My September 2022 CFE Experience: Day 2 Done!

Editor’s Note: Although I’m publishing this in June 2023, this journal entry has not been edited since I wrote it on September 8 (right after the Day 2 exam). If you haven’t already, you can also read about my Day 1 experience here and my Day 3 experience here.

First thought on seeing the Day 2 case today:

Because the case turned out to be IFRS, just like I predicted. 😁

But my other prediction (that there would be an IFRS 16 lease AO) didn’t turn out to be true. Oh well, there might be one on Day 3!

Some thoughts I had again today that I forgot to write down yesterday:

I’m fed up with the Fn key placement on this keyboard. On my own Lenovo Legion laptop, the Fn key is to the right of the Ctrl key. On the Lenovo Thinkpads that were provided by CPA, Fn is to the left of Ctrl. I swear the time I lost accidentally pressing Fn+C and having nothing happen, or pressing Fn+V and ending up with just a tiny little “v” on my screen, cost me at least… 1 minute. Lenovo, why can’t you stay consistent across your own laptop range?
That said, I’m pleasantly surprised by how… functional the laptops are. My main gripe is with how shallow the keyboard is—admittedly I’m spoiled with the Legion 5 which has a really good keyboard for a laptop—and with the SecureClient software. But overall the laptop itself was fast and didn’t give me any issues.
I wish there was some way to preview what was uploaded to SecureClient after clicking the Finish Test button.

Some new thoughts for today:

I arrived at the exam center at 8:25 today, since yesterday I ended up being too early. I was one of the last people to sign in, but I was right on time because the lead proctor ended up starting his announcement at 8:30 just like yesterday.
So many people in the exam room today compared to yesterday. I’m pretty sure we are seated by alphabetical order, and yesterday I was #133 while today I was #166. There were a lot more IT proctors and invigilators this time around, too.
Five hours felt so much longer than the four hours yesterday. My butt was hurting near the end, my arms were getting tired because the table was just a little bit higher than was comfortable and the chairs were non-adjustable.
I’m very grateful that today’s Day 2 case was for a business I actually cared about and was interested in (meal prep kits). Seriously, could not have asked for a better industry!
My back is starting to get pretty sore, especially the area around my left shoulder blade. Hope it doesn’t feel too bad tomorrow. Gotta power through and finish strong!

Rollercoaster Ride

This Day 2 case was a bit of rollercoaster ride. I finished reading/planning the case much earlier than expected, at 9:45 a.m. (I usually take a whole hour to read/plan). I quickly skimmed through the case because I was so paranoid that I’d forgotten an AO. (I attribute this efficient reading to applying Angela’s tip for skimming the common background info, then writing down headings for all the requirements on the Assurance Requirements page, then reading each appendix and exhibit and slotting case facts and page numbers under each heading. I also highlighted “stray facts” in yellow so I could easily see them and decide what to do with them later. I ended up not using all the stray facts but it was comforting being able to see them at a glance towards the end and decide whether to include them in my response or leave them out.)

When I was allocating time to each AO, I allocated based on my instinct and experience from doing previous AO’s. I ended up with a total writing budget of 230 minutes, giving myself my usual 10 minute buffer.

Anyway, because of the extra time I probably relaxed a little too much when doing the first few AO’s and went over my time budget for each one (all of the FR AO’s(link) and the first MA AO(link)). When I got to the third MA AO (Fatima’s request), I was getting worried about the time because I was updating my Excel time tracker as I went along and saw that I had already eaten away all of the 15 precious minutes I’d saved from reading and planning. I checked the time and saw I only had 120 minutes (2 hours remaining) for all of my assurance AO’s.

I remembered Angela’s suggestion for us to prioritize issues and to focus on getting role depth in AO, so I decided to cut the last MA AO short and move onto the assurance AO’s. I highlighted the last bit of my unfinished response in red so I’d know to come back to it later.

I blasted through the first few assurance AO’s(link), being very anxious about time, and gained back about five minutes (I over-budgeted for one of the STL AO’s). So with the 10 minute buffer I still had, I had an extra 15 minutes. I breathed easy again. At this point, I was getting a little tired so I slowed down on the last couple of AO’s, and didn’t really feel like doing the last assurance AO (key audit matters), so I went back and tied up some loose ends, finished up the MA AO, deleted any remaining highlighted stuff, aaand suddenly, there were five minutes left in the exam, and I hadn’t started on the last AO yet. So I started with 25 minutes to spare and ended up typing until the last second.

Overall, my time management could’ve been better but I’m trying not to beat myself up over it because I think Day 2 still went pretty well, all considered.

Day 2 Debrief

Now I’ll write down an outline of the case details before I forget. I’ll discuss these AO’s in the order I tackled them.

Common AO’s

There was an even split between the financial reporting and management accounting common AO’s.

Financial Reporting AO’s

These were the financial reporting assessment opportunities:

Revenue recognition: TMB offered a new discount program in December and we had to analyze whether they had recorded revenues for sales under the discount program correctly. I recommended an adjusting entry of just over $100K deferred revenue IIRC.
- I spent like 30 minutes on this issue because I had the wonderful (/s) idea to discuss each of the criteria for identifying a contract (step 1 of the IFRS rev rec process). Probably totally unnecessary.
Intangible asset: TMB entered into a contract with Chef Arlene for her brand name and recipes. The question was whether they had capitalized it correctly as an intangible asset. I was a bit thrown off by this one, tbh I’m still not sure if either of the components meet the “control” criterion to be recognized as an intangible. I wrote that the brand rights met the criteria to be capitalized because they were free to put it on any of their products, while the recipes didn’t since TMB had “insufficient control” over future economic benefits flowing from the recipes. And I didn’t quantify this one with a journal entry because we needed further information on the allocation of the $400K payments between brand vs recipes.
- In hindsight, maybe I should’ve first discussed what other asset categories it might fall into before diving right into the definition of an intangible asset. In one of the /r/Accounting CFE threads (🎵 oops, I did it again(link to Day 1) 🎶), someone said they treated it as a lease!! An operating lease!!!!
Renovation: TMB renovated their Montreal fulfillment centre and the issue was which of the costs could be capitalized into PPE and which had to be expensed. This one took a long time too because there were hella costs to be discussed. The ones I was most unsure about were:
- Insurance proceeds (TMB had netted them against the capital expenditure costs, but I wrote that they should’ve been capitalized into the carrying cost. Now that I’m writing this down, it sounds horribly wrong, but I had no idea which standard to even refer to for this one)
- Moving and storing equipment while renovation happened (I said they could capitalize this as a site preparation cost, which is a directly attributable cost of constructing a PPE asset, but it seems kind of sus)
- Costs of disposing of old walls/flooring that were to be replaced (again, I capitalized it as a site preparation cost, since they couldn’t very well lay down new floors/walls without stripping the old ones, ie. preparing the site…)

Management Accounting AO’s

These were the management accounting assessment opportunities:

Variance analysis: This is where it really helped to have those yellow-highlighted stray facts that I gathered throughout my reading of the case, because the different variance factors were spread out among the common background information and other exhibits. Also, another thing that helped me was reading and writing down all the requirements first before reading the rest of the case, because as I read, I was mindful of any facts that could relate to a cost variance and was particularly alert to any Q4 operational changes. Hopefully, I showed enough integration this time.
Production spending budget: This one started off quite straightforward, since they gave us the rates for each variable cost and all we had to do was multiply it against the budgeted number of meals produced. The complex bit was the packaging inventory costs, since TMB was told to keep a 2-month supply of packaging and they already had some inventory on hand, and… my calculation was a bit half-assed, but I’m hoping it’s still enough to get a C at least. Bradley was hoping for monthly production spending to stay below $1.8M, but all three months I forecasted were over $1.8M sooooo I hope he’s okay with that. The worst part of this AO was the qualitative part where he asked us to discuss what factors would impact whether they could meet their production spending target of $1.8M. Like idk, dude, if costs go up your spending would go up?!?! I was really stuck on what else to say besides “price fluctuations.” Thought a bit about bringing COVID into it (since supply chain issues have caused us to see some wild food cost increases over the past two years), but ultimately decided to only reference it indirectly because I’m not sure if they want us to bring current events into the case world.
Marketing data: I had fired off like four points and done a quick calculation of the quarterly churn rate trends before I looked at the clock and decided I should get started on the assurance AO’s. I red-highlighted the last sentence so I would know to circle back. Since I like data analytics (I remember doing pretty well on the FFTY data analytics AO), I had planned to come back to this AO at the end as an easy way to cap off the case and end on a strong note. Spoiler: I never came back 🤡 except to remove my red highlights. LOL

I’ve never made a fully conscious decision whether to aim for depth in FR or depth in MA, though subconsciously I leaned towards FR because it is more rules-based whereas I’ve always struggled with MA due to the subjectivity and not knowing which quant to use. Overall, I’m pleasantly surprised by the FR AO’s this time around. No complex ones like financial instruments, employee benefits, consolidation, or (god forbid) pensions, and no untested ones like biological assets or cryptocurrency. Just good old rev rec, PPE, and intangibles.

Assurance AO’s

One word about the Assurance requirements on this case: SO. MANY. PROCEDURES. And not a single discussion of risk or materiality in sight. (EDIT: After discussing with several people months after this case, we are all still shook that there was no audit planning memo requirement, lol.)

Operating segments: I guess this is the inevitable curveball AO that they throw every year. I likely spent too much time on this AO that should’ve been spent on audit procedures or key audit matters, but hopefully I did enough to get a C. I did a calculation of the quantitative thresholds for each geo region (RIP to Saskatchewan and Manitoba for not being able to reach any of the thresholds even after being lumped together) and applied some IFRS 8 paragraphs about how to disclose the segments. Not sure if I interpreted all the paragraphs correctly, not enough time to read carefully. I ended up recommending that each geo region be disclosed separately, even SK/MB and the Atlantic provinces despite not reaching any of the 10% thresholds, since it was more useful for the user to present them separately.
Audit procedures: I tried to come up with at least one procedure for each of the three FR issues and two for the operating segments disclosures. I struggled so hard with the operating segment procedures and in the end only came up with one, and it was pretty mid.
System conversion recommendations: Pretty easy issue to address with WIR, although there wasn’t a lot of case facts. I ended up stretching a couple of points into two to get five points total. God I hope it was enough.
Due diligence procedures: Thank God I reviewed this flashcard with Kevin just a few days ago! I remember from the flashcard that there are three main things to test: existence of assets, completeness of liabilities, and operational issues. I managed to address a couple for each one.
STL recommendations: I’m pretty confident in my WIR approach for this one. I hit like six or seven recommendations which should be safe. Although, I predict everyone will do well on this AO because it was so freaking easy. There were soooo many issues with the production line and I am praying for any person with allergies who ever dares purchase products from STL. You should probably use separate cooking utensils to handle nuts and nut-free products, who knew?!
Procedures to test compliance: I don’t feel as good about this one as the previous two AO’s, but hopefully still did enough to get C. Some of the procedures I wrote were seriously stupid, like “test the water for chlorine with a chlorine kit.” Wtf is a chlorine kit? I googled it later, and I think I was referring to one of those pool pH tester kits.
Key audit matters: Honestly this is probably the AO I’m getting NC on. I simply didn’t have enough time. When I started on this AO, it was 1:56 p.m. 😬 Kevin and I reviewed Emphasis of Matter and Other Matter paragraphs in the flashcards, but nothing about KAM. I read like two sentences from CAS 701 and jotted something down about the PPE and Chef Arlene contract being areas of significant judgment.