P7 Advanced Audit and Assurance

Professional Pilot Paper – Essentials module

Professional Accountant

Time allowed Reading and planning: Writing:

15 minutes 3 hours

This paper is divided into two sections: Section A – This ONE question is compulsory and MUST be attempted Section B – TWO questions ONLY to be attempted Do NOT open this paper until instructed by the supervisor. During reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor. This question paper must not be removed from the examination hall.

The Association of Chartered Certified Accountants

Paper P1

Section A – This question is compulsory and MUST be attempted


Chemco is a well-established listed European chemical company involved in research into, and the production of, a range of chemicals used in industries such as agrochemicals, oil and gas, paint, plastics and building materials. A strategic priority recognised by the Chemco board some time ago was to increase its international presence as a means of gaining international market share and servicing its increasingly geographically dispersed customer base. The Chemco board, which operated as a unitary structure, identified JPX as a possible acquisition target because of its good product ‘fit’ with Chemco and the fact that its geographical coverage would significantly strengthen Chemco’s internationalisation strategy. Based outside Europe in a region of growth in the chemical industry, JPX was seen by analysts as a good opportunity for Chemco, especially as JPX’s recent flotation had provided potential access to a controlling shareholding through the regional stock market where JPX operated. When the board of Chemco met to discuss the proposed acquisition of JPX, a number of issues were tabled for discussion. Bill White, Chemco’s chief executive, had overseen the research process that had identified JPX as a potential acquisition target. He was driving the process...