KASNEB CPA Intermediate common mistakes
KASNEB CPA Intermediate · Understand the traps and how to avoid them.
Applying the Companies Act 2015 general rule that a company may issue shares at a discount without checking the specific exception conditions, and treating the discount as automatically valid.
Candidates memorise the general prohibition on issuing shares at a discount but forget that the Act permits a discount only if authorised by resolution and sanctioned by the court, so they over-apply the general rule.
What to do instead
Before answering, state the general rule, then list the statutory exceptions and their procedural conditions; where a scenario is given, test each condition against the facts rather than assuming the rule applies.
Confusing the roles and liabilities of directors, shareholders and the company in a scenario, and attributing a company's obligation to a director personally.
The separate legal personality principle is studied in isolation but not applied to fact patterns, so the corporate veil and the limited exceptions to it are missed.
What to do instead
For every scenario, draw a quick three-column map (company / directors / members) and record who owes the duty and who bears the liability, noting the fraud or sham exceptions before concluding.
Calculating weighted average cost of capital using book values or ignoring the tax shield on debt, and mixing up the cost of retained earnings with the cost of new equity.
Formulas are memorised without the underlying logic, so the market-value and after-tax adjustments are dropped under time pressure.
What to do instead
Adopt a fixed working order: identify sources, compute each after-tax component cost, apply market weights, then sum; always show the tax adjustment line for debt and the flotation cost line for new equity.
Producing a net present value or payback answer without a clear timeline, so cash flows are placed in the wrong year or the initial outlay is discounted.
Candidates rush to the discount factor table and lose track of year zero, especially with working capital recovery and tax on disposal.
What to do instead
Build a year 0 to n table before discounting, mark the initial outlay at year 0, and separately list terminal items (scrap value, working capital recovery) with their timing.
Preparing financial statements that balance only by forcing a figure into retained earnings or a suspense account rather than tracing the error.
Under exam time pressure, candidates plug the difference instead of working through the trial balance adjustments systematically.
What to do instead
Work through adjustments one at a time, posting both sides of each double entry; if a difference remains, reconcile it to the suspense account and disclose it rather than plugging retained earnings.
Applying the wrong IFRS recognition or measurement basis, for example treating a lease as an operating lease by default or measuring property, plant and equipment without checking the revaluation policy in the scenario.
Standards are learned as lists of rules rather than decision trees, so the scenario facts that trigger a particular treatment are not identified.
What to do instead
For each standard, memorise a short decision sequence (scope, recognition criteria, initial measurement, subsequent measurement, disclosure) and practise extracting the triggering facts from the scenario before choosing a treatment.
Stating an audit opinion without linking it to the sufficiency of evidence obtained and the pervasiveness of the misstatement.
Candidates memorise opinion types but do not apply the two-axis test of materiality and pervasiveness, so they choose qualified when disclaimer or adverse is correct.
What to do instead
Before writing the opinion, record two judgements explicitly: is the matter material, and is it pervasive; then map the combination to the correct opinion using a two-by-two grid.
Describing audit procedures in vague terms such as 'check the records' instead of naming the assertion tested and the specific procedure.
Procedures are recalled as general phrases rather than as assertion-linked actions, which loses marks in scenario questions.
What to do instead
Write each procedure in the form: assertion addressed, procedure type (inspection, observation, enquiry, recalculation, confirmation), population sampled, and evidence expected.
Treating fixed overhead as a variable cost in marginal costing decisions, or using absorption costing figures for a relevant-costing make-or-buy or accept-or-reject decision.
The distinction between contribution and profit is understood in theory but not maintained when the question presents a full absorption cost card.
What to do instead
Restate every cost card into fixed and variable elements before starting the decision, and exclude sunk fixed costs unless they are incremental and avoidable.
Computing variances and stopping at the arithmetic without stating whether each variance is favourable or adverse and what operational cause explains it.
The calculation is treated as the answer, so the interpretation and responsibility assignment marks are lost.
What to do instead
After each variance calculation, write one line giving the sign convention, one plausible operational cause, and the manager responsible, before moving to the next variance.
Calculating taxable income by applying the accounting profit figure directly without adjusting for disallowable expenses, capital allowances and exempt income.
Candidates conflate accounting profit with taxable profit and skip the reconciliation schedule.
What to do instead
Always present a reconciliation starting from accounting profit, listing each adjustment with its statutory basis (disallowed expense, capital allowance, exempt income) before arriving at taxable income.
Describing the public finance cycle or the budget process in general terms without naming the specific constitutional or statutory step, body and timeline required in Kenya.
Candidates learn the process as a narrative and cannot retrieve the precise institutional actors and deadlines when the question asks for them.
What to do instead
Build a one-page timeline of the budget cycle naming each stage, the responsible institution and the statutory deadline, and rehearse it until it can be reproduced from memory.