IAB Professional Practice common mistakes
IAB Professional Practice · Understand the traps and how to avoid them.
Treating anti-money laundering supervision as a pure reporting exercise: describing that a suspicious activity report must be filed, but omitting the preceding risk-based steps (customer due diligence, ongoing monitoring, escalation, internal reporting to the nominated officer) in the answer.
Candidates memorise the final reporting obligation because it is the most visible outcome, and skim the layered obligations that come before it. Under time pressure they write the endpoint and move on, losing the marks allocated to the earlier stages.
What to do instead
Before answering any supervision question, write a four-step skeleton: identify and verify the customer, monitor the relationship, escalate internally to the nominated officer, then consider external reporting with any required consent. Attach each fact in the scenario to a step. Practise reconstructing the full chain from memory in under two minutes so it becomes the default structure rather than an afterthought.
Confusing the roles of the nominated officer (money laundering reporting officer) and senior management: attributing the decision to report to senior management, or attributing overall policy ownership to the nominated officer.
Both roles appear in the same governance narrative and candidates collapse them into a single 'compliance' figure. The distinction is rarely tested in isolation, so it is learned as background rather than as an examinable allocation of responsibility.
What to do instead
Build a two-column table: decision to make an external report and receipt of internal disclosures on one side; approval of policy, resourcing and risk appetite on the other. For every practice question, underline the actor named and check the answer assigns the action to that actor. Recite the split aloud until it is automatic.
Describing risk assessment as a one-off onboarding document rather than a continuing obligation, so answers omit triggers for refresh such as a change in ownership, unusual transaction patterns, or a change in the customer's business.
Textbook diagrams place risk assessment at the start of the customer lifecycle, which anchors candidates to a single point in time. The ongoing nature is stated in guidance but is easy to read past because it is not visually prominent.
What to do instead
When a question mentions an existing customer, default to asking what has changed and whether the file needs refreshing. Keep a short list of refresh triggers and rehearse applying it to a scenario with a long-standing customer. In written answers, add one sentence on periodic review even when the question does not prompt for it.
Recording transactions by their net effect rather than gross: entering a single net figure for a batch of receipts and payments, or netting a sales invoice against a purchase invoice from the same counterparty.
The bank statement shows one net movement, so candidates copy the statement line into the ledger. This feels efficient and matches the document in front of them, but it destroys the audit trail and misstates gross income and expenditure.
What to do instead
Adopt a rule: one ledger entry per underlying document, never per bank line. When a bank line covers several items, split it into its constituent entries and reconcile the total back to the statement. Practise with a batch receipt covering three customers and confirm the gross totals still agree to the control account.
Reversing the debit and credit on the entry that clears a suspense or control account, so the correction doubles the error instead of eliminating it.
Candidates learn the original entry and then try to 'undo' it by repeating it with the same direction, or they reason about the correction in isolation without checking the resulting balance. The logic feels right because the narrative reads as a reversal.
What to do instead
Always write the original entry, then write the required closing balance, then derive the correcting entry as the difference. Test it by calculating the account balance after posting the correction and confirming it equals the target. Do five correction drills covering both overstatements and understatements before the exam.
Omitting the year-end adjustments that do not involve cash: accruals, prepayments, depreciation, and closing inventory, so the reported profit equals the cash movement.
Candidates build the accounts from the bank summary because it is the most concrete evidence available. Adjustments require imagining transactions that have no document in the pack, which is cognitively harder and gets skipped under time pressure.
What to do instead
Keep a fixed closing checklist: inventory, depreciation, accruals, prepayments, bad debt provision. Work through it mechanically for every exercise regardless of whether the question seems to need it, and state the double entry for each. Mark the checklist on the question paper before starting calculations so it cannot be forgotten.
Calculating statutory payroll deductions on a cumulative basis when the scheme requires it but treating each period in isolation, or the reverse, producing incorrect tax for employees with variable pay.
The arithmetic for a single period is straightforward, so candidates apply the same method every period without checking whether the employee's pay has changed. Variable pay is where the two approaches diverge, and that is exactly the case most often tested.
What to do instead
Before computing, identify whether the employee's taxable pay is steady or variable, then choose the method accordingly and state the choice in the working. For cumulative calculations, always show prior cumulative pay, prior tax paid and the current period figure in a small table so the reviewer can follow the logic.
Applying the wrong treatment to payments that are not straightforward earnings: statutory sick pay, statutory maternity pay, expense reimbursements, and termination payments, either deducting contributions from amounts that are not earnings or exempting amounts that are.
These items sit at the boundary of the payroll calculation and candidates treat anything unusual as outside the scope of contributions. The rules are detailed and easy to half-remember, so a plausible-sounding generalisation replaces the specific treatment.
What to do instead
Maintain a one-page classification sheet for each irregular payment type showing whether it is earnings for contributions, whether it is taxable, and how it is recorded. For each practice question, classify the payment before calculating anything, and write the classification in the answer so partial credit is available even if the arithmetic slips.
Preparing payroll journals that do not balance to the gross pay figure: posting net pay to the bank and the tax to the liability account but omitting employer contributions or the pension element, leaving an unexplained difference.
Candidates focus on the employee's net pay because that is the figure the employee cares about, and treat the journal as a bookkeeping afterthought rather than a reconciliation. The employer's own costs are invisible in the payslip.
What to do instead
Build every payroll journal from the gross figure downwards: gross pay, employee deductions, net pay, employer contributions, total cost. Check that debits equal credits and that net pay plus all deductions equals gross. Reconcile the journal to the payroll summary before moving on, and never post a journal with a difference.
Answering an accounting question with a definition where the question asks for application, or vice versa: reciting the definition of an asset or of materiality when the scenario requires deciding how a specific transaction should be recognised or disclosed.
Definitions are the easiest material to memorise and the easiest to reproduce under pressure, so they become a default response. Candidates also misread the command word in the question and answer the topic rather than the task.
What to do instead
Underline the command word (state, explain, calculate, advise) and the specific item in the scenario before writing. Then apply the relevant criterion to the facts explicitly, for example naming the recognition condition and showing how the transaction meets or fails it. Practise converting definitional knowledge into two-line applications for ten common standards.