noted in the answers of many
candidates:
 Few candidates have assumed depreciation even in case of lease option and considered
tax shield both for lease rent and depreciation leading to wrong concl usions.

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 Few candidates have assumed cash inflow at par with WDV and adjusted the cash out
flow accordingly.
(b) Overall performances in this question was very good. Only few candidates calculated
wrongly, the conversion premium taking Rs. 100 as base price, few also adjusted dividend
distribution taxes to arrive at EPS. Even few candidates assumed the earning before tax.
Question 4.(a) In this question, overall candidates have performed above average. In some
cases instead of considering the year 2012 as base year assuming average base for the year
leading to wrong answers. Most of the candidates could not conclude the answer with analysis
and observation.
(b) Overall performance of the candidates in this question was average. However, few
candidates attempted the question based on existing turnover of Rs. 1600 lakhs and ignored
expected growth @ 17.90% i.e. increased sale at Rs. 1886.40 lacs leading to incorrec t
answers.
Question 5.(a) In this question, overall performance was well. Few candidates have
committed mistakes in calculation of portfolio beta ignoring correlation.
(b) In this question, overall performance was very good and proved to be a boon for t he
candidates. Though some candidates have shown bad debt provision of Rs. 5 lakhs in liability
side and Gross debtors of Rs. 50 lakh on assets side. Some candidates instead of arriving at
net capital reserve of Rs. 165 lakhs consequent to reconstruction scheme arrived at reserve
under separate heads like revaluation reserve, revenue reserve and general reserve.
Question 6.(a) Overall performance in this question was good. Some candidates were
confused in working out the cost of cancellation. Further, to calculate the cancellation spot
rate instead of deducting the margin they added the same and for new for forward booking the
premium was not considered correctly.
(b) In this question, overall performance was good. Few mistakes have been committed by
candidates as they considered the face value of shares instead of book value as per balance
sheet. In some cased they also ignored the weightage of different parameters or even
considered parameters on reverse basis (especially in case of Gross NPA) hence lead ing to
wrong calculations.
Question 7.(a) In this question overall performance was good as most of candidates knew
what makes an organization financially sustainable.
(b) Overall performance was average. Though most of the candidates tried to explain th e
difference between cash and derivative contracts but could not properly explained the
technical aspects both in terms of motive and risk involved.
(c) Overall candidates have performed below average in this part of the question. Only few
candidates have covered both External and Internal Exposure and Strategies to tackle the
exposures.

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(d) Overall performance was average. The candidates gave a very general and vague
answer while explaining simulation analysis and its benefits.
(e) Only a few candidates could explain how synergy shall be helpful in effective financial
policy decisions and strategic management decisions to achieve sustainable growth.
Therefore, overall performance was of average level.
In general, it has been observed that answers of theoretical questions contain poor
expression, irrelevant details and repeated points.

PAPER – 3 : ADVANCED AUDITING AND PROFESSIONAL ETHICS

Specific Comments
Question 1.(b) When the Parent’s Auditor is not the Auditor of all its Components:
Though the candidates mentioned that the auditor of the consolidated financial statements
should consider the requirement of SA 600 “Using the Work of Another Auditor”, majority of
them were unaware of how the Consolidated auditor’s report should take care on disclosure
regarding the magnitude of the portion of the financial statements audited by other auditors.
(c) Consolidation of Financial Statement of a Subsidiary: Most of the candidates
mentioned that as per section 129(3) of the Companies Act, 2013 where a company having
subsidiary, which is not required to prepare consolidated financial statements under the
Accounting Standards, it shall be sufficient if the company complies with the provisions on
consolidated financial statements provided in Schedule III to the Act. Only few candidates
referred to AS 21 and AS 13.
Question 2.(a) Audit Plan for Evaluating the Reliability of Controls in CIS Environment:
Candidates have discussed the audit plan for evaluating the reliability of controls in a general
manner. Some Candidates have written about types of Controls viz, Input control, Output
control, Processing controls rather than specific answer namely Preventive controls, Detective
controls, Corrective controls.
(c) Sample Selection: Candidates failed to emphasize how the statistical and non-statistical
methods of sampling are useful to the auditor in selecting sample items to be representative of
the population.
Question 3.(a) Principal Method of Design of Samples: Majority of the candidates seem not
to have understood the requirement of the question on the aspects to be considered by auditor
in designing the sample and evaluating the results; rather their answers were concentrated
mainly on the principal methods of sampling.
(b) False Declaration as Authorized Representative: Candidates showed lack of
knowledge on liability of Chartered Accountants acting as authorised representative and
delivering false information under section 278 of the Income Tax Act, 1961 and most of them
mistakenly related with professional misconduct under the Chartered Accountants Act, 1949.

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(c) Report on the Description, Design and Operating Effectiveness of Controls at a

Service Organization: Even though candidates referred SAE 3402 / SA 402, they were not
aware of the aspects that will be covered in the audit report on controls at a service
organization.
(d) Specific Matters included in an Auditor’s Report in the case of a Non-Banking
Financial Company: Majority of candidates failed to discuss the disclosure of Capital
adequacy ratio /risk asset ratio in respect of Systemically Important Non-deposit taking
NBFCs.
Question 4.(a) Duties & Responsibilities of an Auditor in case of Material Misstatement
resulting from Management Fraud:. Majority of candidates correctly discussed SA 240,
Reporting as per section 143(12) of the Companies Act, 2013 and Clause (x) of Paragraph 3
of CARO, 2016. Some candidates failed to discuss when an auditor encounters exceptional
circumstances that bring into question the auditor’s ability to continue performing the audit as
a result of a misstatement resulting from fraud.
(b) Auditor’s Responsibility Paragraph in Audit Report: Many candidates were able to
highlight only few matters included in Auditor’s Responsibility paragraph. Some candidates
unnecessarily discussed about Management’s responsibility instead of Auditor’s responsibility
(c) Main Phases in the Conduct of Risk Based Audit: Many candidates misunderstood
the question and explained wrongly the types of audit Risk viz., Inherent Risk, Control Risk,
Detection Risk instead of explaining the phases in the conduct of Risk based audit.
Question 5.(a) Key Function of Energy Auditor: Few candidates wrongly mentioned
environmental audit aspects instead of energy audit while few candidates discussed about
technical aspects of energy audit like consumption rate, distribution and source of energy,
ratio of consumption etc., which was not required.
(b) Tolerable Misstatement & Tolerable Rate of Deviation: Many candidates wrongly
mixed up Material misstatement with Tolerable misstatement. Answers were general in nature
and many candidates failed to narrate the Tolerable misstatement and Tolerable rate of
deviation
(c) Tax Audit Report: Majority of candidates failed to discuss the circumstances in which
Form 3CA and Form 3CB are furnished by a Tax auditor. Some candidates wrongly discussed
the relationship between the statutory auditor and tax auditor and concluded wrongly that Tax
auditor has to wait till statutory audit is completed. It seems that Candidates failed to
understand the requirement of the question.
(d) Title deeds of Immovable Property in the name of Bank: Majority of the Candidates
failed to discuss the audit procedures and manner of reporting even though they have
mentioned the relevant clause of CARO, 2016.
Question 6.(a) Printing of QR Code on Visiting Cards: Candidates wrongly mentioned
Clause (6) Part I of First Schedule instead of Clause (7) of Part I of First Schedule to the
Chartered Accountants Act, 1949.

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Question 7.(a) Auditor’s Right to Lien as per the Companies Act, 2013: Many candidates
explained Right of Lien of Auditors in a general manner but most of the candidates failed to
explain the Auditor’s Right to Lien in the context of Companies Act, 2013. Few candidates
wrongly mentioned Rights of an auditor which was not required.
(b) Proper Books of Account as per the Companies Act, 2013: Many Candidates failed to
explain the provisions of section 143(3)(b). Few candidates laid stress on various books of
account, records and document as per section 2(13).
(d) Inquiry: Many candidates mentioned various methods of collecting Auditing Evidence
which is not required. Most of them failed to mention about auditor’s role in evaluating the
Responses to Inquiry; rather they discussed other irrelevant matters without knowing the exac t
requirements of SA 500, “Audit Evidence”.

PAPER – 4 : CORPORATE AND ALLIED LAWS

Specific Comments
Question 1.(a) Performance of the candidates was satisfactory. Most of the candidates have
answered referring to the provisions of Section 138 of the Companies Act, 2013 and Rule 13
of the Companies (Accounts) Rules, 2014.
(b) Performance of the candidates was satisfactory. Most of them have correctly stated the
provisions of Section 161(1) of the Companies Act, 2013, regarding appointment of additional
director and only some of them have referred the provisions of Section 96 of the Companies
Act, 2013.
(c) Performance of the candidates was satisfactory. The question dealt with the issue of
women director as contained in section 149 of the Companies Act, 2013.
(d) Performance of the candidates was below average. The question was based on section
66 of the Competition Act, 2002. Only a few candidates could answer it correctly.
(e) Performance of the candidates was below average. Being the latest amendments
included in the supplementary study material of ICAI, many students were not aware of
Regulation 4 of the SEBI (ICDR) Regulation, 2009, hence the performance was below
average.
Question 2.(a) Performance of the candidates was most satisfactory. Most of the candidates
have stated in brief the provisions of Section 124 of the Companies Act, 2013 correctly but
many of them could not clarify the penal provisions in case of default in not transferring the
dividend amount.
(b) The answer given by most of the candidates was of general nature without stating the
provisions of Section 452 of the Companies Act, 2013. Therefore, the performance was below
average.

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(c) Performance of the candidates was average. Most of the candidates did not attempt the
part of the answer relating to receipt of advance amount against export as given under Section
6 of FEMA.
Question 3.(a) Performance of the candidates was good. Most of the candidates answered
stating the provisions of Section 2 (54) and 196 (4) of the Companies Act, 2013 correctly. But
some of the candidates wrongly understood the question and answered the part relating to
qualifications for appointment as Managing Director instead of procedure of appointment of
Managing Director.
(b) Performance of the candidates was satisfactory. Most of the candidates stated correctly
the provisions of Section 447 and 448 of the Companies Act, 2013 relating to penalty for false
statements.
(c) Performance of the candidates was good.
Question 4. (a) (i) Performance of the candidates was satisfactory. The question was based
on section 218 of the Companies Act, 2013, dealing with the protection of employees during
investigation.
(ii) Performance of the candidates was satisfactory. The question was based on section 219
of the Companies Act, 2013, provides for power of inspector to conduct investigation into the
affairs of related companies etc.
(b) (i)& (ii) Performance of the candidates was most satisfactory. Both the parts are related to
intimation of changes in particulars specified in DIN application based upon Companies
(Appointment and Qualification of Director) Rules,2014 and resignation of directors stated in
Section 168 of the Companies Act, 2013.
(c) Performance of the candidates was good. Most of the candidates stated correctly the
provisions of Section 4 of the Prevention of Money Laundering Act,2002 relating to
punishment.
Question 5.(a) (i) Performance of the candidates was good. This question pertains to Section
118 of the Companies Act, 2013 and it deals with minutes of proceedings of General Meeting.
It also provides certain exemptions to matters for inclusions in the minutes upon which the
Chairman has absolute discretion. These provisions have been correctly stated by most of the
candidates in their answers.
(ii) Performance of the candidates for this part is average. Most of the candidates have
drafted the minutes in general.
(b) Performance of the candidates was below average. The answer to this question is based
upon the provisions of Chapter VI – A of SEBI (Issue of Capital and Disclosure Requirements),
2009 and amended provisions of 2016. Candidates were not having knowledge of the subject
matter in this regard.
(c) Performance of the candidates was satisfactory. The answer given by the candidates
was general in nature.

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Question 6.(a) Performance of all the parts of this question was good. The candidates
answered all the parts pertaining to appointment of an alternative director, a nominee director
to be nominated by financial institution, non – circulation of the proper agenda in the notice of
board meeting and for holding board meeting through video conferencing at a shorter notice.
Most of the students have attempted these parts and secured good marks as they were having
good command over these issues.
(b) Performance of the candidates was satisfactory. A large part of the candidates have
referred the provisions of Section 135 of the Companies Act, 2013 pertaining to CSR.
(c) Performance of the candidates was below average. Most of them could not write
correctly the definition of the terms ‘option in securities’ and ‘spot delivery contract’ stated in
the Securities Contracts (Regulation) Act,1956.
Question 7.(a) Performance of the candidates was satisfactory. Most of the candidates
answered correctly both the parts of the question pertaining to the position of shareholders
after liquidation and the amount to be borne by secured creditors out of the expenses incurred
by the liquidator as asked in the question.
(b) This question has been attempted fairly by most of the students relating to appointment
and re- appointment of technical member in National Company Law Tribunal (‘NCLT’).
(c) Performance of the candidates was good. The candidates have stated the provisions of
Section 244 of the Companies Act, 2013 relating to oppression and mismanagement
specifically and most of them also cited the ratio decidendi of the decided cases correctly.
(d) A Few students have attempted this question and their performance was average. The
question is based on reconstruction scheme of company.
(e) The answer of this question is based upon provisions of Section 13 of the Securitisation
and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002
(SARFAESI). Most of the students could not answer satisfactorily as they were lacking
knowledge of the provisions of SARFAESI Act, 2002.

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