CPA Rwanda cheat sheet

Conceptual framework: relevance and faithful representation are fundamental qualitative characteristics; comparability, verifiability, timeliness and understandability are enhancing.

Revenue (IFRS 15) is recognised via five steps: identify contract, identify performance obligations, determine transaction price, allocate price, recognise on satisfaction of each obligation.

Lease (IFRS 16): lessee recognises a right-of-use asset and lease liability measured at present value of lease payments; lessor classifies as finance or operating.

Expected credit loss (IFRS 9) uses a three-stage model; 12-month ECL applies at Stage 1, lifetime ECL at Stages 2 and 3.

Impairment (IAS 36): recoverable amount is the higher of fair value less costs of disposal and value in use; an asset is impaired when carrying amount exceeds recoverable amount.

Depreciation methods: straight-line = (cost − residual)/useful life; reducing balance applies a fixed rate to opening carrying amount.

Consolidation (IFRS 10) requires control: power over the investee, exposure to variable returns, and ability to use power to affect returns.

Goodwill = consideration transferred + non-controlling interest + previously held interest − fair value of identifiable net assets acquired.

Contribution margin = selling price − variable cost per unit; contribution/sales ratio = contribution ÷ sales.

Break-even units = fixed costs ÷ contribution per unit; break-even revenue = fixed costs ÷ C/S 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.

High-low method: variable cost per unit = (cost at high activity − cost at low activity) ÷ (high activity − low activity).

Overhead absorption rate = budgeted overhead ÷ budgeted absorption base (e.g., labour hours or machine hours).

Flexed budget compares actual costs with budgeted costs at the actual activity level, isolating volume effects.

Relevant cost of a scarce resource: rank products by contribution per unit of limiting factor, not by contribution per unit.

Audit risk = inherent risk × control risk × detection risk; detection risk is controlled by the auditor through the nature, timing and extent of procedures.

Materiality is set at overall financial statement level; performance materiality is lower to reduce the probability that aggregate uncorrected misstatements exceed overall materiality.

Assertions for classes of transactions include occurrence, completeness, accuracy, cut-off, classification and presentation.

Sufficient appropriate audit evidence depends on the risk of material misstatement and the quality of evidence; external evidence is more reliable than internal.

ISA 700 unmodified opinion states financial statements give a true and fair view; modified opinions are qualified, adverse or disclaimer.

Going concern (ISA 570): if material uncertainty exists and disclosure is adequate, an unmodified opinion with an Emphasis of Matter paragraph is issued.

Independence: an auditor must not have a financial interest in the client, and self-review, self-interest, advocacy, familiarity and intimidation threats must be addressed.

Sampling risk is the risk that the auditor's conclusion based on a sample differs from the conclusion from the whole population.

Rwanda VAT standard rate is 18%; VAT-registered taxpayers charge output VAT and recover input VAT on taxable supplies.

Rwanda corporate income tax standard rate is 30% of taxable profit; small businesses may be taxed on a turnover-based regime.

Rwanda personal income tax uses progressive bands on employment income, with pay-as-you-earn (PAYE) withheld by the employer.

Capital allowances replace depreciation for tax purposes; the tax base of an asset differs from its accounting carrying amount.

Trading losses may be carried forward and offset against future taxable profits, subject to statutory limits.

Withholding tax applies to certain payments such as dividends, interest, royalties and service fees at prescribed rates.

Taxable profit = accounting profit adjusted for disallowable expenses, non-taxable income, capital allowances and prior losses.

Deferred tax arises on temporary differences between carrying amounts and tax bases, measured at expected reversal rates.

A contract requires offer, acceptance, consideration, intention to create legal relations and capacity; breach gives rise to damages or specific performance.

A company is a separate legal person with perpetual succession; shareholders have limited liability for company debts.

Directors owe fiduciary duties: act in good faith, avoid conflicts of interest, exercise care and skill, and not misuse company assets.

Agency requires consent, authority and a principal; apparent authority binds the principal where a third party reasonably relies on the agent's representation.

Corporate governance codes separate the roles of chair and chief executive and require independent non-executive directors on the board.

Audit committees should comprise independent non-executive directors and oversee external audit, internal control and financial reporting.

Insolvency tests include cash-flow (inability to pay debts as they fall due) and balance-sheet (liabilities exceed assets) tests.

A company may be wound up voluntarily by members or compulsorily by court order on grounds such as inability to pay debts.

Net present value = present value of cash inflows − initial investment; accept projects with positive NPV.

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

Weighted average cost of capital = (E/V × Ke) + (D/V × Kd × (1 − t)).

Cost of equity via CAPM: Ke = risk-free rate + beta × (market return − risk-free rate).

Dividend growth model: Ke = (D1 ÷ P0) + g, where D1 is next year's dividend and g is growth.

Working capital cycle = inventory days + receivable days − payable days.

Operating gearing is the proportion of fixed costs in total costs; financial gearing is debt relative to equity, measured by debt/equity or interest cover.

Payback period ignores the time value of money and cash flows after the payback date.

PESTLE analyses macro-environment factors: political, economic, social, technological, legal and environmental.

Porter's Five Forces: rivalry, threat of new entrants, threat of substitutes, bargaining power of buyers and of suppliers.

SWOT combines internal strengths and weaknesses with external opportunities and threats; TOWS converts them into strategies.

Ansoff matrix: market penetration, product development, market development and diversification, in ascending order of risk.

BCG matrix classifies products as stars, cash cows, question marks and dogs based on market growth and relative market share.

Value chain analysis separates primary activities (inbound logistics, operations, outbound logistics, marketing, service) from support activities.

Cost leadership and differentiation are generic strategies; being stuck in the middle risks lower returns.

Stakeholder mapping uses power and interest to decide engagement: high power/high interest requires close management.

The COSO internal control framework has five components: control environment, risk assessment, control activities, information and communication, and monitoring.

General IT controls cover access management, change management, IT operations and program development; application controls cover input, processing and output.

Data analytics types: descriptive (what happened), diagnostic (why), predictive (what will happen) and prescriptive (what to do).

Audit data analytics tests full populations rather than samples, increasing coverage but requiring data quality and completeness checks.

CAATs include audit software, test data, parallel simulation and embedded audit modules.

A primary key uniquely identifies a record; a foreign key links to a primary key in another table to enforce referential integrity.

Benford's law predicts the leading digit 1 appears about 30.1% of the time in naturally occurring data sets.

Segregation of duties prevents one person from authorising, recording and having custody of the same transaction.

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

The conceptual framework requires identifying threats and applying safeguards; if safeguards cannot reduce threats to an acceptable level, decline or withdraw.

Self-interest threat: a financial or other interest that inappropriately influences judgement, such as a fee dependency.

Self-review threat: evaluating one's own previous work, such as preparing records then auditing them.

Advocacy threat: promoting a client's position, such as acting as an advocate in a dispute.

Familiarity threat: long association or close relationships causing excessive sympathy with a client's interests.

Intimidation threat: pressure such as threats of dismissal or litigation that deter objective behaviour.

Confidentiality continues after the professional relationship ends; disclosure is permitted where required by law or authorised by the client.