New Newsline KASNEB · 2019. 7. 2. · 4 KASNEB Newsline, Issue No. 4 October - December 2012 In this case, step (iii) above will be examined in detail to enlighten . executives and

October - December 2012 KASNEB Newsline, Issue No. 4 i

NewslineThe Professional Journal of KASNEB Issue No. 4 October - December 2012

KASNEB

Strategic Business Units

KASNEB

October - December 2012 KASNEB Newsline, Issue No. 4 1

Contents

KASNEB

Editor HonorarisPius M. Nduatih

Editorial TeamStaff members of KASNEB

Circulation Office

KASNEB Towers Hospital Road, Upper HillP.O. Box 41362 - 00100

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KASNEB Newsline is the professional students journal of KASNEB.

The views expressed in this journal are those of the respective authors and do not necessarily reflect those of KASNEB.

The Editor welcomes contributions from readers especially students and trainers in accountancy, finance, management, administration, ICT and cognate subjects.

The Editor reserves the right to edit articles for the purposes of clarity and brevity.

Trainers and students are free to photocopy materials contained in this journal for purposes of learning without seeking prior consent from KASNEB.

Reproduction is allowed without charge as long as prior consent is sought and the source acknowledged.

Correspondence should be addressed to:

The EditorKASNEB Newsline

Marketing and Corporate AffairsUnit

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NewslineKASNEBEditorialPage 2

Information strategyPage 12

Strategic business unitsPage 3

Credit scoringPage 32

Financial instruments Page 37

PictorialPage 52

UpdatesPage 46

Audit planningPage 22

Prize winnersPage 54

KASNEB Newsline, Issue No. 4 October - December 20122

Editorial

Editor HonorarisPius M. Nduatih

The environment in which organisations operate is dynamic, presenting a constant stream of opportunities and challenges. Managers are therefore faced with an uphill task of striking a balance between maximising returns and minimising risks which are inherently twined to the opportunities.

For managers to successfully drive organisations through this maze of opportunities and risks, they are required to have an intricate knowledge of their entities from all aspects, including the key sub-units making up the unit. From the view point of management gurus, such sub-units comprise the strategic business units (SBUs), which in essence are autonomous divisions within a business entity with a focus on a distinct customer or market base.

In order to enhance our readers’ understanding of SBUs and the associated optimal strategic options, the subject of SBUs takes centre stage as the focal point of the lead article in this edition of the KASNEB Newsline. The article presents an in-depth analysis of the distinctive features of an SBU, relevant growth strategies, application of various models for analysing SBUs among other pertinent areas.

The second article dwells on the role of an information strategy in promoting organisational growth. The article, while recognising the importance of an information system that is relevant, timely and accurate, also spotlights on the steps involved in the development of an information strategy. The article further provides insight on how the information strategy should dovetail with the overall organisational growth strategy.

The third article addresses the process of audit planning including the preliminary engagement activities, risk assessment, analytical and substantive procedures. The writer opines that audit planning is not a static process and should take cognisance of unexpected events or changes in the nature of evidence available.

In the fourth article, we explore the topic of credit scoring, which is a relatively new phenomenon particularly in emerging financial markets. Credit scores are increasingly becoming the reference basis for determining the creditworthiness of individuals and business entities. Readers will find a rich mix of knowledge areas on the topic, including the components of a credit score and the application of various models for determining credit scores.

The fifth article is a continuation of an article featured in the July – September 2012 edition of this journal and further sheds light on the accounting treatment of financial instruments as required by International Financial Reporting Standards (IFRSs).

The above and other readings in this edition of the KASNEB Newsline have been selected to provide an informative, educative and enjoyable reading to match the needs and dynamics of our wide readership base.


Introduction A strategic business unit is a unit of an organisation that can be considered

as a separate entity for planning/investment purposes. In business, it is a profit centre which focuses on product offering and market segment. Autonomous divisions (profit centres) of an organisation make up what are called “business portfolios”, also referred to as “strategic business units (SBUs).” An SBU is therefore a significant organisational segment that can be analysed to develop organisational strategy aimed at generating future business or revenue.

Why strategic business unitsA strategic business unit is a major concept used to analyse the performance

of organisations. As the number, size and diversity of divisions in an organisation increase, controlling and evaluating divisional operations become increasingly difficult for strategists. Increase in sales, for example, is often not accompanied by similar increases in profitability. The span of control may become too large at top levels of the firm. Thus, in multidivisional organisations, an SBU structure greatly facilitates strategy implementation efforts.

Strategic company planning often consists of five main steps or processes namely:

(i) Defining the organisation’s mission statement.(ii) Setting organisational objectives.(iii) Evaluating the organisation’s strategic business units (situation analysis). (iv) Selecting appropriate strategies to achieve the organisation’s objectives

before implementing them. (v) Implementing the strategies and monitoring the performance/results to

take corrective actions where necessary if the objectives are not being achieved as desired.

Strategic Business Units (SBUs)

Fredrick Buchanan O. Abea

Dip. Acc, CPA, BBM (ongoing)

Internal Audit Department

University of Nairobi.


In this case, step (iii) above will be examined in detail to enlighten executives and managers on how to analyse their SBUs along with the available methods that they can use to perform such analysis for better strategic decisions.

Evaluating the worth of SBUs

Evaluating the worth of a business is critical to strategy implementation because integrative, intensive and diversification strategies are often implemented by acquiring other firms. Many transactions occur each year in which businesses are bought and sold in the country and in all these cases, it is necessary to establish the financial worth or cash value of a business to successfully implement strategies.

Business evaluations are becoming routine in many situations and it is just a good business practice to have a reasonable understanding of what your firm or SBU is worth. Other reasons for periodic valuations include; employee plans, taxes, preparations for mergers and acquisitions, retirement packages, expansion plans, death of a principal or changes in partnership agreements.

Evaluating the worth of a business truly requires both qualitative and quantitative skills since it is difficult to assign a monetary value to some factors such as a loyal customer base, history of growth, dedicated employees, a favourable lease, a bad credit rating or good patents that may not be reflected in a firm’s financial statements.

categorised as SBUs. Each SBU may be a major division in an organisation, a group of related products, or even a single major product or brand.

However, the trick is how to set up an optimum number of SBUs in an organisation because if there are too many SBUs, top management can get bogged down in details associated with planning, operating and planning. On the other hand if they are too few, each unit will cover too broad an area to be useful for managerial planning and control. After SBUs have been satisfactorily delineated, the whole organisation may be viewed as a “portfolio” of businesses or product lines. An essential step in strategic planning is an organisational portfolio analysis, which identifies the present status of each SBU and determines its future role in the company. This evaluation provides guidance to management in designing strategies and tactics for an SBU.

Management typically have limited resources to support their SBUs and thus they need to know how best to allocate these resources in the most efficient way. An organisational portfolio analysis is therefore designed to aid management in decision making as to which SBU(s) should be stimulated for growth, which one(s) to be maintained in their present market position and which one(s) to be eliminated.

Qualifications for an SBU set up

Ideally, what constitutes an SBU varies from organisation to organisation. In larger organisations, an SBU could be a company division, a single product, or a complete product line while in smaller organisations, it might be the entire company. Gurus in the field of strategic management and marketing argue that to qualify to be identified as an SBU, the unit should:

• Be a separately identifiable business.

• Have its own resources and a distinct mission.

• Have its own competitors.• Have its own customers.• Have its own group of

executives (management) with profit responsibility.


Organisational performance analysis for SBUs set up

A small single product organisation can conduct a company wide performance analysis but in diversified firms, company wide planning cannot serve as an effective guide for executives who oversee the organisation’s various divisions. For more effective planning and operation, a multiproduct or multi business organisation should be divided into major product or market divisions. These divisions are then


Strategies for organisational portfolio analysis

Experts in the marketing field suggest that management may adopt any of the following strategic alternatives in the evaluation of an SBU:

(i) Intensify the marketing effort to

strengthen and build the SBU (an invest strategy).

(ii) Help the SBU to maintain its present market position (protect strategy).

(iii) Use the SBU as a cash flow source to help other SBUs grow or maintain position (harvest strategy).

(iv) Get rid of the SBU (divest strategy).

Product - market growth strategies for SBUs

These are opportunities for an SBU’s market growth which can be analysed using Ansoff’s product-market growth matrix. Ansoff argues that most mission statements and objectives reflect an organisation’s desire to grow. That is to increase revenues and profits. An organisation therefore may take any of the two routes in its strategy design. One such route is to do what it is currently doing regarding its products and markets but do it better. The other route is for the organisation to venture into new products or markets. These two routes when applied to markets and products result in four product-market growth strategies which form what is described as the Ansoff matrix as shown below;

Present Products

New Products

Present Markets

Market Penetration

Product Development

New Markets

Market Development

Diversification

From the matrix, the product-market growth strategies can be explained as follows:

(i) Market penetration: This is a strategy where a firm tries to sell more of its present products to its present markets through greater spending on advertising or personal selling.

(ii) Market development: Is a strategy where a firm

continues to sell its present products but venturing into a new market.

(iii) Product development: This is a strategy which calls for a firm to develop new products to sell to its existing markets.

(iv) Diversification: This is a strategy where a firm develops new products to sell to new markets.


Market penetration Market development

Product development Diversification


After completing strategic planning for each SBU, management can plan for each major functional area such as production or marketing guided by the organisation wide or SBU mission and objectives. In the marketing arena, strategic and annual plans need to be developed which involve four steps in the strategic marketing planning process namely:

• Conducting a situation analysis.• Determining the marketing

objectives.• Selecting the target markets and

measuring market demands.• Designing a strategic marketing

mix.

The annual marketing plan becomes the master blue print for a year’s marketing activities for the given business unit or product which results into the “how to do it” document that guides executives in each phase of marketing operations.

Analysing SBUs using the Boston Consulting Group (BCG) Model

The BCG model allows a multidivisional organisation to manage its portfolio of businesses by examining the relative market share position and the industry growth rate of each division relative to all other divisions in the organisation. The BCG model is a 2 x 2 square matrix with four quadrants as illustrated below:

Fig 1.1: The BCG Matrix

From the BCG matrix above, the stars, dogs, cash cows and question marks are described as follows:

The Stars: Are Quadrant II business units which represent the organisation’s best long-run opportunities for growth and profitability. These are divisions with a high market share and high industry growth rate which should receive substantial investments to maintain or strengthen their dominant positions. These divisions should consider forward, backward

and horizontal integration, market penetration, market development, product development and joint ventures as appropriate strategies for adoption.

Question Marks: These are divisions/SBUs in quadrant I which have a low relative market share position yet they compete in a high growth industry. Their cash needs are high and their cash generation is low. They are called question marks because the organisation must decide whether to strengthen them by pursuing an intensive strategy (market penetration, market development, product development) or to sell them.

Cash Cows: Are SBUs/divisions in quadrant III which have a high relative market share position but compete in a low – growth industry. They are called cash cows because they generate cash in excess of their needs and they are often milked. These divisions should be managed to maintain their strong position for as long as possible. Strategies

to be adopted for these divisions include concentric diversification or product development. However, as a cash cow division becomes weak, retrenchment or divestiture may become a more appropriate strategy for them.

Dogs: These are quadrant IV divisions/SBUs of the organisation that have a low relative market share position and compete in a slow or no market growth industry. They are called dogs in the firm’s portfolio because of their weak internal and external position. They are often liquidated, divested or trimmed down through retrenchment. When a division becomes a dog, retrenchment may not necessarily be the best strategy to pursue because many dogs have bounced back after strenuous asset and cost reduction, to become viable profitable divisions in the organisation.

The major benefit of analysing the SBUs using the BCG matrix is that it draws attention to cash flow investment characteristics and needs of an organisation’s various


HIGH

HIGH

Stars

II

III IV

I

DogsCash cows

Relative Market Share

Indu

stry

Gro

wth

Rate

Question marks/wild cat/problem child

LOW

LOW


divisions. The divisions of many firms evolve over time hence; dogs become question marks, question marks become stars, stars become cash cows and cash cows become stars (in an anticlockwise motion) as shown by the arrows in the BCG matrix figure above. Over time, organisations should therefore strive to achieve a portfolio of divisions that are stars.

Limitations of the BCG model• It focuses on the market share

and market growth only.• It does not mention about

relative profitability.• It categorises the SBUs

according to the four categories therefore limiting the manager’s thinking capability.

Analysing SBUs using the General Electric (GE) Screening Model

In 1968, the US based General Electric Consulting firm developed a portfolio model to help organisations with analysing their business units/product lines. The model includes more variables and details about the industry attractiveness and business strengths when analysing SBUs. In industry attractiveness, the model considers the following variables when analysing SBUs:


• The market size of the SBU.• The market growth of the SBU.• Industry profitability.• Pricing flexibility/strength.

In terms of business strengths, the model considers the following variables:

• Relative competitive position.• Market share trends.

Low Medium High

Busi

ness

stre

ngth

Strong 2 1 1

Medium 3 2 1

Weak 3 3 2

Industry Attractiveness

Factors that determine the success of SBUs(i) The degree of autonomy given

to each SBU manager.(ii) The degree to which an SBU

shares functional programs and facilities with other SBUs.

(iii) The manner in which the organisation responds to new changes in the market.

Advantages of having SBU structures in an organisation

• Helps in the implementation of strategies.

• Leads to improved coordination.• Enhances accountability.

• Relative profitability.• Leadership in terms of quality,

technology, manufacturing and marketing.

All these variables are then categorised into zones in a 3 x 3 square matrix called “the General Electric Screening Matrix” as illustrated below:

Resulting from the matrix, the three zones are described as follows:

Zone 1: This is a green zone (desirable zone). This zone contains SBUs that are high in both industry attractiveness and business strengths. The decision strategy for these SBUs is to build the market share (invest more development funds).

Zone 2: This (yellow zone) contains SBUs which are in the middle range (in between) in terms of industry attractiveness and business strengths. The strategic decision for these SBUs is to maintain the market share.

Zone 3: It is a zone (red zone) which includes SBUs that are low in both industry attractiveness and business growth. The strategic decision for these SBUs is to divest and move out of the industry or harvest.

Disadvantages of having SBU structures in an organisation

• Requires an additional layer of management, which increases expenses in salaries.

• The role of the group CEO becomes often ambiguous.

ConclusionMany organisations are

expanding and spreading their wings to cover the East African region and beyond by opening up branches in countries that have

greater attraction in investments. Others are also expanding internally to cover as many counties as they can. SBUs are absolutely essential for multiproduct organisations. In organisational expansions, it is critical that managers evaluate the performance of their business units to identify those that are doing well for classification as strategic business units and proper strategic planning decisions. Since decisions must be made on whether to invest more funds on SBUs that are doing well or to eliminate those that cannot sustain themselves in their business operations, this article will serve as a guide on how to analyse the business units for strategic planning purposes.


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Kenya School of Credit Management (KSCM) is a specialised learning institution for professionals in credit management. Our mission is to promote excellence and professionalism in credit management for all credit managers who work or intend to work in the credit department of different organisations.

The qualifications are a MUST for all:

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Enroll now and reap the benefits.

KENYA SCHOOL OF CREDIT MANAGEMENT

Why train with the Kenya School of Credit Management?

• Pioneers and trainers in credit management in Kenya• Specialists in training credit management in East and Central Africa• We are a one stop shop for all interested in the career of credit

management• Highly experienced and qualified lecturers• Centrally located in the central business district• Job placement for qualified persons in credit management

COURSES OFFERED

Credit Management Technicians (CMT) - Examinable by KASNEBCertified Credit Professionals (CCP) - Examinable by KASNEB

Certificate in Credit Management - Examinable by Gretsa UniversityDiploma in Credit Management - Examinable by Gretsa University

Bachelor of Commerce - Credit management option. Now available at Gretsa University - Thika on a full time, part time and distance learning basis. CCP/CPA/CPS graduates to join at third year.

In-house and open programs in Credit Management available.

Executive Credit Management Program now available through distance learning.

ACADEMIC CALENDAR

KSCM has two semesters in one calendar year. The semesters begin in January and July every year.

SEMINARS AND WORKSHOPSKenya School of Credit Management is a market leader in training and facilitating seminars/ workshops that equip staff working in the credit departments with the latest tools to handle credit.

Fully accredited by KASNEB No. KAS/F/08

� Well equipped library and free internet services to students � Competent & experienced Lecturers � Variety of Student activities, Clubs and Societies � High pass rate in examinations � Facilities include lecture halls, computer labs and hostels � Transport is available within a radius of 20 kilometers

TRAINERS IN ACCOUNTING

Tuition block

College buses

Computer laboratory

Students' excursion trip to Mombasa

Students' excursion trip to Maasai Mara

� Friendly and serene environment � Free branded corporate wear � KNUT members enjoy 15% discount � Fulltime, evening, part time and weekend classes � 2012 form four candidates shall be admitted with mock results � All JKUAT diplomas to change from 2 years to 18 months

Why join our Campus

Note: KASNEB registration for May/June 2013 examinations deadline is 30 November 2012 and late registration is 31 December 2012

2013 First semester begins on 8th January 2013

P.O Box 956-60100 Embu Kenya Tel:068 30247, 0721152709, 30120, 30961Email: [email protected] [email protected], Website: www.embucollege.com www.embucollege.ac.keLocation: 200 M from Embu county council offices/Embu law courts

PROFESSIONAL COURSES DURATION FEE PER SEMESTER /SECTION (Sh.)

ATC I 5 months 9,500

ATC II 5 months 9,500

CPA & CPS I & II 5 months 9,500

CPA & CPS III & IV 5 months 10,500

CPA & CPS V & VI 5 months 11,500

Certified Information Communication Technologists (CICT) I-VI 1 ½ - 3 years 9,500

Information Communication Technology Technicians(ICTT) 1 year 9,500

DEGREE PROGRAMMES DURATION FEE PER SEMESTER 2013

Bachelor of Commerce (Bcom)(JKUAT) 3 years (8 semesters) 48,500

Bachelor of Science in Information Technology (Bsc IT)(JKUAT) 3 years (8 semesters) 48,500

Bachelor of Education – Arts (Secondary)/ECDE/ Primary Option (EGERTON) 2 ½ years (8 semesters) 47,500/33000 (SB)

DIPLOMA PROGRAMMES DURATION FEE PER SEMESTER

Diploma in Law (IU) 2 years 22,500

Diploma in Information Technology (IU) 2 years 22,500

Diploma in Information Technology (JKUAT) 2 years 31,500

Diploma in Information Technology (KNEC) 2 years 14,000

Diploma in Information Science (Library) (KNEC) 2 years 14,000

Diploma in Archives & Record Management (IU) 1 & 3 months 22,500

Diploma in Education Arts Secondary/ECDE/Primary Option (EGERTON) 2 years 29,500/25,000(SB)

Diploma in Secretarial Studies (KNEC) 2 years 22,500

Diploma in Business & Office Management (IU) 2 years 22,500

Diploma in Business Management (ABE/KNEC) 5 months/1½ years 15,000

Diploma in Business Administration (JKUAT) 2 years 15,000

Diploma in procurement management (JKUAT/KNEC) 2 years 15,000

Diploma in Sales and Marketing (ICM/KNEC) 5 months 15,000

Diploma in Human Resource Management (ABE/KNEC/JKUAT) 5 months / 1½ years 15,000/31,500

Higher Diploma in Business management (ABE/KNEC) 1 year 15,000

Higher Diploma in Human resource management (ABE/KNEC) 1 year 15,000

Higher Diploma in Sales & Marketing (ICM) 1 year 15,000

Graduate Diploma in Sales & Marketing (ICM) 5 months 17,500

Graduate Diploma in Human resource management (ABE) 5 months 17,500

Graduate Diploma in Business management (ABE) 5 months 17,500

CERTIFICATE COURSES DURATION FEE PER TERM

Secretarial Studies (KNEC) 1 ½ years 10,000

Certificate in Information Science (Library) (KNEC) 1 year 14,000

Certificate in Archives & record Management (IU) 6 months 22,500

Certificate in ECDE (KNEC) 1 year 17,500/11,500(SB)

Certificate in information Technology (IU) 4 months 22,500

Certificate in information Technology (JKUAT) 3 months 31,500

Certificate in Computer engineering 4 months 14,000

Bridging course In mathematics (JKUAT) 4 months 25,000


� Well equipped library and free internet services to students � Competent & experienced Lecturers � Variety of Student activities, Clubs and Societies � High pass rate in examinations � Facilities include lecture halls, computer labs and hostels � Transport is available within a radius of 20 kilometers

TRAINERS IN ACCOUNTING

Tuition block

College buses

Computer laboratory

Students' excursion trip to Mombasa

Students' excursion trip to Maasai Mara

� Friendly and serene environment � Free branded corporate wear � KNUT members enjoy 15% discount � Fulltime, evening, part time and weekend classes � 2012 form four candidates shall be admitted with mock results � All JKUAT diplomas to change from 2 years to 18 months

Why join our Campus

Note: KASNEB registration for May/June 2013 examinations deadline is 30 November 2012 and late registration is 31 December 2012

2013 First semester begins on 8th January 2013

P.O Box 956-60100 Embu Kenya Tel:068 30247, 0721152709, 30120, 30961Email: [email protected] [email protected], Website: www.embucollege.com www.embucollege.ac.keLocation: 200 M from Embu county council offices/Embu law courts

PROFESSIONAL COURSES DURATION FEE PER SEMESTER /SECTION (Sh.)

ATC I 5 months 9,500

ATC II 5 months 9,500

CPA & CPS I & II 5 months 9,500

CPA & CPS III & IV 5 months 10,500

CPA & CPS V & VI 5 months 11,500

Certified Information Communication Technologists (CICT) I-VI 1 ½ - 3 years 9,500

Information Communication Technology Technicians(ICTT) 1 year 9,500

DEGREE PROGRAMMES DURATION FEE PER SEMESTER 2013

Bachelor of Commerce (Bcom)(JKUAT) 3 years (8 semesters) 48,500

Bachelor of Science in Information Technology (Bsc IT)(JKUAT) 3 years (8 semesters) 48,500

Bachelor of Education – Arts (Secondary)/ECDE/ Primary Option (EGERTON) 2 ½ years (8 semesters) 47,500/33000 (SB)

DIPLOMA PROGRAMMES DURATION FEE PER SEMESTER

Diploma in Law (IU) 2 years 22,500

Diploma in Information Technology (IU) 2 years 22,500

Diploma in Information Technology (JKUAT) 2 years 31,500

Diploma in Information Technology (KNEC) 2 years 14,000

Diploma in Information Science (Library) (KNEC) 2 years 14,000

Diploma in Archives & Record Management (IU) 1 & 3 months 22,500

Diploma in Education Arts Secondary/ECDE/Primary Option (EGERTON) 2 years 29,500/25,000(SB)

Diploma in Secretarial Studies (KNEC) 2 years 22,500

Diploma in Business & Office Management (IU) 2 years 22,500

Diploma in Business Management (ABE/KNEC) 5 months/1½ years 15,000

Diploma in Business Administration (JKUAT) 2 years 15,000

Diploma in procurement management (JKUAT/KNEC) 2 years 15,000

Diploma in Sales and Marketing (ICM/KNEC) 5 months 15,000

Diploma in Human Resource Management (ABE/KNEC/JKUAT) 5 months / 1½ years 15,000/31,500

Higher Diploma in Business management (ABE/KNEC) 1 year 15,000

Higher Diploma in Human resource management (ABE/KNEC) 1 year 15,000

Higher Diploma in Sales & Marketing (ICM) 1 year 15,000

Graduate Diploma in Sales & Marketing (ICM) 5 months 17,500

Graduate Diploma in Human resource management (ABE) 5 months 17,500

Graduate Diploma in Business management (ABE) 5 months 17,500

CERTIFICATE COURSES DURATION FEE PER TERM

Secretarial Studies (KNEC) 1 ½ years 10,000

Certificate in Information Science (Library) (KNEC) 1 year 14,000

Certificate in Archives & record Management (IU) 6 months 22,500

Certificate in ECDE (KNEC) 1 year 17,500/11,500(SB)

Certificate in information Technology (IU) 4 months 22,500

Certificate in information Technology (JKUAT) 3 months 31,500

Certificate in Computer engineering 4 months 14,000

Bridging course In mathematics (JKUAT) 4 months 25,000



Most businesses have a business strategy - this is a long-term plan which shows the direction that the business is taking. The business strategy provides an agreed set of objectives for the business.

To implement the business strategy, organisational information should be continuously generated and managed to ensure operations are closely monitored. Hence an information strategy is needed. In fact, information technology has become a necessary component in any organisation with increasing strategic significance, being the principal tool relied on to generate relevant information.

The IT strategy is concerned with the planning, introduction and use of IT resources for the benefit of the whole organisation. Many organisations do not realise the importance of having a plan on generating and managing information. There are those who still believe IT is something mythical and mundane which should not be considered critical to the successful management of the business.

In this article, I try to demystify the aspect of information planning and the need to recognise and integrate information technology in the business strategy.

Information Strategy

BackgroundIT has historically focused on reducing costs

through process automation and the implementation of applications. But that is no longer enough to sustain competitive advantage. Today, important business decisions depend on having up-to-date, trustworthy information.

Organisations need to build an information strategy to guide them towards a coherent, integrated environment for managing and delivering information in support of their business goals. Focus on information as a corporate asset is needed to support key business

John Waibochi Gitahi

Lecturer

Palmax Business and ICT College

Karatina


aims. Businesses need to move away from the current environment in which data is treated as separate from applications and business process, which may require a cultural shift within the IT department.

Definition of an information strategy

An information strategy is variously defined as:

‘...a management tool linking the delivery of the organisation’s mission to the overall information resource.’

‘.... a strategic planning framework for the delivery, use and management of information.’

An information strategy is a high level strategic plan for managing an organisation’s information and knowledge resources. It is underpinned by an information policy. Elizabeth Orna, a leading writer on information strategy, stresses that the information policy stems from a clear understanding of the organisation’s strategic objectives, and the information resources required to achieve those objectives.

The information strategy puts the information policy into practice by setting out aims/objectives,

actions to achieve them, and targets/deadlines. It is developed and implemented in stages, and must be periodically reviewed.

Information strategy in practice

Organisations rely on information that is relevant, timely and accurate. Their information needs are numerous and diverse. Orna (2004) argues that an

organisation’s information resources should therefore be managed using a strategy based on:

• Its strategic objectives.• A clear idea of its information

needs and how staff should use that information.

Orna lists the following benefits of having an information strategy:

• Decision making on investment in systems and IT is based on organisational strategy and user needs (rather than technology push or the latest trends).

• A strategy avoids wasting time on unnecessary activities, particularly users having to interpret information received in unsuitable formats.

• A strategy also ensures an organisation meets its legal requirements, so avoiding unnecessary costs and risk to reputation.

• Properly managed information supports innovation, productivity and competitiveness.

• Information activities are unified, so fully contributing to organisational objectives.

• A strategy encourages co-operation and openness between managers of information resources. This results in more effective use of the organisation’s information and in more innovation.


BUSINESS STRATEGY

ORGANISATIONAL STRATEGY

INFORMATION STRATEGY

Drive

s

Drives

Supp

orts

Supports

Hardware, software, application, database, procedure, people, network

Structure, hiring, operations, process

Goals, objectives, strategies, tactics

Information Systems Strategy Triangle


PrerequisitesA successful information strategy

requires the commitment and understanding of senior managers from all departments, such as finance, marketing and operations. The rest of the organisation requires a clear understanding of the strategy. Other requirements include time, money and staff to manage and implement the strategy.

Steps in the development of an information strategy

(i) Strategists need to understand the organisation’s strategic objectives, its culture and its business processes/methods of working.

(ii) They need to establish what activities and information resources are required to meet the organisation’s objectives.

(iii) Current processes and information resources are examined through an information audit.

(iv) The results of the information audit are analysed to identify shortcomings or gaps between (a) what is required (Step ii) and (b) existing processes and resources (Step iii).

(v) An information policy is produced based on the organisation’s objectives. It comprises a series of statements covering: (a) the organisation’s attitude to information; (b) principles

governing the management of information, the use of staff and IT for the management of information, and cost effectiveness.

(vi) The information strategy is developed and implemented, possibly in stages. It puts policy into practice through specific actions and projects.

(vii) The information strategy is periodically reviewed to ensure its aims are still appropriate and are being met.

Information auditsAn information audit is defined

as:‘A systematic examination of

information use, resources and flows, with a verification by reference to both people and existing documents, in order to establish the extent to which they are contributing to an organisation’s objectives.’

Information audits employ a number of methods including surveys, interviews, focus groups, and examination of existing databases and documents - both electronic and paper records. Information audits are not one-off exercises. They should be repeated periodically. They may identify opportunities for quick wins - improvements that can be made immediately.

Step 2 is essential before carrying out an information audit. Otherwise you will not know how to use the results of the audit.

Information strategy - possible components

There is no formal model or template for an information strategy. The types of document that are included, their style and content, will vary between organisations according to organisational culture and the aims of the information strategy. However, the strategy is likely to contain the following components:

• What you are trying to achieve and why.

• What you have done and discovered so far.

• Information policies and procedures (or reference to them).

• The plan for the specified projects.

• The framework for the ongoing monitoring and evaluation of the strategy.

• Information strategy is related to, but should not be confused with other lower level strategies, such as: - Information systems

strategy - an identification of the information systems required to meet the information requirements of the organisation.

- Information technology strategy - an identification of the technology needed to support the information and information systems strategy.


Information management

strategy

Information technology

strategy

Informationsystemsstrategy

INFORMATIONSTRATEGY


Information systems strategy

A strategy which allows implementation of the technological implications of the organisation’s overall strategy as well as subsidiary strategies such as the marketing strategy, research and development strategy and human resource plan.

The information systems strategy is a key document underpinning an organisations strategic plan. In particular, the strategy seeks to develop, deliver and support information systems and to provide information technology that makes the organisation to excel.

Other drivers and contributors to the information systems strategy are risk and business continuity management as well as statutory and legislative requirements.

There are three main perspectives on information systems (IS) strategy:

- Strategic information systems planning (SISP) .

- Alignment between IS strategy and business strategy.

- Competitive use of IS or using IS for competitive advantage.

Strategic information systems planning (SISP)

SISP is the analysis of a corporation’s information and processes using business information models together with the evaluation of risk, current needs and requirements. The result is an action plan showing the desired course of events necessary to align information use and needs with the strategic direction of the company (Battaglia, 1991).

For a long time, the relationship between information system functions and corporate strategy was not of much interest to top management of many firms. Information systems were thought to be synonymous with corporate data processing and treated as some back-room operation in support of day-to-day mundane tasks (Rockart, 1979). Lately there has been a growing realisation of the need to make information systems of strategic importance to an organisation. Consequently, strategic information systems planning (SISP) is a critical issue. In many industry surveys, improved SISP is often mentioned as the most serious challenge facing IS managers.

Planning for information systems, as for any other system, begins with the identification of needs. In order to

be effective, development of any type of computer-based system should be a response to a need whether at the transaction processing level or at the more complex information and support systems level. Such planning for information systems is much like strategic planning in management. Objectives, priorities, and authorisation for information systems projects need to be formalised. The systems development plan should identify specific projects slated for the future, priorities for each project and for resources, general procedures, and constraints for each application area. The plan must be specific enough to enable understanding of each application and to know where it stands in the order of development. Also the plan should be flexible so that priorities can be adjusted if necessary. King (1995) in his article argued that a strategic capability architecture - a flexible and continuously improving infrastructure of organisational capabilities – is the primary basis for


Network ResourcesCommunications media and network support

Data Resources

Data and know

ledge bases

People Resources

End users

and IS sp

ecialist

s

Input of data resources

Processing data into

information

Output of information

products

Software Resources

Programs and procedures

Hard

war

e Re

sour

ces

Mac

hine

s an

d m

edia

System Activities

Storage of data resources

Control of system performance

Components of anInformation System

Types of info systems


a company’s sustainable competitive advantage. He has emphasised the need for continuously updating and improving the strategic capabilities architecture.

SISP thus is used to identify the best targets for purchasing and installing new management information systems and help an organisation maximise the return on its information technology investment. A portfolio of computer-based applications is identified that will assist an organisation in executing its business plans and realise its business goals. There is a growing realisation that the application of information technology (IT) to a firm’s strategic activities has been one of the most common and effective ways to improve business performance.

Some characteristics of SISP are:

• Main task: strategic/competitive advantage, linkage to business strategy.

• Key objective: pursuing opportunities, integrating IS and business strategies.

• Direction: executives/senior management and users, coalition of users/management and information systems.

• Main approach: entrepreneurial (user innovation), multiple (bottom-up development, top down analysis) at the same time.

Strategic information systems (SIS) planning in the present era is not an easy task because such a process is deeply embedded in business processes. These systems need to cater for the strategic demands of organisations, that is, serving the business goals and creating competitive advantage as well as meeting their data processing and MIS needs. The key point here is that organisations have to plan for information systems not merely as tools for cutting costs but as means to adding value.

Aligning IT with business strategy

The research on IT and business performance has found that:

(a) The more successfully a firm can align information technology with its business goals, the more profitable it will be and;

(b) Only one-quarter of firms achieve alignment of IT with business (Luftman, 2003). Most businesses get it wrong: information technology gets a life of its own and does not serve management and shareholders’ interests well. Instead of business people taking an active role in shaping IT to the enterprise, they ignore it, claim not to understand IT, and tolerate failure in the IT area as just a nuisance to work around. Such firms pay a hefty charge in poor performance. Successful firms and managers understand what IT can do and how it works, take an active role in shaping its use, and measure its impact on revenue and profits.

To align IT with the business and use information systems effectively for competitive advantage, managers need to perform a strategic systems analysis. To identify the types of systems that provide a strategic advantage to their firms, managers should ask the following questions:

1. What is the structure of the industry in which the firm is located?

• What are some of the competitive forces at work in the industry? Are there new

entrants to the industry? What is the relative power of suppliers, customers and substitute products and services over prices?

• Is the basis of the competition quality, price, or brand?

• What are the direction and nature of change within the industry? From where are the momentum and change coming?

• How is the industry currently using information technology? Is the organisation behind or ahead of the industry in its application of information systems?

2. What are the business, firm, and industry value chains for this particular firm?

• How is the company creating value for the customer - through lower prices and transaction costs or higher quality? Are there any places in the value chain where the business could create more value for the customer and additional profit for the company?

• Does the firm understand and manage its business processes using the best practices available? Is it taking maximum advantage of supply chain management, customer relationship management, and enterprise systems?



• Does the firm leverage its core competencies?

• Is the industry supply chain and customer base changing in ways that benefit or harm the firm?

• Can the firm benefit from strategic partnerships and value webs?

• Where in the value chain will information systems provide the greatest value to the firm? Have we aligned IT with our business strategy and goals?

• Have we correctly articulated our business strategy and goals?

• Is IT improving the right business processes and activities to promote this strategy?

• Are we using the right metrics to measure progress towards those goals?

Using IS for competitive advantage

In almost every industry, some firms do better than others. There is almost always a stand out firm. In the automotive industry, Toyota is considered a superior performer. Apple leads in the smart phones market. In web search, Google is considered the leader.

Firms that do better than others are said to have a competitive advantage over others: they either have access to special resources that others do not, or they are able to use commonly available resources more efficiently - usually because of superior knowledge and information assets.

But how do some firms do better than others and how do they achieve competitive advantage?

How can you analyse a business and identify its stragetic advantages? And how do information systems contribute to strategic advantages?

One answer is in the Michael Porter’s competitive forces model.


PORTER’S COMPETITIVE FORCES MODEL

In Porter’s competitive forces model, the strategic position of the firm and its strategies are determined not only by competition with its traditional direct competitors but also by four other forces in the industry’s environment: new market entrants, substitute products, customers, and suppliers.

• Traditional competitors– All firms share market space

with competitors who are continuously devising new products, services, efficiencies, switching costs.

• New market entrants– Some industries have high

barriers to entry, such as computer chip business.

– New companies have new equipment, younger workers, but little brand recognition.

• Substitute products and services– Substitutes customers might

use if your prices become too high, such as iTunes substitutes for CDs.

• Customers– Can customers easily switch

to competitor’s products? Can they force businesses to compete on price alone in a transparent market place?

• Suppliers– Market power of suppliers

when firms cannot raise prices as fast as suppliers.

• Strategies for dealing with competitive forces, enabled by using IT.

– Low-cost leadership - use information systems to achieve lowest operational costs and lowest prices.

– Product differentiation - use information systems to enable new products and services, or greatly change the customer convenience in using your existing products and services. For example, Google continuously introduces new products and services such as Google maps.

– Focus on market niche - use information systems to enable a specific market focus, and serve this narrow market better than competitors.

– Strengthen customer and supplier intimacy - use information systems to tighten linkages with suppliers and develop intimacy with customers. Chrysler Corporation uses information systems to facilitate direct access by suppliers to production schedules, and even permit suppliers to decide how and when to ship supplies to Chrysler factories.


Information technology strategy

A technology strategy (information technology strategy or IT strategy) is the overall plan which consists of objective(s), principles and tactics relating to use of the technologies within a particular organisation. Such strategies primarily focus on the technologies themselves and in some cases the people who directly manage those technologies. The strategy can be implied from the organisation’s behaviour towards technology decisions, and may be written down in a document. Other generations of technology-related strategies primarily focus on: the efficiency of the company’s spending on technology; how people, for example the organisation’s customers and employees, exploit technologies in ways that create value for the organisation; on the full integration of technology-related decisions with the company’s strategies and operating plans, such that no separate technology strategy exists other than the de facto strategic principle that the organisation does not need or have a discreet ‘technology strategy.’ A technology strategy has traditionally been expressed in a document that explains how technology should be utilised as part of an organisation’s overall corporate strategy and each business strategy. In the case of IT, the strategy is usually formulated by a group of representatives from both the business and from IT. Often the information technology strategy is led by an organisation’s Chief Technology Officer (CTO) or equivalent. Accountability varies for an organisation’s strategies for other classes of technology. Although many companies write an overall business plan each year, a technology strategy may cover developments somewhere between three and five years into the future.

Typical structure of an infrastructure technology strategy

The following are typical sections of a technology strategy:

◊ Executive summary - This is a summary of the IT strategy and includes: . High level organisational

benefits. . Project objective and scope. . Approach and methodology of

the engagement. . Relationship to overall

business strategy. . Resource summary. . Staffing. . Budgets. . Summary of key projects.

◊ Internal capabilities include: . IT project portfolio

management - an inventory of current projects being managed by the information technology department and their status.

. Note: It is not common to report current project status inside a future-looking strategy document. Show the return on investment (ROI) and timeline for implementing each application.

. An inventory of existing applications and the level of resources required to support them.

. Architectural directions and methods for implementation of IT solutions.

. Current IT departmental strengths and weaknesses.

◊ External forces . Summary of changes driven

from outside the organisation. . Rising expectations of users.

Example: Growth of high-quality web user interfaces driven by Ajax technology.

. List of new IT projects requested by the organisation.

◊ Opportunities . Description of new cost

reduction or efficiency increase opportunities.

◊ Threats . Description of disruptive

forces that could cause the organisation to become less profitable or competitive.

. Analysis of IT usage by the competition.

◊ IT organisation structure and governance . IT organisation roles and

responsibilities. . IT role description. . IT governance.

◊ Milestones . List of monthly, quarterly or

mid-year milestones and review dates to indicate if the strategy is on track.

. List milestone name, deliverables and metrics.

The key deliverables can only be achieved if information technology and strategic planning are working together.

CONCLUSIONFor an organisation to fully

harness the benefits associated with information technology, it has to prepare concrete, well defined information systems plans. Properly prepared, such plans will enable the organisation to build, integrate and use information systems successfully.


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5612_ICAEW A4 Poster.indd 1 22/06/2012 10:56

icaew.com/icpakicpak.com

Shaping buSineSS leaderS in accountancy and finance ICPAK and ICAEW, leaders in the finance and accountancy profession, are working in partnership to support their members and continually raise standards of the profession.

As a CPA you can now become a member of ICAEW, use the ACA designatory letters after your name, and leverage worldwide recognition of the ICAEW Chartered Accountant qualification.

As an ICAEW member in Kenya, you can join ICPAK and benefit from the support of the local professional body and access opportunities in the wider East African market.

Holding both qualifications is a guarantee of your professional competence and financial intelligence, and gives you the work experience and skills the business world demands.

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5612_ICAEW A4 Poster.indd 1 22/06/2012 10:56



IntroductionInternational Standard on Auditing (ISA) 300, ‘Planning an Audit of

Financial Statements’ requires the auditor to plan his work so that the audit will be performed in an efficient and effective manner. This article is purely based on a recurring audit, the considerations for an initial audit will be handled in another article. Audit planning is a crucial step in every audit because it provides the guidelines on the nature, timing and extent of an audit. Working without an audit plan is equivalent to embarking on a journey without knowing the route to your destination. Audit planning involves designing both the audit strategy and the audit plan.

Benefits of planning the audit engagement

Audit Planning

According to ISA 300, there are significant benefits which are derived from audit planning which include but not limited to the following:

(i) It helps the auditor obtain sufficient and appropriate evidence for the circumstances on site.

(ii) It helps identify areas of potential risks.(iii) It helps the auditor plan the nature, timing and extent of other

audit procedures.(iv) Planning helps the auditor in devoting appropriate attention to

important areas of the audit.(v) It helps the auditor in the selection of the engagement team and

allocation of work based on their capabilities and areas of risk.(vi) It facilitates planning and supervision of the engagement team

and review of their work.(vii) Planning ensures that the audit is performed in an efficient and

effective manner.(viii) It reduces audit risk to an acceptable level.

AUDIT PLAN FOCUS

Compliance Regulatory Financial Technology

Ope

ratio

nal

Strategic

15%

14%

13%

18%

21%

19%

Agnes Ndinda Mutiso

Audit Lecturer

School of Professional Studies

KCA University


Steps in the process of audit planning

Step 1: Preliminary engagement activities

The preliminary engagement activities are undertaken in order that the auditor can identify and evaluate events or circumstances that may negatively affect the planning and performance of the audit. Specifically, they are aimed at:

• Ensuring that the auditor maintains the necessary independence and ability to perform the engagement.

• Ensuring that there are no issues with management integrity that may affect the auditor’s willingness to continue the engagement.

• Ensuring that there are no misunderstandings with the client’s terms of engagement.

The engagement activities entail the following:

• Performing procedures to assess the continuance of the client relationship and specific audit engagement according to the requirements of ISA 220.

• Evaluating compliance with relevant ethical requirements including independence issues.

• Establishing an understanding of the terms of the engagement in accordance with the requirements of ISA 210.

• Agreeing the terms of an engagement.

Step 2: Planning activities

The planning activities involve establishing the audit strategy and an audit plan.

Audit strategy

ISA 300 states that the auditor shall establish an overall audit strategy that sets the scope, timing and direction of the audit and that guides the development of the audit plan. The audit strategy provides a general approach of how the audit will be conducted.

Factors to consider in designing an audit strategy include the following:

(i) The financial reporting framework on which the financial statements have been prepared.

(ii) Industry specific reporting requirements such as reports mandated by industry regulators.

(iii) The expected audit coverage including the number and locations of components to be included.

(iv) The nature of the business being audited including the need for specialised knowledge.

(v) Effectiveness of the work of internal auditors and the extent to which the external auditor can place reliance on their work.

(vi) The effect of information technology on the audit procedures including software compatibility and use of computer aided audit techniques (CAATs).

(vii) The resource availability of the audit firm and how they are assigned to the different areas of the audit.

(viii) The results of preliminary activities and where applicable, whether knowledge gained on the other engagements performed by the engagement partner for the entity is relevant.

Audit plan

The audit strategy sets the overall approach to the audit while the audit plan fills in operational details of how the strategy will be achieved. The audit plan is more detailed than the audit strategy in that it includes the nature, timing and extent of audit procedures to be performed by the engagement team members. Some of the activities included in the audit plan include:

• Understanding the client’s business.

• Risk assessment.• Determining materiality.• Analytical procedures.• Audit documentation.• Substantive audit procedures.

Audit Planning

Element 1

Identify the characteristics

of the engagement that define its

scope.

AUDIT STRATEGY

AUDIT STRATEGY AUDIT PLANNING

AUDIT PLANNING

Element 5

Ascertain the nature, timing

and extent of resources necessary to perform the

engagement.

Element 4

Consider the results of

preliminary engagement activities and

where applicable, whether

knowledge gained on other engagements performed by

the engagement partner for the

entity is relevant.

Element 3

Consider the factors that in the auditor’s professional

judgement, are significant in directing the engagement

team’s efforts.

Element 2

Ascertain the reporting

objectives of the engagement to plan the timing of the audit and

nature of the communications

required.


Client screeningISA 310 requires a reasonable

understanding of the client’s business and industry. The nature of the client’s business and industry affects the client’s business risk, inherent risk and the risk of material misstatements in the financial statements. The major objective of acquiring knowledge of the client’s business is to identify the risks that the organisation is exposed to and how they could lead to a risk of material misstatement in the financial statements.

Sources of information about the client’s business

The client’s information can be obtained from:

- Information from the audit firm such as previous year’s working papers, previous year’s audit

team, audit partner as well as previous experience with the client.

- Information from external sources such as industry surveys, internet, financial institution, credit reference agencies, suppliers as well as customers.

- Information from the client such as discussions with management, employees, legal advisors, document analysis as well as the client’s website.

Use of the information

The information obtained by understanding the client’s business is critical to the planning and performance of the audit. Such information is used by the auditor mainly to:

- Develop the audit plan as well as the audit programs.

- Assess the level of risk.

- Determine materiality levels. - Evaluate audit evidence. - Identify related parties and their

transactions. - Recognise conflicting and

unusual circumstances. - Appraise appropriateness and

effectiveness of accounting policies.

Nature of information collected

The information could include:

(i) The client’s external environment - the auditor should collect information concerning the economic conditions, impact of competition, reporting obligations, legal and regulatory requirements.

(ii) Relationship with external parties - the auditor should identify factors such as major sources of income, key customers and suppliers, sources of finance and related party transactions which require disclosure in the financial statements.

(iii) Management information - the management has the key responsibility of preparing financial statements which show the true and fair view of company affairs. The auditor should collect information about the management philosophy and operating styles, ability to identify and respond to risks, commitment to effectiveness of internal controls as well as the general competence of the managers.

(iv) Client’s operations - the auditor should obtain understanding about the client’s objectives related to reliability of the financial reporting, efficiency and effectiveness of operations as well as compliance with laws and regulations.

(v) Client’s performance measurement system - the performance measurement system has direct relationship with inherent risk because if the objectives are too difficult to meet or if the system allows for manipulation of the financial statements the

Audit Planning

AUDIT PLANNING

AUDIT PREPARATION

AUDIT EXECUTION

AUDIT FOLLOW-UP

Communication of results to auditee

Bi-annual remediation plan

follow-up

Remediation planperiodic update

Action plan sent to audit sponsors

Audit execution

Preliminary report

issuance

Draft audit report issuance

Requirements request

Auditrequest

Agenda sent to auditee

Audit date agreement

Audit date assignment

Audit preparation

Final report issuance


inherent risk will increase. The auditor is expected to read the financial statements, carry out ratio analysis and inquire from the management about the key performance indicators that they use to measure progress towards the company objectives.

Risk assessmentThe audit plan should

incorporate procedures to be included in assessing the level of risk. In a risk based audit the auditor is expected to assess the level of audit risk. Audit risk is the risk that the auditor will issue an inappropriate audit opinion, for example when the auditor concludes that the financial statements show the true and fair view of company affairs when they are actually materially misstated.

Importance of risk assessment

Risk analysis is a very important stage of the audit as it enables the auditor to:

• Identify areas of the financial statements where material misstatements are likely to occur.

• Plan procedures that address the significant risks identified.

• Minimise the risk of issuing an inappropriate audit opinion to an acceptable level.

• Reduce the reputational risk as well as punitive damages.

• Carry out an efficient and effective audit.

Elements of audit risk to be assessed

Audit risk is a component of inherent risk, control risk and detection risk. In other words, audit risk = inherent risk x control risk x detection risk. During planning the auditor is expected to assess the level of each of these risks so as to reduce the audit risk to an acceptable level.

Inherent risk

ISA 400 defines inherent risk as the susceptibility of an account balance or class of transactions to misstatement. These are risks derived from characteristics of the client’s environment, conditions, events, actions and inactions that could adversely affect an entity’s ability to achieve its business objectives or goals. Failure to achieve the business objectives may put pressure to management to manipulate the financial statements so as to make their performance better than they are hence increasing the risk of misstatement in the financial statements. Examples of inherent risk may include pressure to meet strict budgeted results, when the company’s performance is not good, stiff competition from competitors, susceptibility of the company assets to theft or misappropriations among others.

Control risk

This is the risk that the client’s control system has been unable to prevent, detect and correct misstatements. During planning the auditor should design procedures to be followed in testing the effectiveness of the company’s internal control system so as to evaluate the level of risk due to insufficiency of controls or ineffective application.

Detection risk

This is the risk that the auditor’s procedures are unable to identify misstatements whether as a result of errors or fraud either individually or in aggregation. The detection risk may result from:

(i) Sampling risk - risk that the auditor’s conclusions based on a sample may be different from his conclusions if the entire population of transactions were subjected to similar audit procedures. This means that the auditor fails to detect misstatements due to problems related to the sample size.

(ii) Non sampling risk - this is the risk that the auditor fails to detect misstatements due to other reasons not related to the sample size. Examples of non sampling risks may include inadequate audit team in terms of numbers and qualifications, use of inappropriate audit procedures, lack of auditor’s independence as well as misinterpretation of the results of the tests.

Audit Planning


Determining materialityMateriality is a threshold or a

limit. Misstatements are considered material if they can reasonably influence the economic decision of users either individually or in aggregation. During the planning phase the auditor determines materiality to help in setting the limits of misstatements that the auditor is willing to accept. It is important to note that determining materiality is a matter of the auditor’s judgement because of the differences in clients’ level of risk.

Factors to consider in determining materiality include:

- The circumstances surrounding the entity.

- Both the size and nature of the misstatement.

- The thresholds given by the profession, for example• 0.5%- 1% of turnover.• 5% - 10% of profit before tax.• 1%- 2% of gross assets.

Preliminary analytical procedures

ISA 520 states that “ The auditor should apply analytical procedures at the planning and overall review stages of the audit”. Analytical procedures involve the evaluation of financial information through an analysis of plausible relationships among financial and non financial data with the aim of identifying significant differences which could indicate potential areas of misstatement. The analytical procedures incorporate the comparison of:

- Current and prior year figures. - Actual and budgeted figures. - Clients information and that of

the average in the industry.

Purpose of analytical procedures at the planning phase

During planning, the auditor is expected to carry out analytical procedures to:

- Assist in understanding the client business.

- Identify areas of potential risks. - Plan the nature, timing and extent

of other audit procedures. - Determine the resource

requirements and allocate those resources appropriately.

Audit documentationThe auditor is required to

prepare and retain a written documentation that provides sufficient and appropriate record of the basis for audit report, evidence that the audit was planned and performed in accordance with ISAs and other regulatory requirements. The documentation of the audit plan is a record of the planned nature, timing and extent of the audit procedures that can be reviewed and approved prior to their performance. The auditor may use standard audit programs or audit completion check lists tailored to the needs of the particular engagement circumstances. At the planning stage the auditor should document the overall audit strategy, the audit plan, risk analysis, determination of materiality as well as the client screening results.

Audit Planning


Substantive proceduresThese are procedures carried

out at the assertion level to detect material misstatements whether as a result of fraud or error in the financial statements. These procedures are carried out during collection of evidence but their nature, timing and extent should be determined in the planning phase after determination of materiality, risk assessment and tests of control.

ConclusionAudit planning is a key step in

the audit process which should be carried out with utmost seriousness.

Audit Planning

The success of the audit is majorly determined by the effectiveness of the planning process and such should be supported by all the key engagement team members including the audit managers as well as the engagement partners. Audit planning involves establishing both the audit strategy and the audit plan which acts as a road map to the journey of the audit process. Thus adequate planning benefits the audit of the financial statements by identifying potential risk areas, devoting more attention to those areas by allocating more resources, more time and more qualified team members to the risky areas hence reducing the audit risk to an acceptable level. Audit planning is

not a static process which is only performed during the start of the audit, the audit strategy and plan may be modified during the audit in case of unexpected events, changes in conditions or evidence obtained provide information which is significantly different from what was available to the auditors at the planning phase. Proper planning and review of the audit plan as the audit process progresses is key in ensuring that the audit is carried out in an efficient and effective manner thus reducing the risk of issuing an inappropriate audit opinion which could have adverse consequences to the audit firm.

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MISSION

To provide the highest quality training in accountancy and business that is relevant to the market and to students and to provide the highest quality accountancy and financial management consultancy to our clients while keeping and enhancing our position as a leading training centre in the

country and in the region.

Integrity an

d excelle

nce

CORE VALUES

Integrity: To display the highest level of integrity in all that we do.Excellence: To continually pursue excellence in the performance of our duties.Professionalism: To diligently and professionally conduct our business.


BackgroundCommercial score cards were

first used in personnel recruitment where the interviewee characteristics were summarised into a card known as a score card. Before we delve into score cards let us understand the origin of credit. Early credit originated from mere deferred payment which was purely based on trust. As commerce developed an era was reached where the basis was credit character, collateral condition and capacity. These factors have been summed up or refined into what we call score cards which were adapted from personnel interviews.

Credit scoring first came about in the 1980s due to a need to process credit applications quickly and accurately. Traditionally, lending decisions were carried out by individuals rather than computers. However, due to high volumes of applications and the information contained within them, the system had to quickly change. In fact, today, it is possible to visit some websites, complete a form and get your credit score instantly.

Typically, a credit scoring model will contain the score card element which keeps tabs of the score based on the questions asked and the statistical analysis of certain responses to those questions.

A credit score is a number generated by a statistical formula based on information in your credit report or as provided by yourself, compared to information relating to other people. Essentially, it is a systematic method of evaluating credit risk that provides a consistent analysis of the factors that have been determined to cause or affect the level of risk. Factors are usually determined through an analysis of historical loan payment activity as well

Credit Scoring

Wasilwa Miriongi

Managing Director

Del Creder Credit Management Limited

Nairobi


as various descriptive parameters that may be used to classify an account into one of several defined categories or customer classes. The resulting number is a highly accurate prediction of how likely you are to pay your loan. Credit scores are used extensively, and if you have gotten a mortgage, a car loan or a credit card, the rate you received was directly related to your credit score. Ideally, the higher the number, the better you appear to lenders. People with the highest scores are supposed to get the lowest interest rates.

What makes up a score?

If we examine FICO (Fair Isaac Corporation), the most commonly used scoring model, there are five criteria that make up the score. The biggest driver, as one would assume, is payment history. This makes up 35% of the score. Second, is the amount of money the applicant owes other creditors. This accounts for 30% of the score. Third, is the length of credit history, 15%. Fourth, new credit acquired within the last 12 months, 10%. The remaining 10% is the type of credit used; installment loans, mortgages and credit cards.

Scoring categories

Lenders can use one of many different credit-scoring models to determine the creditworthiness of credit applicants. Different models can produce different scores. However, lenders use some scoring models more than others. The FICO is one such popular scoring method.

Its scale runs from 300 to 850. The vast majority of people will have scores of between 600 and 800. A score of 720 or higher will get you the most favourable interest rates on a mortgage, according to the FICO score.

With the development of scoring methods, each of the major credit bureaus uses their own version of the FICO scoring method. Equifax has the BEACON score, Experian has the Experian/Fair Isaac Risk Model and TransUnion has the EMPIRICA score. Their versions can come up with varying scores because they use different statistical applications. Variances can also occur because of differences in data contained in different credit reports.

No matter which scoring model lenders use, it pays to have a good credit score. Your credit score determines whether you get credit or not, and how high your interest rate will be. A better score can lower your interest rate. If you have an existing

credit card, the issuer is likely to look at your credit score to decide whether to increase your credit limit or charge you a higher interest rate.

Developing user based scoring

Where a company processes data from applicants and has a lot of information, an own scoring model can be developed and there may be no need for the complex bureau based models.

There are two types of score cards. One is the Custom Score Card which is usually internally designed and uses information directly from applications. It is also called tailored custom card.

Credit Scoring

35%

30%15%

10%10%

Payment history

New credit

Types of credit in use Amounts owed

Type of credit in use


The other type of score card is known as the Bureau Score Card which obtains information from reference bureaus. The two scorecards have commonly been used but the major difference is that the latter is more expensive to apply. The point worth noting is that score cards need not necessarily be reference bureau derived.

Advantages and disadvantages of credit scoring

The theory behind credit risk scoring is that the existence of certain risk factors, or combinations of risk factors, will result in a greater likelihood of serious payment delinquency or payment default. The stated advantages of using credit scoring include:

Increased credit availability: The use of credit scores gives lenders a much better understanding of risk than previously, giving them the confidence to offer credit to more people. Lenders who use credit scoring can approve more loans, because credit scoring gives them more information upon which they can base their decisions to make loans. In addition, lenders can tailor a range of loans to different risk levels and offer a whole range of credit options.

Lower credit rates: With more credit available the cost of credit for borrowers has decreased. Credit scoring is far more cost efficient due to its automation. Being an

automated credit process including credit scoring, makes the credit process more efficient and thus less costly for lenders, who pass savings on to their customers. In addition, lenders can more effectively control their losses using credit scoring systems, again, allowing them to offer lower overall rates.

Fairer credit decisions: Credit scoring is an automated mathematical process that utilises technology to determine suitability for loans. It considers only factors related to credit risk, removing from the lending process the risk of human bias based on race, religion, nationality or marital status.

Faster credit decisions: Technology that utilises scoring systems allows lenders to make instant credit decisions. This is notable in virtually all areas where a consumer seeks credit, from a supermarket to a motor vehicle

dealer to buying a house. In the personal loan and mortgage lending industry, applications can be approved in hours rather than weeks for borrowers who score above a lender’s score cut-off.

Opportunities to improve the score: Before the advent of credit scoring, so-called “knock out rules” meant that lenders often turned away borrowers based on a past problem in their file. Credit scoring considers all credit-related information, good and bad, in a person’s credit report. With credit scoring systems, past credit problems fade as time passes and as recent good payment patterns are established.

Flexibility: The model is such that the credit manager can alter certain parameters and increase or decrease the amount of credit risk the scoring model will consider acceptable,

Credit Scoring


or unacceptable. Amendments and changes can be made across the board with immediate effect.

Training: Extensive training of credit staff is avoided as the system does not purely rely on staff expertise and sometimes a reduction in credit staff may be achieved.

Uniformity and consistency: It removes the human element from the risk assessment process. Although many would prefer the more personal touch, a consistent system ensures that decisions are made without the individual being swayed by personal factors.

Much has been said and written about the advantages and benefits of credit scoring applied to commercial credit risks, but little has been written about the limitations of credit scoring models. Here are a few comments about the problems, limitations and disadvantages of credit scoring models:

Poorly designed scores: A properly designed credit scoring system allows creditors to evaluate thousands of applications consistently, impartially and quickly.

Credit Scoring

If this is true, then the opposite must also be true. A poorly designed credit scoring system can evaluate thousands of applicants and can make the wrong recommendation every time.

Impact of changing environment: Scoring models base their decision on present and past data. So, it will be difficult to predict the future financial position of the company. Many changes take place due to changes in economic, political, social, technological, legal and other environments. All this will

affect the working of the company being assessed. Therefore, scoring is not a guarantee for financial soundness of the company. Credit risk can change almost overnight. Example: The owner of a business dies and there is no one qualified to replace him.

Improper disclosure may happen: Certain individuals are able to manipulate the system by anticipating the most appropriate answers that will help them achieve a higher score.


Credit Scoring

Problems for new companies: There may be problems for new companies to access credit from the market. This is because a new company may not be in a position to prove its financial soundness. Therefore, it may receive lower credit scores. This will make it difficult to get credit from the market.

Overriding a risky decision: Credit managers should be able to override the credit score and its credit recommendation. However, doing so is difficult to justify if there is a serious payment problem, or worse a bad debt loss. For this reason, credit professionals are reticent to override the scoring model even when they believe the recommendation is wrong.

Lack of proper analysis for an internally developed score: Internally developed credit scoring models often lack sophistication and usually have not been subjected to critical analysis of the statistical significance of the factors used to develop the credit score and the credit recommendation.

Scoring models can be expensive: Professionally designed, tested and validated credit scoring models can be expensive, and can be hard to customise. As a result, the credit scores these programs

generate may not mimic the decision making style and the risk tolerance of the companies that purchase them and therefore they do not produce the desired results.

Difficulty in explaining negative decisions: Some professionally designed models only provide the credit manager with a numerical score. With this limited information, it can be quite difficult for the credit manager to explain a negative credit decision [based only on a numerical score] to an irate credit applicant, or to an active customer. On rejection of an application due to the credit score, many individuals can be left feeling very dissatisfied largely due to the absence of one single identifiable factor.

Measuring risk precisely: Credit risk can never be measured precisely and any model that says it can is wrong.

Computer error: There may be the perception that application refusal is due to computer errors.

Difference in scoring: There are cases, where different scores are provided by various scoring agencies for the same application. These differences may be due to many reasons. This creates confusion in the minds of users.

The benefits introduced by credit scoring system and its revolution in consumer credit risk analysis decisions cannot demean the role played in improving risk mitigation that in the absence of any comparable systems this remains the easiest, cheapest, accurate and quickest way of credit assessment.

It is important to remember that it is not a lender’s job to avoid all potential high risk debts - if this was the case then only those with an impeccable score would be able to obtain credit. The nature of the business is to assess the degree of risk and then price their interest rates accordingly. Lenders who wish to lend to those borrowers with an imperfect credit history or a low credit score may reflect that higher risk by charging an increased rate of interest on the loan product.


This is the second part of the article on financial instruments. The first part introduced financial instruments, provided a general framework within which financial instruments are accounted for and presented and finally, their recognition and categorisation. The second part shall revisit the various classifications, cover measurement, impairment, derecognition, hedging and disclosures.

Classification, measurement, impairment and derecognition

For the purpose of measurement, IAS 39 recommends that financial assets (according to the perspective of the investor or lender) should be classified into four main categories while financial liabilities (according to the perspective of the borrower) should be classified into two categories. The main categories of financial assets as per IAS 39 are as follows:

(i) Financial assets at fair value through profit and loss (FVPL).(ii) Held to maturity (HTM).(iii) Loans and receivables (L/R).(iv) Available for sale (AFS).

For financial assets, we need to consider initial measurement, that is, the value immediately the entity becomes party to the contract, subsequent measurement (the value to be used in presentation in the financial statements), impairment (possibility of non recovery or significant decline in value) and derecognition (removal from financial statements).

Financial Instruments: IAS 32, IAS 39 and IFRS 7 (Part 2)

Geoffrey Injeni

Director

School of Finance and Applied Economics

Strathmore University, Nairobi


A summary of these classifications is as follows:FVPL HTM L/R AFS

1.Describe Financial assets acquired with the intention of trading/resale/speculation

Financial assets acquired with the intention to be held till settlement date (quoted)

Financial asset acquired with intention to hold till settlement date (no active market/not quoted)

Default category for other financial assets and those that the firm chooses to classify here.

2.Examples Shares and loan stock traded on a stock exchange.Derivatives that have a net cash inflow (must be classified here)

Loan stocks that are traded on a stock exchange with intention to hold till settlement date, that is, all interest and principal to be received

Loan stocks that are not traded.Loans to customers such as by financial institutionsReceivables (sale of goods and assets on credit)

Shares and loan stock traded and not traded.Shares of private companies.Loans issued by private companies and individuals

3.Initial measurement At fair value = transaction price.Transaction costs are expensed

At cost = transaction price + transaction costs

At cost = transaction price + transaction costs

Quoted at fair value = transaction price + transaction costsOthers at cost = transaction price + transaction costs

4.Subsequent measurement

At fair value with changes in fair value reported in the income statement

At amortised cost with changes reported in income statement

Loans measured at amortised cost with changes reported in income statement. For short-term receivables we use estimated amount receivable and where relevant a specific allowance for loan losses

Those at fair value = fair value with changes reported in reserves (AFS reserve).Those at cost = at initial cost

5. Impairmentfactors(i) Financial difficulty or

insolvency of borrower(ii) Significant decline in

market values(iii) Request for deferred

repayment

Not applicable Checked for impairment loss. Difference between current amortised cost and new amortised cost after impairment. Can be reversed later

Checked for impairment loss. Difference between current amortised cost and new amortised cost after impairment. Can be reversed later

Should be checked for impairment, if significant then report as an expense in the income statement. Impairment loss on shares cannot be reversed

Note: amortised cost is the present value of future cash flows discounted at an effective interest rate. If you recall example one on the convertible loan stock as featured in the July-September 2012 edition of this journal, the value of the liability component is the amortised cost.

Financial Instruments

Accounting for financial instruments under IFRS

Contract

Recognition Classification Measurement Derecognition

AssetLiabilityEquity

AssetAmortised cost held until

maturityFair value+profit/loss

or comprehensive income if held for trading

LiabilityPrinciple: amortised

costsException: Fair

value + profit/loss or comprehensive income

EquityFair value + APIC - transaction costs

Discharge,cancellation or

expiry

Transfer

Accounting for differences between the carrying amount

and the consideration through profit/loss


Categories of financial liabilitiesThere are two categories:1. Financial liabilities at fair value through profit and loss

(FVPL).2. Financial liabilities at amortised cost (AC).

For financial liabilities, we need to consider initial measurement that is, the value immediately the entity becomes party to the contract, subsequent measurement (the value to be used in presentation in the financial statements) and derecognition (removal from financial statements).

A summary of these classifications is as follows: FVPL AC

Description Financial liability borrowed with the intention of trade or speculation

Default categories for all other financial liabilities.

Examples Loan stock quoted borrowed with the intention to pay when market price declines.Derivative with a net cash outflow.

Loan stocks quoted and also of a private company.Payables on purchase of goods on credit.

Initial measurement

Fair value = transaction price.Transaction costs expensed.

Measure at transaction price - transaction costs

Subsequent measurement

Fair value with changes reported in the income statement

Measured at amortised cost and changes also reported in the income statement

Derecognition

Financial assets should be derecognised (removed from financial statements), when the rights to receive cash are either cancelled, expire or settled. Financial

liabilities should be derecognised when the obligations to transfer cash is cancelled, extinguished or settled. On derecognition of either a financial asset or a financial liability, the firm should report a gain or loss in the income statement and where relevant after making adjustments for previous gains and losses reported in the AFS reserves.

Example two (Classification, measurement and derecognition)Assume the following transactions for a company:

2011 Transaction summary Amount

1 January Borrowed a 10% loan stock

payable in 4 years time

(quoted). (The principal was

Sh.50,000)

Transaction price =

present value using

interest rate of 12%

1 March Bought 10,000 shares in A Ltd.

(quoted) paying 2% brokerage

fees of the share price

Sh. 50 per share

1 July Bought 5,000 shares in B Ltd.

(quoted) paying 2% brokerage

fees on the share price

Sh. 80 per share

1 October Bought 20,000 shares in X Ltd.

a private company paying legal

costs of 5% on the share price

Sh. 50 per share

The following additional information is relevant:

• The loan stock that was borrowed on 1 January 2011 was to be held till settlement date and interest was payable annually on 31 December each year.

• The shares in A Ltd. were to be held in the long term (that is, no intention to sell). As at 31 December 2011 the market price was Sh. 70 per share.


• The shares in B Ltd. were acquired for resale. On

31 December 2011, the market price of all shares was

Sh. 70 per share. On 15 January 2012 half of the shares of B Ltd. were sold for Sh. 75 each.

Required:

Show how these transactions will be recorded and reported in years 2011 and 2012.

Suggested solution

The best approach is to account for each financial asset or liability (all transactions in shillings).

ASSET

Extinguished by realisationTransferred

YESYES NO

NO With right to sell

Without right to sell

Asset/liability to be on books Asset/liability

go off books

Put assets off books recognise

gain/loss

By way of sale By way of collateralPut assets off books;

no question of gain/loss

Loss of control by transferor;

vesting of control in transferee

Asset/liability to be on books; debtor to disclose collateral

seperately

Conditions for derecognition of

asset met

Exchanged against liability

Derecognition of assets


Transaction 1: Loan stock borrowed

Financial liability at amortised cost: to be held till settlement date.

On 1 January 2011 initial measurement = transaction price = PV of future cash flows (interest + principal)= 50,000 x PVIFA12%4yrs + 500,000 x PVIF12%4yrs= Sh. 469,630

Journal entry :

Dr. Cash account 469,630 Cr. 10% loan stock 469,630

On 31.12.2011 subsequent measurement =amortised cost

To recognise interest at 12%

Dr. I/S finance cost (12% x 469,630) 56,360

Cr. Interest accrued 56,360 To record payment of Sh 50,000 interest

Dr. 10% loan stock 50,000

Cr. Cash account 50, 000

Loan stock to the Statement of Financial Position (SFP) (non-current liability) at amortised cost = (469,630 + 56,360 - 50,000) = Sh. 475,990

Transaction 2: Shares in A Ltd.

Financial asset: classified as AFS because there is no intention for sale.

On 1.3.2011 initial measurement = transaction cost plus transaction price

Dr. Investment in A Ltd. (AFS) 510,000

Cr. Cash account 510,000

On 31.12.2011 subsequent measurement = measure at fair value (Sh. 70)

An increase from Sh. 510,000 to 700,000 (gain of Sh. 190,000 to AFS reserve).

Dr. Investment in A Ltd. (AFS) 190,000

Cr. AFS reserve 190,000

The investment will be part of noncurrent assets (NCA) at Sh. 700,000 in the statement of financial position.

On 15.1.2012 disposal of 5,000 shares of A Ltd. (derecognition)

Dr. Cash account (5000 x 75) 375,000

Dr. AFS reserve 95,000

Cr. Investment in A Ltd. 350,000

Cr. I/S (balancing fig.) 120,000

Note on AFS reserve. As we have sold half of the shares in A Ltd., we should also remove half of the gain that is attributable to the shares of A Ltd. that was reported in the AFS reserve when we revalued the shares to their market value on 31 December 2011 and reported a gain of Sh. 190,000.

Transaction 3: Investment in B Ltd.

Financial asset: classified as fair value through profit and loss as there is intention to sell.

On 1.7.2011 initial measurement = transaction price of Sh 400,000 and expense brokerage fees of Sh. 8,000

Dr. Investment in B Ltd. (FVPL) 400,000

Dr. I/S brokerage 8,000


On 31.12.2011 subsequent measurement = fair value (Sh. 70)

There is a loss of 400,000 – 350,000 = Sh. 50,000

Dr. Income statement (loss) 50, 000

Cr. Investment in B Ltd. 50,000

The shares will be classified under current assets (FVPL or as part of cash equivalents).

On 15.1.2012 disposal of 2,500 shares (derecognition).

Dr. Cash account 187,500


Cr. I/S - gain 12,500

Transaction 4: Investment in X Ltd.

Financial asset: AFS because there is no intention to sell

Dr. Investment in X Ltd. 1,050,000

Cr. Cash account 1,050,000

On 31.12.2011 subsequent measurement = measured at fair value

Measured up to 20,000 x 70 = 1,400,000 therefore an increase of Sh. 350,000

Dr. Investment in X Ltd. (AFS) 350,000

Cr. Income statement 350,000

The next example relates to an entity operating in a foreign market. A foreign currency has been used purely for illustrative purposes.



Example three (impairment)

XYZ Ltd., an international company carried out the following transactions in years 2010 and 2011.

1. Purchased 1000 shares in A Ltd. and 500 shares in B Ltd. at $80 and $50 each on 1 July 2010. The shares of A Ltd. were classified at fair value through profit and loss while those in B Ltd. were classified as available for sale. The share prices were $90 and $70 on 31 December 2010 respectively but fell to $40 and $20 respectively in 2011. This was considered to be impairment.

2. Invested in $100,000 10% loan stock of D Ltd. that was priced at 12% on 1 January 2010. It was to be redeemed at the end of five years. Interest on the loan stock was receivable annually on 31 December. On 31 December 2011 after the receipt of the interest, D Ltd. was reported to be in financial difficulty and hence the management of XYZ Ltd. estimated that only half of the principal amount would be received although the full interest would be received over the next three years.

Required

Show how the transactions would be reported by XYZ Ltd. in years 2010 and 2011.

Suggested solution

Investment in A Ltd.

On 1 July 2010 on purchase (all transactions in $)

Dr. Investment in A Ltd. (FVPL) 80,000


On 31.12.2010 measure at fair value

Dr. Investment in A (90,000-80,000) 10,000

Cr. I/S - gain on revaluation 10,000

SFP investment in A Ltd is $90,000 under current assets.

On 31.12.2011 revalue to fair value ($40,000)

Dr. Income statement (40,000-90,000) 50,000

Cr. Investment in A Ltd. 50,000

Investment in B Ltd.

On 1 July 2010 on purchase

Dr. Investment in B Ltd. (500x50 )- AFS 25,000


On revaluation

Dr. Investment in B Ltd. (35000-25000) 10,000

Cr. AFS reserve 10.000

In the SFP investment in B Ltd. will be shown at $35,000.

On 31.12.2011, we report the impairment loss to I/S after making adjustments for the AFS reserve.

The new value ($20x500) = $10,000

Dr. AFS reserve 10,000

Dr. I/S 15,000


In the SFP as at 31.12.2011, investment in B Ltd. will be $10,000 under non current assets.

Investment in $100,000, 10% loan stock in D Ltd.

Financial assets quoted = HTMFinancial assets not quoted = L/R

The above two are measured at amortised cost irrespective of the class.= $10,000 PVIFA12% 5yrs + $100,000 PVIF 12%5yrs= $ 92,790

On 1.1.2010, on purchase

Dr. Investment in 100,000 loan stock 92,790


Every year (2010 and 2011), the investor will accrue interest at 12%.

Increase the investment with accrued interest but reduce the investment with the actual interest received.

Dr. I/S (interest accrued) (12% x 92,790) 11,135

Cr. Investment in loan stock (12% x 92,790) 11,135

Dr. investment in loan stock(actual interest received) 10,000

Interest accrued 10,000

2010 2011

$ $

Bal as at 1.1 92,790 93,925

31.12: accrue interest at 12% 11,135 11,271

103,925 105,196

31.12: Interest received (10,000) (10,000)

Balance as at 31.12 93,925 95,196



Amortised cost before impairment review is the present value of the remaining interest to be received and the final par value. = $10,000(1.12-1) + $10,000(1.12-2) + $60,000(1.12-3) = $59,607

Impairment loss (95,196 – 59,607) = $35,589

Dr. I/S-Impairment 35,589

Cr. Investment in loan stock 35,589

In the SFP 31.12.2011 = $59,607

Hedging

Hedging for accounting purposes means designating one or more financial instruments so that their change in fair value is offset either fully or partly by the change in fair value or cash flows of another hedged item (may or may not be a financial instrument).

Basically, firms carry out hedging to reduce their exposure to risk and uncertainty such as changes in prices, interest rates or foreign exchange rates.


IAS 39 allows an entity to depart from normal accounting requirements for financial instruments and use hedge accounting, but under strict circumstances. The following conditions must be met before a hedging relationship qualifies for hedge accounting.

The hedging relationship must be designated at its inception as a hedge based on the management’s objective.

This may be confirmed by the firm having a journal documentation that lists:• The asset to be hedged that is, hedged item.• The hedging instrument.• The nature of the risk to be hedged (could be cash

flow or changes in fair value).

The hedge is expected to be highly effective in offsetting changes in fair value or cash flows attributable to the hedge item.

The hedge is assessed on an ongoing basis and on whether it has been effective during the financial year.

The effectiveness of the hedge can be measured reliably (the loss on hedged item divided by the gain on hedging item in absolute terms should be between 80% and 125%).

For cash flow hedges, a forecast transaction must present an exposure to variations in cash flows, and it is highly probable that this will affect the profit and loss account.

A firm is required to discontinue the hedge accounting when the following circumstances arise:

• The hedging instrument expires, is sold, terminated or exercised.



• The hedge no longer meets the hedge accounting conditions.

• The company revokes the initial hedge designation.• The expected effect on the hedge item on the profits is

now not expected.

In case of any discontinuation of hedge accounting adjustments are made to the carrying amount of the budgeted items by amortising the previously reported gains or losses in equity over the life of the assets. In this context, this accounting treatment is more appropriate for discontinued cash flow hedges.

Disclosure

The objective of IFRS 7 is to require entities to provide disclosures in their financial statements that enable users

to evaluate the significance of financial instruments on the financial position and performance and the nature and extent of risks arising from financial instruments to which the entity is exposed.

The disclosures are generally in three categories:

1. Classes of financial instruments and level of disclosure.2. Significance of financial instruments for financial

position and performance.3. Nature and extent of risks arising from financial

instruments.

Category Detailed disclosures1. Classes of financial instruments

Class of financial instruments appropriate to the nature of the information disclosed and that take into account the characteristics of those financial instruments.

2. Significance of financial instruments

(i) Statement of financial position(a) Categories of financial assets and financial liabilities - The carrying amounts of financial assets and

liabilities at FVPL, financial assets as HTM, loans and receivables and AFS and financial liabilities at amortised cost.

(b) Financial assets or financial liabilities at fair value through profit or loss – The maximum exposure to credit risk, the extent to which the firm has hedged the credit risk and changes in fair value and how the fair value is determined.

(c) Reclassification – From FVPL to AC and AC to FVPL or to AFS disclose the amount reclassified into and out of each category and the reason for that reclassification.

(d) Derecognition – The nature of assets and in case of not full recognition then extent of risk entity still remains exposed to.

(e) Collateral - carrying amount of financial assets it has pledged as collateral and the terms and conditions relating to its pledge.

(f) Allowance account for credit losses Separate account for allowance for impairment losses and reconciliation. (g) Defaults and breaches –details of default.

(ii) Income statement(a) Net gains or net losses on financial assets or financial liabilities at FVPL or loss and AFS for the amount of

gain or loss recognised in other comprehensive income (AFS reserve) during the period and the amount reclassified from equity to profit or loss for the period HTM, loans and receivables,

(b) Total interest income and total interest expense arising from financial assets or financial liabilities that are not at FVPL; and

(c) Interest income on impaired financial assets accrued in accordance with IAS 39; and(d) The amount of any impairment loss for each class of financial asset.

(iii) Other disclosuresAccounting policies- Summary of significant accounting policies, the measurement basis (or bases) used in preparing the financial statements and the other accounting policies used that are relevant to an understanding of the financial statements.

Fair values - Fair value of a class of assets and liabilities, the methods and, when a valuation technique is used, the assumptions applied in determining fair values of each class, whether fair values are determined, in whole or in part, directly by reference to published price or are estimated using a valuation technique.

3. Nature and extent of risks

(i) Qualitative disclosures (exposures, objectives and how the risks are being managed).(ii) Quantitative disclosures on the risks exposed to.(iii) Credit risk (Collateral and other credit enhancements obtained).(iv) Liquidity risk.(v) Market risk.

45

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Contact the Marketing and Publications Section through:P.O. Box 41362 - 00100 Nairobi Tel: 254(020) 2712640 / 2712828 Cellphone: 0722-201214/0734-600624 E-mail: [email protected] or [email protected]

KASNEB Newsline is produced four times in a year. Over 50,000 copies are printed for each issue. The Newsline is distributed free of charge within and outside Kenya through secondary schools, Kenya National Library Services branches, training institutions, universities, government ministries, Kenya Embassies and High Commissions.

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April - June 2011 KASNEB Newsline, Issue No. 2 1

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Contact the Marketing and Publications Section through:P.O. Box 41362 - 00100 Nairobi Tel: 254(020) 2712640 / 2712828 Cellphone: 0722-201214/0734-600624 E-mail: [email protected] or [email protected]

KASNEB Newsline is produced four times in a year. Over 50,000 copies are printed for each issue. The Newsline is distributed free of charge within and outside Kenya through secondary schools, Kenya National Library Services branches, training institutions, universities, government ministries, Kenya Embassies and High Commissions.

The Newsline is also available on the KASNEB website. It is one of the most widely read journals in Kenya. Spruce up your business by advertising in the KASNEB Newsline. Call us, book space and watch your business grow.


NewslineThe Professional Journal of KASNEB Issue No. 3 July - September 2011

KASNEB

A shared dream



KASNEB

The pricing dilemma

KASNEB

NewslineThe Professional Journal of KASNEB Issue No. 1 January- March 2011

KASNEB

On the Controls


NewslineThe Professional Journal of KASNEB Issue No. 2 April - June 2012

KASNEB

E-commerce

KASNEB

NewslineKASNEB


Updates

KASNEB student fee collection

accounts with banksStudents, trainers, parents/guardians/sponsors, employers and other stakeholders are hereby informed that KASNEB has opened student fee collection accounts with the following banks:

(a) National Bank of Kenya Ltd. (NBK) - Account No.01001031572601.(b) Equity Bank Ltd. - Account No.0170299238025.(c) Kenya Post Office Savings Bank (Postbank) -

Account No.0744130009246.(d) Co-operative Bank of Kenya Ltd. - Account No.01129128535900.

The bank accounts are already operational.

Students are required to complete the appropriate KASNEB forms and relevant fee deposit slips (except for Postbank which does not use deposit slips). The students will be issued with one copy of the deposit slip and a computer generated slip for their records. However, for Postbank only a computer generated receipt will be issued.

Upon payment of the requisite fees to the bank, a cash deposit receipt will be issued to the payee. The completed KASNEB forms will be left with the bank for onward transmission to KASNEB together with one copy of the deposit slip.

All students are advised to pay their fees through any of the above bank accounts.

Note: Students should ensure that all documents requiring certification, such as copies of academic and professional certificates and identity card/passport are so certified before being handed over to the bank.

October - December 2012 KASNEB Newsline, Issue No. 4 47 July - September 2012 KASNEB Newsline, Issue No. 3 47

College profile

EDITOR’S NOTE

As part of our continuous approach to promote accredited institutions, we have been running a feature on fully accredited institutions. In this edition, we feature Alphax College based in Eldoret. The profile below is provided by Mr. Henry K. Yatich, the Principal of the college.

Alphax College Profile

(Fully accredited by KASNEB No. KAS/F/001)

Vision: To be the pacesetter in providing quality and professional education.

FOCUS ON FULLY ACCREDITED TRAINING INSTITUTIONS

Mission Statement: To provide High Quality, Broad-Based Educational Programs that Promote Mastery and Application of Knowledge, Concepts and Skills that Contribute Positively to National Building and Provide Responsible Leadership in Africa.

Our Values: Character, Competence & Quality Our Motto: “Study to show yourself approved …” II Tim 2:15

Alphax College is an offshoot of Alphax Computer School which was established in 1996 as a tertiary college. It is fully registered by the Ministry of Higher Education, Science and Technology (MOHEST/PC/1371/010) and fully accredited by KASNEB.

The institution has continued to be the pacesetter in providing and promoting effective, efficient and profitable education to organisations in both private and public sectors by providing quality and professional education.

KASNEB PROGRAMMESOur KASNEB courses on offer at Alphax College are:• Certified Public Accountants (CPA) • Accounting Technicians Certificate (ATC)• Information Communication Technology Technicians

(ICTT)• Certified Information Communication Technologists

(CICT)

ADMINISTRATIVE STRUCTUREChief Executive Officer: Mr. Kevin OkwaraDirector: Mrs. Jane Ndubi

Management Team: Principal: Mr. Henry Yatich Deputy Principal: Mr. Peter WesongaRegistrar: Mr. Dennis NyonjeExamination Officer: Ms. Joan Maiyo

Departmental Heads: Librarian: Mr. Jackson AbereHead of School of Business, Hotel and Tourism Management: Ms. Joyce NjugunaHead of School ICTE: Mr. Alphonce MulumbaHead of School Media and Social Sciences: Mr. Stanley ChumbaAssistant Administrative Officer: Mr. Bernard Muyelele

PARTNERSHIPS

We have partnered with Jomo Kenyatta University of Agriculture and Technology (JKUAT) and Kabarak University.

Alphax College has been collaborating with Jomo Kenyatta University of Agriculture and Technology since 2007 and Kabarak University since 2009. The courses

on offer are in the field of IT and Business. The Business programmes (Bachelor of Commerce) enable students to pursue accounting courses offered by KASNEB thus complementing their studies.

Through this collaboration, the students manage to graduate with accounting and ICT skills at the same time. The institution’s registration and accreditation by KASNEB enable students to also take their KASNEB examinations at Alphax College – KASNEB Centre.

ACCREDITATION PROCESS BY KASNEB

KASNEB accreditation process and tours have been most insightful and quality oriented. KASNEB officers have always attached quality factors and modern changes of technology use in the administration of accreditation. Both comments made through visits have infused strength to our policies and strategies towards offering quality and professional education.

WHAT MAKES ALPHAX EXCLUSIVE

Alphax programmes have always been anchored on its third core value of QUALITY. The availability of well trained and experienced personnel, well stocked library, WIFI internet service, equipped computer labs, frequents seminars, co-curricular activities and its Christian principles have all contributed to its uniqueness in the region as a pacesetter.

We are also registered with the National Industrial Training Authority (NITA). This has enabled us to offer our cutting edge training services.

The serene environment provides our students and staff with a quiet atmosphere to study.

The Principal, Mr. Henry K. Yatich

Alphax College Profile


CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIESCurrently, we have adopted a street under the Eldoret Green Town Initiative (EGTI), for which we plant indigenous trees and clean the street.

We have participated in the Eldoret Town clean-up exercise, hunger walks, provided food to starving people in Kerio Valley, visited children’s homes in Kitale and within Eldoret, fenced off the Eldoret Arboretum in conjunction with the Kenya Forestry Service (KFS) and planted trees.

GROWTH AREASOur strategic plan 2012-2016 provides for the establishment of Alphax University by 2014. This is in anticipation to expand and disseminate knowledge across the country, Africa, and the entire globe, and contribute positively to the attainment of Kenya Vision 2030.

We have also opened our Eldoret Town Campus at Santuri Court, 2nd Floor, next to Barclays Bank, where we offer KASNEB evening and part time programmes.

The Noble Conference Centre is an exceptional Training Facility with an ambient atmosphere for seminars and workshops which we hope will benefit all our clients.

We have established our Bungoma Campus, at Bungoma Teachers SACCO, 4th Floor, where we hope to register KASNEB programmes, once the due process is completed.

Contacts:Along Iten Road, next to Deliverance ChurchP.O. Box 6516 – 30100ELDORET Tel: 053-2060127/155

College profile


Students of KASNEB, parents, sponsors, guardians, training institutions and other stakeholders are hereby notified of the following important dates and information.

1. Examination dates for May/June 2013 examinations are as follows:

(a) ATC, ICTT, IST and CMT Levels I and II - Tuesday, 28 May 2013, Wednesday, 29 May 2013 and Thursday, 30 May 2013

(b) CPA, CPS, CSIA, and CCP Part I - Friday, 31 May 2013, Tuesday, 4 June 2013 and Wednesday, 5 June 2013

(c) CPA, CPS, CSIA and CCP Parts II and III - Thursday, 6 June 2013, Friday, 7 June 2013 and Monday, 10 June 2013 (d) CICT

(i) Part I - Friday, 31 May 2013, Tuesday, 4 June 2013, Wednesday, 5 June 2013 and Thursday, 6 June 2013

(ii) Part II - Wednesday, 5 June 2013 ,Thursday, 6 June 2013, Friday, 7 June 2013 and Monday, 10 June 2013

(iii) Part III - Thursday, 6 June 2013, Friday, 7 June 2013 and Monday, 10 June 2013

(e) Foreign Accountancy Qualifications (FAQ) - Friday, 7 June 2013 and Monday, 10 June 2013

2. Closing dates for examination entries for the May/June 2013 examinations are shown below: Normal entry: Friday, 15 February 2013 Late entry: Friday, 15 March 2013

3. Examination brochures and forms are obtainable on request, free of charge: (a) In Kenya either in person at the offices of KASNEB or through the post. The examination brochures and forms are also

available at any branch of the Kenya National Library Service (KNLS) countrywide or training institutions.

(b) Outside Kenya either in person at the offices of KASNEB, through the post or at the following offices in Eastern and Central Africa:(i) In Uganda at DMK Associates, Crown House Building - Umeme offices, first floor, suite 2, Bombo Road - Kampala,

Makerere University Business School (MUBS) - Nakawa, Kampala International University - Kansanga, Busoga University - Iganga, and Bugema University, Kampala Campus - Bombo Road.

(ii) In Rwanda at Kigali Institute of Management - Rimera, School of Finance and Banking, Gikondo - Kigali and Institut Polytechnique De Byumba.

(iii) In Burundi at the East Africa Centre for Professional Studies (EACPS), Boulevard de L’OVA Quartier Industriel QL6284/C and Kim-PAC, Rohero 2, Avenue Moso, No.28 - Bujumbura.

(iv) In Cameroon at Maaron Business School 10, Rue, Joffre, Akwa – Douala and Fomic Business School, Buea, Cameroon.

(v) In South Sudan, at the University of Juba.

4. Method of payment of fees Attention of students is drawn to the “Guide to the May/June 2013 examinations” regarding secure methods of paying fees

to KASNEB. (a) In Kenya Students are advised to pay through any branch of the National Bank of Kenya Ltd. (NBK), Equity Bank, Kenya

Post Office Savings Bank (Postbank) or Co-operative Bank of Kenya. Students may also make payment in person at KASNEB offices in cash, by cheques/bankers cheques/drafts drawn in the name of KASNEB or through the post.

(b) Outside Kenya Students are advised to pay the applicable fees in dollars at any branch of KCB in their countries to KASNEB KCB collection account number 1123096465, domiciled at Capital Hill Branch, Nairobi. Thereafter, students should submit their documents to KASNEB together with a copy of the bank deposit slip. Students are individually and personally responsible for ensuring that fees are paid to KASNEB. Consequently, students who pay fees through third parties should ensure that such parties are honest and reliable and will therefore remit the fees to KASNEB without delay. Bankers Cheques/Drafts should be drawn payable to KASNEB and Inter-State Money Orders should be payable at City Square Post Office - Nairobi. Examination entry/annual registration renewal forms and remittances which are sent by post should be posted at least one week before the closing date to ensure that they are received in time.

5. All students who sat for the November/December 2012 examinations should ENTER for the May/June 2013 examinations immediately upon confirmation of their November/December 2012 examination results.

6. All students of KASNEB are required to update their annual registration renewal position by 1 July of each year.

7. Closing dates for applicants wishing to be registered as students in order to be eligible to enter for the November/December 2013 examinations are as shown below:

Normal Registration: Friday, 31 May 2013 Late Registration: Friday, 28 June 2013

8. All inactive students are reminded and encouraged to update their student registration status and enter for the examinations in order to realise their goals. Please get in touch with the office for guidance and advice on how to regularise your student status.

EXAMINATIONS NOTICE - MAY/JUNE 2013 EXAMINATIONS

EXAMINATION DATES

PATH Institute of Technology and Entrepreneurship

PATH INSTITUTE OF TECHNOLOGY AND ENTREPRENEURSHIPKITENGELA COURSES OFFERED:

Hostels available at reasonable rates

KASNEB

Accounting Technicians Certificate (ATC) Levels I and II Certified Public Accountants (CPA) Parts I - III Information Communication Technology Technicians (ICTT) Certified Information Communication Technologists (CICT)

KNEC/ABE/ICM

Certificate/ Diploma in Business ManagementCertificate/ Diploma in Sales and MarketingCertificate/ Diploma in Purchasing and Supplies Management

PITE

• Certificate in MS Office, • Certificate in Data Analysis, • Certificate in Computerised Accounting, • Certificate in Web Design, • Certificate in Computer Programming, • Entrepreneurship short courses and seminars• Production skills in soap-making, cosmetics, exercise books, paints

and dyes, animal feeds, cakes, juices, yoghurt e.t.c

INTERNATIONAL COMPUTER DRIVING LICENCE (ICDL)ICDL registration every Monday

KASNEB


K ASNEB Pictorial

Mr. Pius M. Nduatih (centre) KASNEB CEO presents a sponsorship cheque to the 2012 Financial Reporting (FiRe) Awards technical committee. The Fire Awards ceremony was held on Friday, 26 October 2012 at the Safari Park Hotel and Casino and was organised by the Institute of Certified Public Accountants of Kenya (ICPAK).

KASNEB officers, staff of Kisii University and officials of the Accounting Students Association (ASA), Kisii University during the Inter-varsity Business Forum organised by ASA on Thursday, 25 October and Friday, 26 October 2012 at the University.


K ASNEB PictorialKASNEB officers, invited guests and officials of the Cameroon Association of KASNEB

Students (CAKS) during a conference organised by CAKS on Saturday, 8 December 2012 at the American Language Centre in Douala, Cameroon.


JUNE 2012 EXAMINATION PRIZE WINNERSWe congratulate the following candidates who excelled in their respective examinations and

qualified for award of prizes in the specified papers, levels and sections in the June 2012 examination sitting.

Prize winners

ACCOUNTING TECHNICIANS CERTIFICATE (ATC)

EXAMINATION

LEVEL I

Introduction to Financial Accounting

ATC/137836CHARLES MWANGI KIMANI

Donor: KASNEB

Introduction to Law(Common Paper)

ATC/144091JANE ANYANGODonor: KASNEB

Runner upIntroduction to Law

ATC/136531NDUTO MUSYOKA KIOKO

Donor: KASNEB

Entrepreneurship and Communication (Common Paper)

ATC/145063DENNIS IRUNGU MAINA

Donor: KASNEB

Principles of Management(Common Paper)

ATC/145362ERNEST KIROMO WAMBUI

Donor: KASNEB

Business Mathematics(Common Paper)

ATC/144675DUNCAN KANG’ETHE MWANGI

Donor: KASNEB

LEVEL II

Financial AccountingATC/137879

DINAH GAKII MURIUKIDonor: KASNEB

Fundamentals of Information Communication Technology

(Common Paper)ATC/136487

LEWA ZIRO ZIRODonor: KASNEB

Cost AccountingATC/133357

JOSEPH MUKUNDI RUTEREDonor: KASNEB

TaxationATC/137932

MICHAEL J. NJENGA MWANIKIDonor: KASNEB

AuditingATC/125993

ABRAHAM ONYANGO ONDAGODonor: KASNEB

BEST OVERALL IN A LEVEL

ATC LEVEL IATC/144327

JOHN GICHUKI MWANGIDonor: KASNEB

ATC LEVEL IIATC/141795

JOSHUA N. BIRUNDUDonor: KASNEB

INFORMATION COMMUNICATION

TECHNOLOGY TECHNICIANS (ICTT) EXAMINATION

LEVEL I

Introduction to ComputingICT/3926

VIVIENNE SHENGA ALUSIOLADonor: KASNEB

Runner upIntroduction to Law

ICT/3923MAXWEL KIOKO MUSEMBI

Donor: KASNEB

Computer MathematicsICT/3392

SILLAH STANLEY MBELENZIDonor: KASNEB

Computer Applications (Theory)ICT/4056

JAKAIT DOMINIC DICKSONDonor: KASNEB

Computer Applications (Practical)ICT/4129

JOHN KIDERA ABUNGUDonor: KASNEB

Computer NetworkingICT/3886

PASSCALINE WAHU KINUTHIADonor: KASNEB

LEVEL II

Internet SkillsICT/3829

JAMES OMARI RATEMODonor: KASNEB

Computer Support and Maintenance

ICT/3566DANIEL KAMUNYU CHEGE

Donor: KASNEB

Runner upComputer Support and

MaintenanceICT/3508

ROSARIA WANJIRA KARIUKIDonor: KASNEB

Programming ConceptsICT/3812

SAMUEL MATHERI MWAURADonor: KASNEB

Runner upProgramming Concepts

ICT/3255GEORGE OCHIENG OMOLO

Donor: KASNEB

Prize winners


Foundations of Accounting(Common paper)

ICT/3255GEORGE OCHIENG OMOLO

Donor: KASNEB

Information SystemsICT/3830

GEOFFREY GITHAIGA KARITUDonor: KASNEB


ICTT LEVEL IICT/4258

CHARLES OYUYO SAKWADonor: KASNEB

ICTT LEVEL IIICT/3488

GLORIA NYAMOITA MATOYADonor: KASNEB

INVESTMENT AND SECURITIES TECHNICIANS (IST)

EXAMINATION

LEVEL IFinance and Investments

IST/297PAUL KIPLAGAT YEGO

Donor: KASNEB

Financial Institutions and MarketsIST/297

PAUL KIPLAGAT YEGODonor: KASNEB

Law and Regulations Governing Financial Markets

IST/297PAUL KIPLAGAT YEGO

Donor: KASNEB

LEVEL II

Securities Analysis and ValuationIST/293

RICHARD KIPTUM BIRECHDonor: KASNEB

Wealth Creation and ManagementIST/293



IST LEVEL IIST/297

PAUL KIPLAGAT YEGODonor: KASNEB

IST LEVEL IIIST/293


CREDIT MANAGEMENT TECHNICIANS (CMT)

EXAMINATION

LEVEL I

Fundamentals of Credit ManagementCMT/931

JENNIFER MUENI NYAMAIDonor: KASNEB

LEVEL II

Economics(Common paper)

CMT/919WYCKLIFE OLUOCH JUMA

Donor: KASNEB

Marketing and Customer RelationsCMT/919

WYCKLIFE OLUOCH JUMADonor: KASNEB

Law Governing Credit PracticeCMT/885

ALEX GIKONYO KINIARUDonor: KASNEB


CMT LEVEL ICMT/935

PETER KIPKOECH LANGATDonor: KASNEB

CMT LEVEL IICMT/919

WYCKLIFE OLUOCH JUMADonor: KASNEB

CERTIFIED PUBLIC ACCOUNTANTS (CPA)

EXAMINATION

PART I - SECTION 1

Financial AccountingNAC/142733

JAMES MBURU NJOROGEDonor: ERNST & YOUNG

Introduction to Law(Common paper)

NAC/187957EDWIN WESONGA WANYAMA

Donor: KINYORI AND ASSOCIATES

PART I - SECTION 2

Economics(Common Paper)

NAC/192149GEOFFREY MAINA KAGIRIDonor: WACHIRA IRUNGU &

ASSOCIATES

Cost AccountingNAC/202941

ANN WANJIRU NJUGUNADonor: MUGO & COMPANY

Auditing and AssuranceNAC/189592

DERRICK LIYALADonor: CARR STANYER GITAU &

COMPANY

BEST OVERALL IN SECTION (S)

SECTION 1 ONLYNAC/200727

TIMOTHY K. CHEBIIDonor: RSM ASHVIR


EDWIN MWANGI MAINADonor: RSM ASHVIR

SECTIONS 1 AND 2 COMBINEDNAC/200727

TIMOTHY K. CHEBIIDonor: RSM ASHVIR

PART II - SECTION 3

Management Information Systems(Common paper)

NAC/171917KEVIN KIRAGU WAMBUI

Donor: DELOITTE & TOUCHE

Prize winners


Runner up (1)Management Information Systems

NAC/178236CATHERINE WAMBUI MWANYOTA

Donor: KASNEB

Runner up (2)Management Information Systems

NAC/196484FELICAH NDUKU GREGORY

Donor: KASNEB

Financial Management(Common paper)

NAC/186201YVONNE NGONYO MUNDIA

Donor: KIGO NJENGA & ASSOCIATES

Financial ReportingNAC/190267

KENNEDY SAWE KIPKOGEIDonor: PRICEWATERHOUSECOOPERS

PART II - SECTION 4

TaxationNAC/161381

ANGELOU GAKII MURIUNGIDonor: PKF Kenya

Company Law(Common paper)

NAC/165016FESTUS AMUKUYI

Donor: KASNEB

Runner upCompany Law

NAC/173572EDWIN NJUGUNA MUTHONI

Donor: KASNEB

Quantitative Analysis(Common paper)

NAC/187431HELLEN MUTHONI THIONG’ODonor: MHASIBU SACCO LTD.



KENNEDY SAWE KIPKOGEIDonor: MAZARS CERTIFIED PUBLIC

ACCOUNTANTS (KENYA)


DAVID WARITHO MUKURIADonor: H.W. GICHOHI & COMPANY


KENNEDY SAWE KIPKOGEIDonor: MBAYA & ASSOCIATES

PART III - SECTION 5

Principles and Practice of Management(Common paper)

NAC/167220GERALD SILA MUSYOKA

Donor: KASNEB

Management AccountingNAC/160724

DAVID BIRU GITHOMEDonor: KPMG KENYA

Advanced Financial ManagementNAC/147013

KELVIN JUMA WANGILA WATIDonor: DELOITTE & TOUCHE


Advanced TaxationNAC/137498

WILSON NJOROGE GAKUYADonor: PKF KENYA

Advanced Auditing and AssuranceNAC/153382

BERNARD MUCHIRI KIMANIDonor: PRICEWATERHOUSECOOPERS

Advanced Financial ReportingNAC/157310

PETER KUNG’U WAKAIRUDonor: MURDOCH McCRAE & SMITH



GERALD SILA MUSYOKADonor: ICPAK


BERNARD MUCHIRI KIMANIDonor: KASNEB


KEFAH BOGONKO OSIEMODonor: ICPAK

BEST LADY GRADUATENAC/141554

ESTHER NJOKI GACHAGUADonor: AWAK

CERTIFIED PUBLIC SECRETARIES (CPS)

EXAMINATION

PART I - SECTION 1

Organisational BehaviourNSC/204420

LILIAN NYAGUTHII KABAYADonor: CROWE HORWATH EASTERN

AFRICA

Communication and Report WritingNSC/200425

SALOME MORAA AYUNGADonor: VISION INSTITUTE OF

PROFESSIONALS


SECTION 1 ONLYNSC/200425

SALOME MORAA AYUNGADonor: ICPSK


ERIC OTIENO OGADADonor: KASNEB

SECTIONS 1 AND 2 COMBINEDNSC/199123

PETER MURIMI MAINADonor: KASNEB

PART II - SECTION 3

Company Secretarial PracticeNSC/204258

MARY REBA MALEYA CHABEDADonor: NGURU MUREGI & ASSOCIATES

PART II - SECTION 4

EntrepreneurshipNSC/179712

JAPHETH OLUOCH OGOLADonor: KASNEB

Company Law(for CPS only)NSC/159173

DERICK EPAE KOLIDonor: AFRICA REGISTRARS

Meetings- Law and ProcedureNSC/157251

MAUREEN MUTHANJE NYAMAIDonor: KASNEB

Prize winners




MARTIN MAKEBU WAFULADonor: KASNEB


DERICK EPAE KOLIDonor: KASNEB


MARYANNE NYAMBURA NDUNG’UDonor: KASNEB

PART III – SECTION 5

Advanced Company Secretarial Practice NSC/165454

VINCENT MUSYOKI MUTHUIDonor: H.W. GICHOHI & COMPANY

Project Planning and Management(Common paper)

NSC/110979DUNCAN MUINDI MUTHOKA

Donor: KASNEB


Strategic ManagementNSC/167525

CECIL LAZARO KUYODonor: KASNEB

Runner upStrategic Management

NSC/161499WALTER OCHIENG ONYANGO

Donor: KASNEB

Strategic Human Resources ManagementNSC/164634

MOSES KIPKURGAT CHIRCHIRDonor: SAVANNA & ASSOCIATES

Corporate Governance and EthicsNSC/167525

CECIL LAZARO KUYODonor: KASNEB

Runner upCorporate Governance and Ethics

NSC/149674AMUHAYA DIANA BARASA

Donor: KASNEB



YOHANA GADAFFI OUMADonor: ICPSK


CECIL LAZARO KUYODonor: CHUNGA ASSOCIATES


SIMON OWAWA NYAMOLODonor: KASNEB

BEST LADY GRADUATENSC/183033

NELLY WAMAITHA WAMBUIDonor: KASNEB

CERTIFIED INFORMATION COMMUNICATION

TECHNOLOGISTS (CICT) EXAMINATION

PART I - SECTION 1

Introduction to ComputingCTP/1602

SAMMY MUHUNI MUCHAIDonor: KASNEB

Runner upIntroduction to Computing

CTP/1551DANIEL KANYINGI TERESIA

Donor: KASNEB

Computer Applications (Theory)CTP/1522

DONA NZOMO MULEE SMITHDonor: KASNEB

Computer Applications (Practical)CTP/1602


PART I - SECTION 2

Operating Systems (Theory)CTP/1573

ETSABO ALEXANDER WANYAMADonor: KASNEB

Operating Systems (Practical)CTP/1525

AMOS KENNEDY KIMANTHI NGWAREDonor: KASNEB

Computer Support and MaintenanceCTP/1573

ETSABO ALEXANDER WANYAMADonor: KASNEB


SECTION 1 ONLYCTP/1602




SECTIONS 1 AND 2 (COMBINED) CTP/1602


PART II - SECTION 3

Database SystemsCTP/1308

EDNAH GESARE OURUDonor: KASNEB

Structured ProgrammingCTP/1234

VINCENT MAJANI ALWAVUHADonor: KASNEB

Systems Analysis and DesignCTP/1448

MICHAEL K. RONOHDonor: KASNEB

PART II - SECTION 4

Object Oriented ProgrammingCTP/731

TERESIAH NJERI KIRIETHEDonor: KASNEB

Runner upObject Oriented Programming

CTP/677DORCAS DIANA KEMUNTO

Donor: KASNEB

Data Communication and Computer Networks (Theory)

CTP/810SOY HELLEN CHEPKIRUI

Donor: KASNEB

Prize winners


Data Communication and Computer Networks (Practical)

CTP/967WILLIAM KIBURI MUTHAURA

Donor: KASNEB

Systems Security, Professional Values and Ethics

CTP/903HENRY MBUGUA WANJAHI

Donor: KASNEB



EDNAH GESARE OURUDonor: KASNEB


TERESIAH NJERI KIRIETHEDonor: KASNEB

SECTIONS 3 AND 4 (COMBINED)CTP/1429

NANCY WANGARI KANGANGIDonor: KASNEB


Software EngineeringCTP/1290

CHARLES ORUKO AGWATADonor: KASNEB


Information Systems ManagementCTP/607

DAVID LWANGADonor: KASNEB

Web Design, Internet Programming and e-Commerce

CTP/748BRIAN KHAMATIE WAMUKOYA

Donor: KASNEB

Research MethodsCTP/094

JOHN WAIBOCHI GITAHIDonor: KASNEB

Runner up (1)Research Methods

CTP/708JAMES SIFUNA WAFULA

Donor: KASNEB

Runner up (2)Research Methods

CTP/1148RAEL BWARI BICHANG’A

Donor: KASNEB



CHARLES ORUKO AGWATADonor: KASNEB


BRIAN KHAMATIE WAMUKOYADonor: KASNEB

SECTIONS 5 AND 6 (COMBINED)CTP/748

BRIAN KHAMATIE WAMUKOYADonor: KASNEB

CERTIFIED SECURITIES AND INVESTMENT ANALYSTS

(CSIA) EXAMINATION

PART I - SECTION 1

Financial MathematicsISP/2066

STEPHEN MBUGUA MURENGIDonor: KASNEB

Financial Institutions and MarketsISP/2473

AMOS GIITA MACHARIADonor: KASNEB


SECTION 1 ONLYISP/2512

MATHEW MUSAKI MUEDonor: KASNEB


JOHN NGUGI MBURUDonor: KASNEB

SECTIONS 1 AND 2 (COMBINED)ISP/2417

JOHN NGUGI MBURUDonor: KASNEB

PART II - SECTION 3

Financial Statements AnalysisISP/2429

MAKUPE CHIWAYA MARAHANIDonor: KASNEB

CSIA PART II - SECTION 4

Advanced Finance, Investment and Equity Analysis

ISP/2022DANIEL KAMAU MWANGI

Donor: KASNEB

Runner up Advanced Finance, Investment and

Equity AnalysisISP/2403

GABRIEL WARIMA NDUNG’UDonor: KASNEB

Law and Regulations Governing Financial Markets

ISP/2227ANTHONY MACHARIA KAMAU

Donor: KASNEB



MARTHA WAMBUI WACHIRADonor: KASNEB


BETHUEL KEMBOI KIRUIDonor: KASNEB

SECTIONS 3 AND 4 (COMBINED)ISP/2195

PETER NJOROGE MIRUGIDonor: KASNEB


Valuation and Analysis of Fixed Income Instruments

ISP/2212WILLY KIPRUTO SAINA

Donor: KASNEBAsset Management

ISP/2337TABBY WANJIRU GOKO

Donor: JONAH K. AIYABEI

Prize winners


Runner upAsset Management

ISP/2273DAVID KIPTANUI KOSGEI

Donor: KASNEB


Portfolio ManagementISP/1389

SYLVIA CAROLINE KARIMI NYAGAHDonor: Dr. GEORGE O. WAKAH

International FinanceISP/1075

JOSEPH GACHIE MUTUMADonor: KASNEB

Valuation and Analysis of DerivativesISP/1075




CHRISTINE MAKENA MURUNGIDonor: KASNEB



CERTIFIED CREDIT PROFESSIONALS (CCP)

EXAMINATION

PART I - SECTION 1

Credit ManagementCCP/1646

STEPHEN KARIITHI NDUNG’UDonor: INSTITUTE OF CREDIT

MANAGEMENT

Entrepreneurship and Communication(Common paper)

CCP/1664GEORGE KIHUMBA WAITHAKA

Donor: KING’ANG’I KAMAU & COMPANY

PART I - SECTION 2

Financial Accounting (Common paper)

CCP/1669SAMWEL MACHARIA KARANJA

Donor: KASNEB

Taxation Theory and Practice(Common paper)

CCP/1669SAMWEL MACHARIA KARANJADonor: KINYORI & ASSOCIATES


SECTION 1 ONLYCCP/1669

SAMWEL MACHARIA KARANJA Donor: KASNEB


SAMWEL MACHARIA KARANJADonor: KASNEB

SECTIONS 1 AND 2 (COMBINED)CCP/1669

SAMWEL MACHARIA KARANJADonor: KASNEB

PART II - SECTION 3

Advanced Credit ManagementCCP/1524

PAUL WANJAU RUIRIEDonor: INSTITUTE OF CREDIT

MANAGEMENT

CCP PART II - SECTION 4

MarketingCCP/1376

TIMOTHY THURANIRA ITARUDonor: KASNEB



JOSEPH WANJOHI KIMOTHODonor: KASNEB


ALICE MORAA ONDIGIDonor: KASNEB

SECTIONS 3 AND 4 (COMBINED)CCP/1463

ALICE MORAA ONDIGIDonor: KASNEB


Public RelationsCCP/1225

ISAAC MACHARIA NDAIGADonor: KASNEB

Runner up 1Public Relations

CCP/1322EVALINE WAIRIMU MAINA

Donor: KASNEB

Runner up 2Public Relations

CCP/1054VYONE NYAMOITA MING’ATE

Donor: KASNEB

Law Governing Credit PracticeCCP/1478

MARTIN MBURU KARANJADonor: KASNEB

Runner upLaw Governing Credit Practice

CCP/1338ISAAC MUIRURI WARUI

Donor: KASNEB


Debt RecoveryCCP/1031

EDWIN OPIYO OWINODonor: KASNEB

Corporate LendingCCP/1338

ISAAC MUIRURI WARUIDonor: KASNEB

Practice of Credit ManagementCCP/1215

ERIC MWANGA MWALIMUDonor: KASNEB





ERIC MWANGA MWALIMUDonor: KASNEB

SECTIONS 5 AND 6 COMBINEDCCP/1478


Prize winners



Documents

New Newsline KASNEB · 2019. 7. 2. · 4 KASNEB Newsline, Issue No. 4 October - December 2012 In this case, step (iii) above will be examined in detail to enlighten . executives and