NQF AAT Syllabus Jun2011

8/8/2019 NQF AAT Syllabus Jun2011

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Accredited Accounting TechnicianExamination

Syllabuses effective from the

June 2011 Session onwards


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Detailed competency map:

Knowledge requirements

(AAT examination)


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Fields of competency

The items listed are shown with an indicator of the minimum acceptable level of competency,based on a three-point scale as follows:

1. Awareness

The candidate demonstrates familiarity with the concept in question; can define it inoverview terms and can relate the importance or relevance of the concept to theactivities of an accounting technician.

2. Knowledge

This builds upon awareness. The candidate is able to explain the concept; describe anddiscriminate between its component parts and describe their inter-relationships;recognize instances of the concept; and describe processes, theories and judgementissues; without necessarily being able to perform in those areas with professional skill.

3. Application

This builds upon knowledge. The candidate is able to execute or implement knowledge;apply the knowledge to real world problems in real world situations. In so doing, thecandidate displays to a satisfactory degree of the level of competence reasonably to beexpected of an accounting technician at career entrance level.


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Paper 1: Fundamentals of accounting and computerized accounts

Aim: This paper aims:

(i) to develop and assess candidates knowledge, comprehension and application ofthe basic accounting concepts and principles; including the ability to apply these torecord business transactions; and to prepare and interpret basic financial reports

(ii) to develop and assess candidates ability to use available accounting software torecord business transactions and to generate financial reports

Content (Fundamentals of accounting)

Unit ofcompetency

Activity required to demonstrate competence(Performance indicators)

Level ofcompetence

required

Define accounting 2

Describe the function of both financial and managementaccounting

2

Identify the users of accounting information and theirrespective information needs

2

Understandingof the role ofaccountingwithin abusinessenterprise Explain the qualitative characteristics of accounting

information2

Identify the types of financial statements produced byboth financial and management accounting

1

Describe the purposes of each type of financialstatements

2

Identifying andunderstanding

of the types offinancialstatements andthe purposesof each type

Identify principal types of business activities 2

Explain how each type of business activity is recorded asa business transaction

2

Understandingof therelationshipbetweenbusiness

activities andbusinesstransactions

Describe and classify business transaction into:o assetso liabilitieso equityo revenueso expenses

3

Distinguish between capital and revenue expenditure 2

Explain the profit impact of incorrect classification

between capital and revenue items

2

Understandingof the doubleentryaccountingsystem

Apply the accounting equation (A = E+L) 3


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Understandingof theprinciples ofaccounting

Explain the following accounting concepts, principles andconventions:

o going concerno accrualo consistencyo materialityo prudenceo business entityo accounting periodo historic costo measuremento realizationo substance over form

2

Define non-current assets 2

Explain depreciation and the reasons for providing for it 2

Calculate deprecationdepreciation using various methods 3

Explain the factors to be considered in formulatingdepreciation policy

2

Demonstrate the accounting entries for providingdepreciation charges in depreciation methods, and fordisposing of non current assets

3

Understandingof theaccounting

treatment ofnon-currentassets

Explain and record the revaluation of assets 3

Define current assets 2

Define inventories 2

Explain the difference between perpetual and periodicinventory systems

2

Explain and justify the valuation of inventories at thelower of cost and net realizable value using FIFO, LIFO,and average cost methodologies

2

Prepare the accounting entries for inventory transactions 3

Define receivables 2

Explain bad debts and the provisionallowance fordoubtful debts

2

Understandingof theaccountingtreatment ofcurrent assets

Prepare the accounting entries for receivablestransactions

3

Understandingof the records

of original entry

Describe the functions of the following records of originalentry:

o cash booko petty cash journalo sales and returns journalo purchase and returns journalo general journal

2

Prepare the following records of original entry fromsource records:

o cash booko petty cash journalo sales and returns journalo purchase and returns journalo general journal

3Applying theaccountingequation tobusinesstransactionsand prepare a

trial balance Post journals to general and subsidiary ledgers 3


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Describe the function of control accounts 2

Prepare control accounts for receivables and payablesledgers and control accounts

3

Reconcile control accounts and subsidiary ledgers 3

Explain the purpose of preparing a bank reconciliationstatement

2

Prepare a bank reconciliation 3

Describe types of accounting errors 2

Describe the purpose of a suspense account 2

Prepare journal entries to correct errors 3

Extract a trial balance from ledger accounts 3

Applyingperiod endadjustments

Prepare the accounting entries for the following periodend adjustments:

o accrued expenseso prepaid expenseso inventory

o depreciationo bad/doubtful debtso income in arrears/in advance

3

Identify the incomplete information for preparation offinancial statements

3Preparingfinancialstatementsfromincompleterecords

Using substitution technologies, prepare financialstatements from available information

3

Define a sole trader and prepare a trading and profit andloss accountstatement of comprehensive income and abalance sheetstatement of financial position from a trialbalance for a sole trader

3

Explain the characteristics of clubs and societies andprepare a receipts and payments account, an incomeand expenditure account, and a balance sheetstatementof financial position for a club or society

3

Understandingof accountingfor, andpresentationof financialstatements forvariouscommon typesof businessentity

Explain the characteristics of a partnership and preparean income a statement of comprehensive income, anappropriation account and a balance sheetstatement offinancial position for a partnership incorporating: interest

on partners capital; partners salaries; interest onpartners drawings; sharing of profits and losses:

o distinguish between and prepare partners capitaland current accounts

o record admission and retirement of partners andprepare the balance sheetstatement of f inancialposition for a new partnership

o describe the nature of partnership goodwill andexplain its accounting treatment

o record dissolution of partnership and preparerealisation account

3


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Explain the characteristics of a limited liability company and:o explain the nature and purpose of share capital

reserves and debentureso record the issue of shares and debentureso record interim and final dividendso prepare an income statement, appropriation

account and balance sheet a statement ofcomprehensive income and a statement offinancial position

3

Explain the characteristics of a manufacturing businessand:

o prepare a manufacturing account and an incomea statement of comprehensive income showingprime cost; cost of goods produced; transfer priceof finished goods

o prepare a balance sheetstatement of financialposition

o calculate the unrealized profit on finished goodso Demonstrate the accounting entries for removing

unrealized profit on finished goodso explain the usepurpose of transfer prices for

goods transferred from a factory to a warehouse

3

Explain the use of ratio analysis 2

Calculate the following ratios:o gross margino net margino return on owners equityo return on capital employedo current turnoverratioo currento quick (acid test) ratioo inventory turnovero debtors collection periodo creditors repayment periodo gearing ratioo interest covero dividend covero dividend yieldo earnings per shareo price earnings ratio

3

Analyzing andappraisingfinancialstatements

Demonstrate the significance of, and reasons for,changes in ratios over time; and differences in ratiosbetween entities; in respect of:

o profitabilityo short term liquidityo long term solvencyo return on investment ratioand risk

3


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Content (Computerized accounts**)

Unit ofcompetency


Level ofcompetence

required

Set up information relating to entity 3

Create master files 3

Create a chart of accounts 3

Create and input opening balances 3

Establishing asimpleaccountingsystem usingavailableaccountingsoftware

Create the following files and accounts:o new general ledger accountso new customer/supplier fileso new inventory itemsa non-current asset register

3

Recording and

processingdata usingavailableaccountingsoftware

Record and process the following business transactions:o sales and returnso purchases and returnso receiptso paymentso accounts receivable and accounts payableo inventory inwards and outwardso accruals, prepayments, depreciation,

provisionallowance for doubtful clientsdebts,taxation, error corrections

o detailed non-current asset informationo purchase and disposal of non current assets

3

Producingrelevantaccountingreports andfinancialstatementsusingavailableaccountingsoftware

Produce the following accounting reports and financialstatements:

o chart of accounto sales analysis, sales journalo purchases analysis, purchases journalo receipts and payments analysiso general journalo bank reconciliationo general ledgero trial balanceo

inventory analysiso receivables / payables ageingo debtors statementso history and balance of accounto customer/supplier transaction detailso transactions of a particular type for a given periodo fixed assets register (including details of additions

and disposals)o profit and loss account, balance sheet, cash flow

statementstatement of comprehensive income,statement of financial position, statement of cashflows

3


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Identify potential risks 2

Describe actions to mitigate risks identified 2

Understandingof risksinherent inusingavailableaccountingsoftware forproducingaccountingreports andfinancialstatements

**MYOB Premier Plus v13 will be used for Paper 1 Computerized Accounts section starting from theJune 2011 examination session.


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Paper 2: Business communication and organization and management


(i) to develop and assess a broad range of skills used to communicate effectively inbusiness situations

(ii) to introduce candidates to the basic principles of management, develop a basicunderstanding of business structures, and the operation of the various functionalunits within organizations

Content (Business communication)

Unit ofcompetency


Level ofcompetence

required

Define communication 1

Identify the elements in the communication process:o sendero messageo encodingo channelo receivero decodingo feedback

1

Understanding ofthe basicconcepts ofcommunication

Describe the importance of the you-attitude:o differentiate between the you-attitude and the I-

attitudeo describe how to develop the you-attitude

2

Distinguish between the different means ofcommunication:

o readingo writingo speakingo listening

2Understanding ofthe differentmeans ofcommunication

Compare the advantages and effectiveness of the fourtypes of communication

2

Identify the common barriers that impedecommunication:

o barriers in the world around uso barriers between peopleo barriers made by wordso barriers caused by cultural differences

1Understanding ofeffectivecommunicationtechniques

Explain how effective communication can be achieved:o create a favourable environmento observe the dress codeo use a proper channelo understand the audiences background

o organize thoughts/ideas logicallyo focus on specific topics

2


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o encourage feedback from the audience

Discuss Maslows Hierarchy of Needs 1

Identify the various sources of written materials 1Recognizing ofthe source ofwritten materials

Develop the ability to extract relevant information froma wide range of documents and resources

3

Understanding ofthe forms ofcommunicationwithin anorganization

Explain the different forms of communication:o internal and externalo verbal and writteno upward and downwardo vertical and lateral

3

Explain and demonstrate the stages in the writingprocess:

o brainstorming

o defining goals and audienceo conducting researcho planningo draftingo revisingo proof-reading

3

Identify and eliminate common problems in writing:o wordinesso the overuse of passive sentenceso excessive use of s and commaso choppinesso subjectivityo negativityo clichso lack of variety

3

Apply unity and clarity in writing effective sentences 3

Understandingthe writingprocess

Explain the rules of paragraphing and use topicsentences in writing clear paragraphs

3

Demonstrate knowledge of business jargon andabbreviations

3

Discuss the advantages and disadvantages ofpresenting information from diagrams, charts, tablesand graphs in writing

2

Ability tocompose clear,concise andprofessionalbusiness writing

Use an appropriate tone:o the four Ps:

personal/polite/positive/professional

3

Ability to conveyaccurate andconcreteinformation inwritten businesscommunications

Discuss and distinguish the differences between thefollowing business communication:

o business lettero memoo agenda/minuteso reporto proposal

o e-mailo fax message

2


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Demonstrate clear understanding of the definition andapplication of the various jargon in the above businesscorrespondence

3

Explain the nature and features of business letters:o enquiry lettero letter of requesto letter placing an ordero collection lettero sales and promotion lettero complaint lettero letter of recommendationo letter of appreciationo letter of congratulationso letter of condolence

3

Distinguish the tone and format of the above types ofletters

3

Compose effective and concise written documents andcorrespondence

3

Writing differentforms of externalbusinesscommunicationeffectively

Prepare responses for the following businesscorrespondence:

o enquiry lettero letter of requesto letter placing an ordero complaint order

3

Discuss the nature and needs for writing the variouskinds of documents for internal communication:

o memorandumo agenda and minuteso reporto proposalo notice

2

Discuss the degree of formality used in a memorandum 2

Write clear and effective memorandums for routineenquiries, responses, policies, directives and indirectmessages

3

Writing effectiveinternal businesscommunication

Describe facts and incidents concisely and clearly 3

Define the purpose of a report 1

Distinguish between the various kinds of reports:

o formal/informal reporto long/short reporto proposalo recommendation reporto evaluation report

1

Outline the report-writing process and explain theimportance of objectivity in report writing

2

Producing short

reports that areinformative,accurate andtimely

Prepare a complete report:o identify the different styles of report and the

features in a reporto understand the pros and cons of including

diagrams, pictures, data, tables in a reporto discuss the importance of design and layout of a

3


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reporto gather and select information and summarize

relevant data from research materialo evaluate the quality of the report

Explain the functions of a meeting/conference 1

Describe the process for calling a productive andeffective meeting

1

Identify the features of a meeting:o peopleo purposeo venue

1

Prepare an agenda and minutes 3

Consolidate materials into effective, concisepresentation materials for the meeting

3

Describe the problems of a meeting:o group-think

o hidden agendao interpersonal conflicts

2

Understanding ofthe nature andrequirements fora businessmeeting

Evaluation the quality and effectiveness of a meeting 3

Content (Organization and management)

Unit ofcompetency


Level ofcompetence

required

Describe the various levels of management and thefunction and inter-relationship of each

2

Outline alternative approaches by management toproblem solving and decision making

23

Describe and distinguish the various types and levels ofplanning undertaken by organizations

23

Describe the concepts of authority, accountability andresponsibility

12

Describe the basic elements of organization design andthe advantages/disadvantages of differing structures

12

Knowledge ofthe importanceof effectiveorganizationalmanagement toachieve theaims of anorganization

Identify common quality management techniques 1

Describe the need for control in organizations 12

Describe the characteristics of effective control systemsin organizations

12

Explain financial and non-financial methods of control 12

Knowledge of

thecharacteristicsof effectivecontrol systemsin organizations

Define marketing 12

Define and understand the relationships between:o segmentationo targetingo positioning

12

Understandingof the basicconcepts ofmarketing andmarketing mix

Understand the different marketing mix:o producto price

12


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o placeo promotion

Identify the different types of research data 12

Describe the steps in the market research process 12

Knowledge ofmarket researchtools

Explain how businesses analyze and use marketinginformation 23

Describe the key elements of products and operationsmanagement

2

Explain the role of strategic production analysis 2

Describe the concept of total quality management 2

Understandingof the keyelements ofproduction andoperationsmanagement ina manufacturingbusiness

Describe the distinctive features of a serviceorganization

12

Explain the importance of strategic planning in serviceorganizations

2

Understandingof the keyelements ofmanagement ina serviceorganization

Describe the importance of service quality2

Explain the critical role of financial management in theoverall management of an organization

23

Explain the key financial decisions an organizationneeds to make

23

Describe different forms of financial planning andsources of finance

12

Understandingof the role offinancialmanagement inorganizations

Explain the role of the accounting function in relation tofinancial analysis, reporting and control

2

Explain the importance of human resource management 12Understandingof the role of thehuman resourcemanagementfunction in anorganization

Describe:o staff planningo employee recruitmento selectiono inductiono training

o developmento appraisal

12

Describe the importance and relevance of conductingbusiness across national borders

12Understandingof the uniquecharacteristicsof internationalbusiness

Explain the unique characteristics of internationalbusiness:

o regulatory requirementso terminologyo cultural diversity

2


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Paper 3: Management accounting

Aim: This paper aims to develop and assess the understanding of both the principles of costand management accounting and the application of these principles

Content

Unit ofcompetency


Level ofcompetence

required

Explain and differentiate the purposes of costaccounting, management accounting and financialaccounting

2

Appreciate the role of cost accounting in amanagement information system

1

Comparing cost,management andfinancialaccounting

Appreciate the importance of financial and non-financial information for planning, control anddecision-making purposes

1

Recognize the variety of cost units, cost centres andprofit centres

1

Understand the nature and purpose of costclassification

1

Appreciate the importance of cost accumulation 1

Differentiate between direct and indirect costs; fixedand variable costs; period and product costs;controllable and uncontrollable costs; avoidable and

unavoidable costs; etc

2

Identify cost classification for decision-making andplanning

2

Appreciate cost behaviour patterns including linear,curvi-linear and step functions

1

Understanding ofcost classification,cost concepts,and costingterminology

Appreciate the importance of unit costs for bothfinancial and management decision making

1

Describe the methods and procedure of store-keeping, stocktaking and inventory control

2

Explain and illustrate the perpetual inventory system

and its procedures documentation

2

Understanding ofmaterials cost asan element of

finished goods Explain and illustrate the methods available for pricing

stores issues and for inventory valuation2

Appreciate the basic features and functions of directand indirect labour costs

1

Explain the impact of different remuneration methodson the cost of f inished goods

2

Understanding oflabour cost as anelement offinished goods

Appreciate the process of labour cost accounting 1


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Appreciate the nature of overhead costs 1

Explain and illustrate the problems and procedures ofidentifying, analyzing, allocating and absorbingoverhead costs

2

Explain the different bases for overhead absorptionrates

2

Compute overhead absorption rate 3

Differentiate and calculate plant-wide overhead ratesand departmental overhead rates

3

Understanding ofoverhead costs asan element offinished goods

Explain and illustrate the principles and methods oftreatment of under and over-absorption of overheadcosts

3

Explain the flow and accumulation of costs whenusing job costing

2

Describe the purpose and content of a job cost sheet 2

Understanding ofjob costing

Demonstrate the methods for accumulating costs for

products and services

3

Identify appropriate units for accumulation of controlcosts

1

Demonstrate the preparation of a control cost account 3

Explain the treatment of profit/loss on contractsincluding uncompleted contracts

2

Understanding ofcontract costing

Demonstrate the accounting entries used inaccumulating costs under contracts

3

Demonstrate the application and identification of cost

units

3

Demonstrate the accounting entries and specialfeatures of process cost accounts

3

Explain and determine the equivalent units and costper equivalent unit

3

Demonstrate how costs are assigned to equivalentunits using process costing

3

Demonstrate the cost accounting methods used incost processes, process losses and work in progress

3

Understanding of

process costing

Explain the difference between joint product and by-product costing

2

Define activity cost pools and provide examples 1 Compare and illustrate ABC and traditional product

costing systems2

Demonstrate how activity bases are used to assigncost pools to units produced

3

Outline the benefits and limitations of ABC 2

Understanding ofthe principalfeatures of activitybased costing(ABC)

Explain the differences between, and the effect of,using full absorption costing, marginal costing andactivity based costing for the allocation of costs toproducts

3


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Paper 4: Business economics and financial mathematics

Aim: This paper aims

(i) to develop and assess the understanding candidates have of the basic principles ofeconomics in relation to the economic management of the Hong Kong SpecialAdministrative Region (HKSAR) and other countries

(ii) to introduce candidates to, and assess their understanding and application of, thebasic principles and techniques of business mathematics used in making decisionsand inferences in the business world

Content (Business economics)

Unit ofCompetency

Activity Required to Demonstrate Competence(Performance Indicators)

Level ofCompetence

Required

Describe the economic concepts of:o scarcityo choiceo opportunity costo allocation of resources

1Understandingof the principalfeatures of theeconomicenvironment inwhich businessoperates

Describe and differentiate the concepts of marketeconomy, planned economy and mixed economy

2

Explain demand, supply, market equilibrium and priceelasticity

2

Identify instances in the HKSAR economy of demand,supply, market equilibrium and price elasticity in action

2

Explain the theory of production and identify conceptsof:

o cost/revenue determinationo diminishing returnso economies of scaleo long and short run productiono factor market and income distribution

2

Describe and relate to HKSAR, the 4 types of marketstructure and the respective profit maximizationstrategies:

o monopolyo oligopolyo perfect competitiono monopolistic competition

2

Using economictheory to

understand theworking ofHKSAR andother economies

Describe and be able to identify with the HKSAReconomy, the behaviour of consumer demand underthe assumption of utility maximization

2

Describe:o market and economic efficiency

o market failureo public policies

2


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Explain the circular flow of income 2

Describe measures of economic activity 2

Describe the concepts of investment, consumption, andsavings

2

Describe how fiscal and monetary policies achieve

macroeconomic goals

2

Describe the causes of unemployment, inflation, andeconomic growth

2

Describe the difference between free trade andprotectionism

2

Understandingofmacroeconomictheory and itsimpact on theeconomicpolicies ofHKSAR

Describe both the processes for, and importance of,managing:

o exchange rateso balance of paymentso international trade

2

Content (Financial mathematics)

Unit ofcompetency


Level ofcompetence

required

Understanding ofthe principalconcepts used infinancialmathematics

Calculate and explain the use of:o simple interesto compound interesto net present valueo internal rate of returno

annuities

3

Describe the following statistical terms:o descriptive statisticso inferential statisticso sampleso parameterso census

2

Describe the process of statistical analysis 2

Understanding ofthe principalconcepts used instatisticalanalysis

Describe and use the following sampling techniquesand identify the advantages, disadvantages anddifferences between each:

o convenience samplingo judgement sampleso quota samplingo simple random samplingo systematic random samplingo stratified random samplingo cluster random sampling

3


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Paper 5: Principles of taxation

Aim: This paper aims to develop and assess both the understanding of the fundamentalprinciples of Hong Kong taxation and the application of those principles

Content

Unit ofcompetency


Level ofcompetence

required

Distinguish between different classifications of taxes 1

Describe the characteristics of the Hong Kong taxationsystem

1

Describe the sources of Hong Kong tax law and howthe tax statutes are interpreted

1

Describe the functions of different units of the InlandRevenue Department

1

Describe the structure, powers and functions of theBoard of Inland Revenue

1

Describe the structure, powers and functions of theBoard of Review

1

Understanding ofthe operation ofthe Hong Kongtaxation systemand the

chargeability toHong Kongincome tax

Describe and distinguish the scope of charge ofdifferent sources of income tax:

o property taxo salaries taxo profits tax

2

Identify the persons and properties subject to propertytax

2

Compute the assessable value and net assessablevalue

3

Compute the amount of property tax and provisionalproperty tax

3

Distinguish the circumstances where income fromletting of property is subject to property tax or profits tax

2

Understanding ofthe computationof property taxliabilities ofowners ofland/buildingssituated in HongKong

Explain the statutory requirements of retention of rentrecords

2

Describe the factors to be considered in determining thelocality of income of:

o employmento officeo pension

2

Distinguish between employment and profession 1

Explain the differences between the treatment of:o Hong Kong offices and non-Hong Kong officeso Hong Kong employment and non-Hong Kong

employment

1

Understanding ofthe computationof salaries taxliabilities ofindividuals

Identify the different types of income exempt fromsalaries tax

1


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Identify the basis period 1

Explain the meaning of accrual of income anddetermine the date of accrual of different kinds ofincome

2

Describe different kinds of income to be included asincome from employment or office

2

Describe and compute taxable benefits, including:o rent free or subsidized accommodationo holiday journeyo share optionso education expenses of a child of an employeeo benefits-in-kind

3

Compute assessable income, net assessable incomeand net chargeable income

3

Compute provisional salaries tax payable 2

Explain the procedures and treatment for relating backlump sum receipts

2

Explain the conditions for any expenditure to bededucted from the assessable income

2

Describe the conditions for the deduction ofconcessionary deductions

2

Explain the conditions for the deduction of personalallowances

2

Define the meanings of persons, trade and professionbusiness

1

Describe the badges of trade 2

Define the meaning of profits arising in or derived from

Hong Kong and identify the factors to be considered indetermining the source of profit

2

Distinguish between capital and revenue receipts andcapital and revenue expenditure

2

Explain different kinds of deemed trading receiptschargeable to profits tax

2

Identify different kinds of income to be excluded incalculating profits tax

1

Explain the conditions for the deduction of various typesof expenses under profits tax in general

2

Identify the various types of non-deductible expenditureunder profits tax

1

Identify different acceptable methods of the valuation ofinventory

1

Explain the principalprinciple ofSharkey v Wernher 2

Compute the amount of profits tax and provisionalprofits tax

3

Understanding ofthe computationof profits taxliabilities of

businesses of anindividual,partnership orcorporation

Explain the conditions for the deduction of specificexpenses under profits tax, including:

o special contributions to recognized occupationalretirement schemes

o expenditure on research and developmento expenditure on refurbishment of buildingo

expenditure on prescribed fixed assetso expenditure on environmental protection

facilities

2


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o expenditure on environment-friendly vehicleso technical education paymento patent and know-how purchase costs

Determine when income from business should beassessed

1

Determine the basis period for different circumstances 2

Explain the requirements and conditions for hold over ofpayment of provisional profits tax

2

Explain the treatment of losses for different kinds ofbusinesses

2

Compute the profit/loss shared by each partner 3

Explain the person who is liable to pay the tax underpartnership

1

Explain the treatment of share of profit/loss where thereis a change in a partnership

3

Explain the treatment of losses of a partnership 3

Explain the meaning of plant and machinery andidentify items which are plant and machine

1

Compute depreciation allowances under the poolingsystem and non-pooling system

3

Explain the meaning of an industrial building andidentify a building/structure which is treated as anindustrial building

2

Compute the industrial building allowance 3

Explain the meaning of commercial building and identifya building/structure which is treated as a commercialbuilding

2

Understanding ofthe computationof depreciationallowances

Compute the commercial building allowance 3

Explain the persons who are eligible to elect forpersonal assessment

1

Explain the requirements and conditions for electingpersonal assessment

2

Understanding ofthe computationof tax payableunder personalassessment Compute the tax payable under personal assessment in

respect of:o an individualo husband and wife

3

Explain the powers of the following officers of the InlandRevenue Department:

o assessoro inspectoro assistant commissionero commissioner

1

Explain the obligations of a taxpayer and an employer 1

Explain the requirements and procedures for lodging avalid objection by a taxpayer

3

Explain the procedures at the Inland RevenueDepartment upon receipt of a valid objection

2

Explain the requirements of a valid appeal against theCommissioner of Inland Revenues determination to theBoard of Review

3

Understanding ofthe

administration oftaxes under theInland RevenueOrdinance

Explain how the Board of Review hears and disposes ofan appeal

1


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Explain the procedures required to lodge an appeal tothe:

o Court of First Instanceo Court of Appealo Court of Final Appeal

1

Explain the right of a taxpayer to make an error oromission claim

3

Explain the powers of the Inland Revenue Departmentin respect of the demand of payment of tax underobjection or appeal

2

Explain the powers of the Inland Revenue Departmentin the recovery of tax

2

Explain the procedures for claiming repayment of tax 1

Explain the penalties to be imposed by the InlandRevenue Department in respect of an offencecommitted by the taxpayer

2

Explain the procedures for raising an assessment to

additional tax under section 82A

2

Explain the requirements of a valid appeal against theassessment to additional tax under section 82A

2


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Paper 6: Fundamentals of business law

Aim: This paper aims to develop and assess the basic knowledge of business law applicable tothe HKSAR.

Content

Unit ofcompetency


Level ofcompetence

required

Describe the need for law 1

Describe the constitutional framework applying inofHong Kong society

2

Describe the formal sources of law in Hong Kong 1

Describe the system of courts and administration of

justice in Hong Kong

1

Understanding ofthe principleprincipal features ofthe legalenvironment

Explain the concept doctrine of precedent and theprinciples of statutory interpretation

2

Describe the law-making process 2

Understanding ofthe generalprinciples of liabilityin tort

Describe the following concepts:o liabilityo negligence (including professional

negligence)o defamationo the remedy of damagesremedies in tort

2

Explain the following terms concepts relating to theformation of a contract:

o offero acceptanceo considerationo intentiono legalityo exemption clauses

2

Describe the effects of different means ofcommunicatingonofacceptance ofcontractsoffer

2

Explain the distinction between commercial and

social contracts

2

Describe the effects of exemption clauses andevaluate the legal control of them

2

Discuss the following concepts:o mistakeo misrepresentationo agencyo undue influenceo duresso illegal contracts

2

Describe how an agency is created 2

Understanding ofthe basic conceptsof contract law

Differentiate the different types of authority of an

agent

2


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Explain and describe the rights, duties and liabilitiesof agents and principals

2

Describe how a contract can be discharged 2

Explain the range of remedies for breach ofcontract, including fundamental breaches of

contracts

2

Explain the scope and the key provisions of theSales of Goods Ordinance

2

Explain the key provisions of the Sales of GoodsOrdinance

2

Understanding ofthe key provisionsof consumer lawsin Hong Kong

Describe the key provisions of the UnconscionableContracts Ordinance

2

Compare the ownership and governance structureof:

o sole traderso partnershipso companieso joint ventures

2

Explain the liability rights, duties and liabilitiesattaching toofpartners

2

Explain the concept of limited liability 2

Describe the process of registration for a company 2

Describe the accounting and audit requirements forcompanies

2

Understanding ofthe ownership and

governancestructures ofdifferent types ofbusinesses

Describe the key provisions to be included in jointventure agreements

1

Define a bill of exchange and a negotiableinstrument and demonstrate awareness of thepurpose of a bill of exchange

1

Define a cheque and distinguish it from other bills ofexchange

1

Identify the parties to a bill of exchange and acheque

1

Explain the concept of negotiability and describe theprocess of negotiation

1

Outline the different types of indorsement 1

Describe how a bill of exchange and a cheque canbe dishonoured

1

Explain the liabilities of parties to a dishonoured billof exchange and a dishonoured cheque

1

Explain the effect of a forged or unauthorizedsignature of a bill of exchange

1

Explain the purpose and describe the different typesof crossing in cheques

1

Outline the duties and liabilities of a bank withrespect to cheques

1

Understanding ofthe nature,definition andpurpose of a bill ofexchange; theconcept ofnegotiability of billsof exchange; andthe duties andliabilities of the

parties concerned

List the statutory protection available to the payingbank and collecting bank with respect to cheques

1


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Paper 7: Financial accounting

Aim: This paper aims to develop and assess the understanding and application of theprinciples and mechanics of financial accounting

Content

Unit ofcompetency


Level ofcompetence

required

Describe the structure of the financial regulatorysystem and its relationship to financial statements

1

Identify the nature and role of organizations that setaccounting standards and guidelines

1

Describe the Hong Kong Financial Reporting

Standards and their application to external financialreports

1

Understanding of theneed for and functionof financial reportingstandards

Explain the need for generally accepted accountingprinciples (GAAP)

1

Explain the requirements of relevant accountingstandards and legislation relating to the disclosuresrequired in financial statements

2Understanding of thedisclosure andpresentationrequirements offinancial statements

Demonstrate the disclosures required in variousfinancial statements:

o income statement of comprehensive incomeo statement of changes in equityo balance sheeto cash flow statement of financial positiono statement of cash flowso statement of significant accounting policieso other notes to the financial statements

3

Define accounting policies, accounting estimatesand prior period errors

2

Explain the principles of the selection and consistentapplication of an appropriate accounting policy

2

Explain the accounting treatments and disclosures

of changes in accounting estimates

2

Understanding of thetreatment anddisclosure ofaccounting policies,changes in

accounting policiesand accountingestimates and errors

Explain the accounting treatments and disclosuresof prior period errors

2

Define events after the balance sheet datereportingperiod

2

Define and identify adjusting and non-adjustingevents after the balance sheet datereporting period

2

Understanding of thesignificance ofevents after thebalance sheet datereporting period onan entitys profit andloss for a period andfinancial position at

the year end


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Explain the significance of disclosing related partytransactions

2Understanding of thenature of relatedparties Define a related party and identify the key elements

in determining related party relationships and

transactions

2

Define an item of property, plant and equipment 2

Discuss the recognition and derecognition criteria forproperty, plant and equipment

2

Describe the cost elements and the initialmeasurement of property, plant and equipment

2

Describe the requirements of the subsequentmeasurement of property, plant and equipment:

o the cost model and revaluation model ofdetermining the carrying value

o the depreciation charges

o the impairment losses

3

Understanding of theaccounting treatmentfor property, plantand equipment

Describe the presentation and disclosurerequirements of an item of property, plant andequipment

2

Define an investment property and its distinctionwith an item of property, plant and equipment

2

Discuss the recognition and derecognition criteria foran investment property

2

Describe the cost elements and the initialmeasurement of an investment property

2

Describe the requirements of the subsequentmeasurement of an investment property, includingthe cost model and fair value model of determiningthe carrying value

3

Understanding of theaccounting treatmentfor investmentproperties

Describe the presentation and disclosurerequirements of investment properties

2

Demonstrate awareness of the accounting issuesconcerned with finance lease and operating lease

2

Explain the nature and classification of leases 2

Apply the required accounting treatments tooperating leases and finance leases in the financial

statements of the lessee and lessor

3

Understanding of theaccounting treatmentfor leases

Describe the disclosure requirements for bothlessees and lessors

2

Describe intangible assets 2

Outline on the problems relating to accounting forintangible assets

2

Describe the necessary accounting treatments anddisclosures for intangible assets

2

Define research and development 2

Understanding of theaccounting treatmentfor intangible assets

Describe the necessary accounting treatments anddisclosures for research and developmentexpenditure

2


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Define construction contracts and describe thecriteria of combining and segmenting constructioncontracts

2

Discuss the appropriate accounting practice withrespect to the recognition of measurement ofrevenue and costs of construction contracts

2

Explain how the profit or loss on a constructioncontract is recognized

2

Discuss the appropriate accounting practice ofvaluation of construction contracts and compute thevalue to be included in the periodic financialstatements

2

Understanding of theaccounting treatmentof revenue and costs

associated withconstructioncontracts

Describe the requirements of the presentation anddisclosure of information regarding constructioncontracts in financial statements

2

Define and identify provisions, contingent liabilitiesand contingent assets

2

Explain the recognition and measurement of aprovision and changes in provisions

3

Describe the disclosure requirements of provisions,contingent assets and contingent liabilities

2

Understanding of theaccountingtreatments anddisclosures ofprovisions,contingent assetsand liabilities

Demonstrate awareness of the issues in revenuerecognition

2

Identify revenue transactions and determine themeasurement of revenue 2

Discuss the revenue recognition and measurementcriteria for:

o sale of goodso rendering of serviceso interest, royalties and dividends

2

Understanding ofincome

measurement andrevenue recognition

Describe the disclosure requirements of revenuetransactions

2

Definition of government grant and governmentassistance

2Understanding of theaccounting treatment

and disclosures forgovernment grants

Understand the recognition, presentation anddisclosures requirements of government grant

2

Define borrowing costs and describe the criteria forcapitalization of borrowing costs

Computation of borrowing costs to be capitalized

2Understanding of theaccounting treatmentand disclosures forborrowing costs Describe the disclosure requirements of borrowing

costs2

Preparing financialstatements for limitedliability companies

Prepare financial statements in accordance with therequirements of the Hong Kong CompaniesOrdinance, accounting standards, and generalaccepted accounting principles incorporating the:

o income statement (profit and loss account)

3


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o balance sheeto statement of comprehensive income

(income statement)o statement of f inancial positiono statement of changes in equityo cash flow statement of cash flowso notes to the financial statements

Prepare a cash flow statement of cash flows for asingle company using the direct and indirectmethods with supporting notes in the format asspecified in the accounting standard

3

Describe the requirements of the Hong KongCompanies Ordinance and relevant Hong Kongreporting standards in relation to the preparation anddisclosures of consolidated financial statements

1Understanding of theregulatory frameworkof consolidatedfinancial statements

Define a parent, a subsidiary, a group, minority

interests and consolidated financial statement

1

Define an associate 1

Explain the meaning of significant influence 1

Identifying the natureof an investment inan associate

Define joint venture and differentiate betweeninvestments in a joint venture and other types ofinvestments

1Identify the nature ofan interest in a jointventure

Identify the major types of joint venture:o jointly controlled operationso jointly controlled assetso jointly controlled entities

1

Evaluate the sources and application of the cashflows of an entity using cash flow statement of cashflows

3Analyzing andevaluating the cashflow of an entity

Evaluate the cash position of an entity using a cashflow statement of cash flows

3

Explain the objectives of ratio analysis 2

Discuss the uses of financial ratios 2

Calculate and interpret the following categories of

accounting ratios:o liquidity ratioso profitability ratioso management efficiency ratioso capital structure ratioso investment ratios

3

Discuss the limitations of ratio analysis 2

Apply financial ratios to appraise and communicatethe position and prospects of a business

3

Calculating andinterpretingsignificant ratios for

financial statementanalysis

Apply ratios in cross-sectional comparison and trendanalysis

3


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Paper 8: Principles of auditing and management information systems


(i) to develop and assess the principles of auditing as required in the regulatory, legaland reporting framework in Hong Kong

(ii) to develop and assess the understanding of information as a key resource toorganization and the appreciation of how management information systems cancreate value and improve the competitive advantage of an organization

Content (Auditing)

Unit ofcompetency


Level ofcompetence

required

Identify the objectives, nature and benefits of the auditprocess

1

Distinguish between auditing and accounting 2

Identify the types of audits 1

Distinguish between external auditors and internalauditors

1

Outline the responsibilities of auditors under the HongKong Companies Ordinance

1

Explain the concept of true and fair 2

Explain managements responsibilities in preparingfinancial statements

2

Describe auditors responsibilities to verify financialstatements and discover material errors, irregularitiesand illegal acts

1

Describe auditors responsibilities to consider fraud inan audit of financial statement

1

Understanding ofthe nature ofauditing

Describe auditors liability to clients and third parties 1

Explain the nature of audit evidence 2

Describe the four audit evidence decisions that theauditor must make to prepare an audit programme:

o audit procedures

o sample sizeo items to selecto timing

1

Determine the factors affecting the persuasiveness ofaudit evidence:

o relevanceo competenceo reliabilityo sufficiencyo timeliness

2

Understanding ofaudit evidence

Explain the following procedures for obtaining auditevidence:

o inspectiono observation

2


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o enquiry and confirmationo computationo analytical procedures

Define the following types of audit tests:o procedures to obtain an understanding of

internal controlo tests of controlso substantive tests of transactionso analytical procedureso tests of details of balances

1

Explain the concept of representative sampling 1

Distinguish between statistical and non-statisticalsampling

1

Select representative samples 32

Explain how the use of computer based systemsaffects the audit of business organizations

2

Describe computer based internal controls and theirimpact on evidence accumulation

2

Awareness ofissues relating to

the audit ofcomputer basedsystems

Discuss the importance of adequate audit planning 1

Explain the purpose of obtaining an engagement letterand discuss the contents of an engagement letter

2

Understanding ofaudit planninganddocumentation Explain the purposes of audit work papers 2

Understand the concept of materiality to the auditprocess

2Understanding ofmateriality andrisk Define risk in auditing 1

Discuss the nature of internal control and itsimportance to both management and the auditor

2

Describe the following with regard to internal control:o managements responsibilityo reasonable assuranceo inherent limitations

2

Understanding ofinternal control

Identify:o control environmento control procedures

2

Explain the purpose and content of a managementrepresentation letter

1

Explain the communication with the audit committeeand/or management

1

Describe the requirement for, and meaning of, theauditors report

2

Explain a standard unqualified audit report 2

Understanding ofthe requirementsfor completing anaudit from theperspective of acompany

Evaluate circumstances that require the auditor toexpress a qualified opinion

2


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Content (Management information systems)

Unit ofcompetency


Level ofcompetence

required

Understand the value of information as a key resourceand asset of an organization

2

Recognize the strategic significance of informationsystems as a tool in enhancing the competitiveadvantage of the organization

1

Explain and illustrate different types of informationsystems: transaction processing systems (TPS),management information systems (MIS), decisionsupport systems (DSS), expert systems (ES),executive information systems (EIS) and enterpriseresource planning systems (ERP)

2

Explain the different information needs and managerialdecisions at different organizational levels: strategic,tactical and operational

2

Understanding ofthe nature andvalue ofinformationsystems

Understand how information systems contribute to thesuccess of strategy implementation and theirrelationships

1

Understand the nature and characteristics of e-commerce and e-business as a strategic business tool

1

Explain the different types of networks used inorganizations: internet, intranet, and extranet

1

Knowledge of theinformationtechnologyapplications

Understand the roles of knowledge management

systems (KMS), business intelligence systems (BIS),data warehouse (DW), data mining (DM), onlineanalytical processing (OLAP) and artificial intelligence(AI) in enhancing the value of information incontemporary organizations

2

Describe the role of e-commerce in the Hong Kongbusiness environment

1

Describe the role of e-commerce in the global businessenvironment

1

Understanding ofthe role ofelectroniccommerce

Identify key security and control issues relating to

common e-commerce transactions

1

Outline the methodology followed in selecting amanagement information system or computer package

1

Describe the method for evaluating different products 1

Knowledge of theissues andprocess involvedin selecting amanagementinformationsystem


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Describe key risks and threats to information systems 2Understanding ofrisks to security ofmanagementinformation

Describe general controls applied to informationtechnology activities:

o physicalo

organizationalo procedural

2

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NQF AAT Syllabus Jun2011

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