CMA Final Paper 15 common mistakes
CMA Final Paper 15 · Understand the traps and how to avoid them.
When computing NPV, candidates discount each year's cash flow using a different cost of equity for every year, or switch to the WACC midway through the projection, rather than applying one consistent discount rate to the whole project unless the risk profile genuinely changes.
They have memorised that 'risk-adjusted discount rates' matter and over-apply the idea, mixing hurdle rates from different parts of the syllabus (CAPM, WACC, divisional rates) without justifying the switch.
What to do instead
Before discounting, write one line at the top of the answer: 'Discount rate used = X%, because...'. Apply it to every year. Only change the rate if you can state in one sentence why the project's risk changes in that year.
Treating sunk costs, allocated fixed overhead, or interest expense as incremental cash flows in investment appraisal, and omitting working capital recovery at the end of the project.
Candidates copy figures straight from the accounting income statement because it is the familiar format, rather than converting to a cash-flow and incremental basis.
What to do instead
Rebuild the cash flow from scratch in four lines: incremental revenue, incremental cash operating costs, incremental capital expenditure, working capital change. Add back the working capital release in the final year. Explicitly label any excluded item as 'not incremental'.
In transfer pricing and divisional performance questions, using the selling division's full cost plus markup as the transfer price and then concluding the group should accept the order, without checking whether the group's total profit actually rises.
Candidates stop at computing a defensible transfer price and never test the decision at group level, missing the goal-congruence point that the question is really testing.
What to do instead
Always compute two numbers: the division's profit under the proposed transfer price, and the group's incremental profit. State whether the two decisions agree. If they diverge, identify the minimum and maximum transfer price range (variable cost to selling division, external market price to buying division).
Calculating variances and stopping at the arithmetic, without splitting a mix-and-yield variance or explaining whether a favourable variance is actually good (for example a favourable material usage variance caused by using inferior input).
Candidates treat variance analysis as an arithmetic exercise and run out of time before the interpretive marks, which are usually where the higher-scoring marks sit.
What to do instead
For every variance, allocate one sentence to 'possible cause' and one to 'management action'. For any favourable usage variance, explicitly test whether quality, rework, or customer returns could reverse the benefit.
In risk questions, listing controls generically ('segregation of duties', 'authorisation') without mapping each control to a specific identified risk, and without distinguishing inherent, residual, and target risk.
Candidates recall control names from the syllabus but do not practise the mapping discipline, so answers read as a list rather than an assessment.
What to do instead
Use a two-column table: risk on the left, named control on the right, plus a residual risk rating. If the question asks for a risk register, include likelihood, impact, owner, and response type (avoid, reduce, transfer, accept).
Confusing the roles of the audit committee, the risk committee, internal audit, and the external auditor, for example stating that internal audit reports to the audit committee and therefore 'manages' risk, or that the audit committee sets risk appetite.
The governance structures overlap in membership and reporting lines, and candidates learn the names without learning the accountability boundaries.
What to do instead
Memorise one sentence per body: board sets risk appetite and strategy; audit committee oversees financial reporting and external audit; risk committee oversees the risk framework; internal audit provides independent assurance to the audit committee; external audit opines on financial statements. Answer role questions by naming who does what and to whom they report.
In ethics questions, identifying the ethical issue but failing to apply a structured decision framework, and failing to state the specific professional standard or threat category (self-interest, self-review, advocacy, familiarity, intimidation) that is engaged.
Candidates write a moral opinion rather than a professional analysis, because they have not practised labelling the threat and the safeguard.
What to do instead
Use a fixed four-step structure: identify the facts and stakeholders; name the threat category and the principle at risk (integrity, objectivity, confidentiality, competence, professional behaviour); evaluate safeguards; recommend a specific action and escalation route.
In financial reporting questions, computing a ratio or adjusting a figure without stating the accounting policy or standard that drives it, for example adjusting revenue for a contract without identifying the performance obligation and the timing of satisfaction.
Candidates treat the section as ratio arithmetic and skip the standards, which is where the analytical marks are awarded.
What to do instead
For each adjustment, write the standard reference and the recognition principle in one line before the number. For revenue, identify the contract, the performance obligations, and whether control transfers over time or at a point.
In valuation questions, calculating a terminal value with the Gordon growth formula but using a growth rate above the long-run nominal GDP growth rate, or applying the terminal value at the wrong year, or failing to bridge enterprise value to equity value by deducting net debt and minority interests.
Candidates memorise the formula but not its constraints, and they skip the reconciliation steps because they are not part of the formula.
What to do instead
Always show the bridge: enterprise value, less net debt, less minority interest, plus associates, equals equity value, divided by shares equals value per share. Write a one-line sanity check on the assumed growth rate against inflation plus real growth.
In strategic financial management questions, recommending a financing or dividend decision without linking it to the entity's stated strategy, capital structure target, or covenant headroom, and without quantifying the effect on gearing and interest cover.
Candidates answer the technical calculation and then add generic strategic commentary that could apply to any company, because they have not practised tying numbers to the scenario's stated objectives.
What to do instead
Before recommending, extract the scenario's stated objectives and constraints into a short list. For each recommendation, state the effect on at least two named metrics (gearing, interest cover, dividend cover, WACC) and whether it moves the entity towards or away from its stated target.