By Vicky Cato CPA
Vicky Cato CPA passed the CFE in 2018, and having a solid approach to responding to quantitative questions contributed to her achievement. Vicky is is an Accounting Manager at PinkWood Ltd.
Having a toolkit ready to help you respond to quantitative assessment opportunities (AOs)—also known as “quants”—will increase your chances of success as you progress through the CPA Professional Education Program (CPA PEP) modules and the Common Final Examination (CFE). I’ve put together some tips to help you succeed on your quants.
Reading the case
When reading the case, it’s best to scan first and read in detail later. This goes for the case itself, the appendices, and the financials. As you read, try to relate the appendices to one or more of the AOs.
It’s unlikely you will be given irrelevant information. If you are given a detailed breakdown of something (for example, inventory or sales), you will likely need to use this information. Consider why it is important and which AO it relates to.
Tips for financial statements
Financial statements can be full of issues you need to look out for. If they are unaudited, they likely contain errors. Look for dates on the financials; if you are given part-year numbers, then you may have to annualize.
Always check for liquidity and for solvency. Figure out if the company is in a profit or loss position.
Setting up your quants
Create a standard template to help you set up quants for your response. Use exhibits to allow for easy referencing in your response. When comparing options, always use the same basis (for example, don’t compare monthly amounts with annual amounts).
You don’t need to include all adjustments in your quant; aim for sufficient, not perfect. If you leave out a number, make a brief note to discuss why you’ve left it out (e.g. sunk cost, irrelevant, etc.) either in your written response or as a note in excel.
It’s important to know key ratios and what they mean; if the current ratio is less than one, what does this mean, and why is it important to stakeholders. Additionally, always consider sensitivities. When you’re given a range, use case facts to decide if it would be best to use the high value, low value, or the average. Be sure to state how the outcome, and possibly your recommendation, may change based on a given sensitivity.
Writing your response
Set up your response with the exhibit number, the purpose or question, your analysis, conclusion, and notes. Again, a standard template helps here.
If you have set up your quant correctly, but you feel like your answer is incorrect—for example, a positive net present value (NPV) when it should be negative—your recommendation and conclusion should support your quant, even if you think it is wrong.
Make sure you state your assumptions, and remember to discuss any numbers you left out of your quant.
Lastly: conclude, conclude, conclude! After you do all of the work to support your conclusion, you need to remember to state what your conclusion or recommendation is. It’s always helpful to have a conclusion in your quant and one in your written response, just in case you don’t have time to finish the conclusion in your written response.
Getting the right answer is important, but it’s even more important to show your thought process and your work. Markers want to see that your thought process was logical. The better job you do at labelling your quants, the easier it will be for them to see that you are on the right track. This could be the difference between “not competent” and “reaching competent.”
I hope these tips were helpful to you, and I wish you success as you work through your modules and the CFE!
The views expressed in this post are those of the guest writer, Vicky Cato CPA. Please refer to cpawsb.ca for the latest guidelines from the CPA Western School of Business.
