Egypt Accountants & Auditors Register Exam cheat sheet

Accounting equation: Assets = Liabilities + Equity; every transaction preserves this equality, so double entry always balances.

Accrual basis: revenue is recognised when the performance obligation is satisfied, expenses when incurred - not when cash moves.

Depreciation methods: straight-line = (cost − residual)/useful life; reducing balance applies a fixed rate to carrying amount; units-of-production uses output ratio.

Inventory under IAS 2 is measured at the lower of cost and net realisable value; cost includes purchase, conversion and costs to bring inventory to saleable condition.

Closing entries transfer revenue and expense balances to retained earnings via the income statement; temporary accounts then start at zero.

A bank reconciliation starts from the bank statement or the cash book and adjusts for unpresented cheques, deposits in transit, bank charges and errors.

Trial balance equality of debits and credits does not prove accuracy: compensating errors, omissions of complete entries and posting to the wrong account of the same class remain undetected.

Impairment loss = carrying amount − recoverable amount, where recoverable amount is the higher of fair value less costs of disposal and value in use.

Audit risk model: AR = IR × CR × DR; detection risk is the only component the auditor controls, so higher inherent and control risk force more substantive work.

Assertions tested: occurrence, completeness, accuracy, cut-off, classification (transactions); existence, rights and obligations, completeness, valuation (balances).

Materiality: overall materiality is set by benchmark (profit before tax, revenue, total assets); performance materiality is lower to cover undetected misstatements.

Evidence reliability hierarchy: external direct confirmation > external documents > internal documents > oral representation; original > copy.

Sampling: sampling risk falls as sample size rises; non-sampling risk is human error and is not reduced by size.

Opinion types: unmodified, qualified (material but not pervasive), adverse (material and pervasive), disclaimer (inability to obtain evidence, material and pervasive).

Going concern: if material uncertainty exists but disclosure is adequate, issue unmodified opinion with a separate Material Uncertainty paragraph.

Subsequent events: adjust for conditions existing at year end; disclose non-adjusting events that are material after year end.

Egyptian Accounting Standards (EAS) are issued by the Egyptian Financial Regulatory Authority and are substantially converged with IFRS, with local modifications mainly on presentation and disclosures.

IFRS 15 five steps: identify contract, identify performance obligations, determine transaction price, allocate price, recognise revenue on satisfaction.

IFRS 16: lessees recognise a right-of-use asset and lease liability at present value of lease payments; lessors continue to classify as finance or operating.

IFRS 9: financial assets classified by business model and contractual cash flow characteristics - amortised cost, FVOCI, or FVTPL; expected credit losses apply from initial recognition.

IAS 16: cost model or revaluation model for a whole class; revaluation surplus goes to OCI and is not recycled to profit.

IAS 36: goodwill and indefinite-life intangibles are tested annually for impairment regardless of indicators.

IAS 12: deferred tax is computed on temporary differences using the tax rate expected to apply when the difference reverses.

EAS/IFRS financial statements: statement of financial position, statement of profit or loss and OCI, statement of changes in equity, statement of cash flows, and notes.

Egyptian auditing standards are issued by the Financial Regulatory Authority and are based on ISAs, so ISA structure, terminology and requirements apply in Egypt.

ISA 200: reasonable assurance, not absolute; inherent limitations of audit include judgement, sampling and fraud concealment.

ISA 240: the auditor must presume a risk of fraud in revenue recognition unless rebutted and documented.

ISA 315 (Revised): identify and assess risks of material misstatement at financial statement and assertion level, including IT general controls.

ISA 500/501: external confirmations, physical inventory observation and litigation inquiry are standard evidence procedures.

ISA 700/701/705/706: forming the opinion, key audit matters (listed entities), modifications, and emphasis of matter or other matter paragraphs.

ISA 220 and ISQM 1: engagement quality review and firm-level quality management systems, including ethics and independence monitoring.

Documentation under ISA 230: sufficient record to enable an experienced auditor with no prior connection to understand work performed and conclusions reached.

Egyptian corporate income tax rate on profits is 22.5%; a discounted rate applies to small and micro enterprises under the relevant law thresholds.

Taxable profit = accounting profit adjusted for non-deductible expenses, exempt income, and depreciation per tax rules rather than book depreciation.

Withholding tax applies to certain payments to non-residents and to specified domestic supplies; the rate depends on the nature of the payment.

VAT standard rate in Egypt is 14%; reduced rates apply to specified goods and services, and exports are generally zero-rated.

VAT is charged on the value of supply; input VAT is recoverable only where it relates to taxable business activity, with non-recoverable items defined by law.

Salary tax is withheld monthly by the employer on employment income after applying the personal exemption and the progressive bracket schedule.

Stamp tax is levied on specified documents and transactions at fixed or proportional rates; it is separate from VAT and income tax.

Tax returns and payment deadlines are statutory; late filing and late payment attract delay penalties computed on the unpaid tax.

Egyptian companies law recognises joint stock companies, limited liability companies, partnerships limited by shares, and sole proprietorships.

A joint stock company's capital is divided into equal tradable shares; founders must subscribe and the capital must be paid per the statutory schedule.

Limited liability company partners are liable only up to their capital contribution; the company's legal personality is separate from the partners.

Board of directors of a joint stock company acts collectively; directors owe duties of care and loyalty and face liability for acts exceeding their authority.

General assembly ordinary meeting approves the financial statements and profit distribution; extraordinary meeting amends the articles of association.

Commercial registration and the commercial register give the trader legal status; commercial books must be kept as required by law.

Cheques and commercial papers are governed by the Commercial Code; a cheque must be drawn on a bank and is payable on demand.

Merger, demerger and liquidation require statutory procedures including shareholder approval and creditor protection formalities.

Five fundamental principles: integrity, objectivity, professional competence and due care, confidentiality, and professional behaviour.

Independence has two components: independence of mind (state of mind) and independence in appearance (observable by a third party).

Self-interest, self-review, advocacy, familiarity, and intimidation are the five threat categories; threats are addressed by safeguards or elimination.

A financial interest held directly by the auditor or an immediate family member in the client creates a self-interest threat; direct material holdings are not permitted.

Provision of non-assurance services such as bookkeeping, valuation or internal audit to an audit client creates self-review threats; certain services are prohibited for listed clients.

Contingent fees for audit engagements are prohibited because they create a self-interest threat to objectivity.

Long association with a client creates a familiarity threat; partner rotation is required for listed entity audits after the specified period.

Confidentiality continues after the engagement ends; disclosure is permitted only with consent or where required by law or professional duty.

Contribution margin = sales − variable costs; contribution per unit = selling price − variable cost per unit.

Break-even units = fixed costs / contribution per unit; break-even revenue = fixed costs / contribution margin ratio.

Margin of safety = (budgeted sales − break-even sales) / budgeted sales, expressed as a percentage.

Target profit volume = (fixed costs + target profit) / contribution per unit.

Absorption costing includes fixed production overhead in product cost; marginal costing treats it as a period cost, so profit differs by the movement in inventory.

Overhead absorption rate = budgeted overhead / budgeted activity base; under- or over-absorption arises when actual activity differs from budget.

Standard costing variances: material price = (standard − actual price) × actual quantity; material usage = (standard − actual quantity) × standard price.

Relevant costs for decisions exclude sunk costs and allocated fixed overhead; opportunity cost of the alternative forgone is included.

IT general controls cover access management, change management, backup and recovery, and operations; application controls cover input, processing and output.

Segregation of duties in an ERP system prevents one user from initiating, approving and recording the same transaction.

Audit trails and system logs must be retained and protected; the auditor tests completeness and integrity of the log.

CAATs include data analytics, test data, parallel simulation and embedded audit modules; they allow testing of 100% of a population.

Computer-assisted sampling risk still exists; software outputs must be validated against source data reconciliation.

Electronic records must satisfy the same evidence standards as paper; digital signatures and time stamps support authenticity.

Cybersecurity risk assessment considers unauthorised access, ransomware, phishing and third-party service providers; controls include MFA and encryption.

Cloud accounting raises data ownership, data residency and service-organisation reporting (SOC) considerations for the auditor.

Time value: PV = FV / (1 + r)^n; NPV = present value of cash inflows − initial investment; accept projects with positive NPV.

IRR is the discount rate at which NPV equals zero; accept if IRR exceeds the cost of capital.

Payback period ignores cash flows after the cut-off and the time value of money; discounted payback corrects the latter.

WACC = (E/V × cost of equity) + (D/V × cost of debt × (1 − tax rate)).

Cost of equity via CAPM: Ke = risk-free rate + beta × market risk premium.

Working capital cycle = inventory days + receivable days − payable days; a shorter cycle reduces financing needs.

Current ratio = current assets / current liabilities; quick ratio excludes inventory.

Demand elasticity: price elasticity = % change in quantity demanded / % change in price; elastic demand means revenue falls when price rises.

Inflation erodes purchasing power; nominal cash flows are discounted at a nominal rate and real cash flows at a real rate.