Institute of Financial Accountants (IFA) Qualifications Practice Management and Professional Skills Syllabus

What is 'Simplified Due Diligence' (SDD) and when may it be used?

A reduced level of CDD permitted where the firm has assessed the business relationship as low risk (e.g. certain regulated/listed entities or public authorities). The firm must still monitor and must escalate to standard/enhanced CDD if risk increases.

What is a 'beneficial owner' under the Money Laundering Regulations?

The natural person(s) who ultimately own or control the customer – typically an individual holding more than 25% of the shares or voting rights, or who otherwise exercises ultimate control over the entity or arrangement.

What is a risk-based approach to AML?

Directing AML resources and the intensity of due diligence/monitoring in proportion to the assessed risk of each client and transaction, so higher-risk relationships receive enhanced scrutiny and lower-risk ones receive simplified treatment.

What is a SAR and to whom is it submitted?

A Suspicious Activity Report – a report of known or suspected money laundering or terrorist financing. The firm's MLRO submits it to the National Crime Agency (NCA).

What is the offence of 'tipping off' and why is it significant?

It is an offence under POCA to disclose to a client (or third party) that a SAR has been made or that a money-laundering investigation is being or may be carried out, where that disclosure is likely to prejudice the investigation. It carries criminal penalties.

What is a 'Defence Against Money Laundering' (DAML), formerly 'appropriate consent'?

Consent requested from the NCA, via a SAR, to proceed with a transaction that would otherwise risk committing a principal money-laundering offence; it provides the reporter a defence if consent (or deemed consent after the notice period) is given.

What is the difference between 'knowledge' and 'suspicion' as triggers for reporting under POCA?

Knowledge means actual awareness that money laundering is occurring; suspicion is a lower threshold – a positive feeling of unease or apprehension that is more than mere speculation, based on some factual foundation. Either triggers a reporting obligation.

Which UK law governs data protection and what is its EU-derived companion?

The Data Protection Act 2018, which sits alongside the UK GDPR (the retained/UK version of the General Data Protection Regulation).

State four of the data protection principles under the UK GDPR.

Lawfulness, fairness and transparency; purpose limitation; data minimisation; accuracy; storage limitation; integrity and confidentiality (security); and accountability (any four).

What is the distinction between confidentiality as an ethical duty and data protection as a legal duty for an accountant?

Confidentiality is the fundamental ethical principle (per the Code of Ethics) to keep client information private and not use it for personal advantage; data protection is the statutory framework (DPA 2018/UK GDPR) governing the lawful processing and security of personal data specifically.

Under the Code of Ethics, in what circumstances may an accountant disclose confidential client information?

When disclosure is permitted by law and authorised by the client; when required by law (e.g. a SAR, or to a court); and when there is a professional duty or right to disclose (e.g. to comply with a professional body's quality review), provided it is not prohibited by law.

What is the purpose of business planning and forecasting for a small business?

To set objectives and strategy, anticipate future financial position and cash needs, secure finance, monitor performance against targets, and make informed decisions – turning goals into quantified, testable financial projections.

Distinguish between a cash flow forecast and a profit (budget) forecast.

A cash flow forecast projects the timing of actual cash receipts and payments to assess liquidity; a profit forecast (budgeted income statement) projects revenue and expenses on an accruals basis to assess profitability. Profit does not equal cash because of timing, credit, capital items and depreciation.

What is the formula for the breakeven point in units?

$$\text{Breakeven units} = \frac{\text{Fixed costs}}{\text{Selling price per unit} - \text{Variable cost per unit}}$$ where the denominator is the contribution per unit.

Define the contribution margin and give its formula per unit.

Contribution is the amount each unit of sales contributes towards fixed costs and profit after covering its variable costs: $$\text{Contribution per unit} = \text{Selling price} - \text{Variable cost per unit}$$

What is the 'margin of safety' and how is it calculated?

The amount by which actual or budgeted sales exceed the breakeven point, indicating how far sales can fall before a loss occurs: $$\text{Margin of safety} = \text{Budgeted sales} - \text{Breakeven sales}$$ often expressed as a percentage of budgeted sales.

What is the purpose of management information (MI) reported to business owners?

To give owners timely, relevant, decision-useful information (financial and non-financial) about performance, position and prospects, so they can monitor the business, control costs, manage cash and make informed strategic and operational decisions.

List four qualities that make management information effective.

Relevant, accurate, timely, and clearly presented/understandable (other valid qualities: complete, reliable, comparable, and cost-effective to produce).

What is a KPI and give two examples relevant to a small business.

A Key Performance Indicator – a quantifiable measure of performance against objectives. Examples: gross profit margin, debtor (receivables) days, current ratio, sales growth %, or customer retention rate.

What is 'cloud bookkeeping' and name two advantages over traditional desktop software.

Bookkeeping using software hosted on remote servers and accessed via the internet (e.g. Xero, QuickBooks Online). Advantages: real-time access from anywhere, automatic backups/updates, multi-user collaboration, bank-feed automation, and lower upfront IT cost (any two).

What is 'Making Tax Digital' (MTD) and how does it relate to digital accounting?

An HMRC initiative requiring businesses to keep digital records and submit tax information to HMRC using compatible software, driving the adoption of digital/cloud accounting and removing manual paper-based filing.

What is a 'bank feed' in cloud accounting and why is it useful?

An automated digital link that imports bank transactions directly into the accounting software. It speeds up bookkeeping, reduces manual data-entry errors, and enables faster, more accurate bank reconciliation.

What does ESG stand for in the context of sustainability reporting?

Environmental, Social and Governance – the three categories of non-financial factors used to assess a business's sustainability and ethical impact.

Why is ESG/sustainability reporting becoming relevant even for small businesses?

Because larger customers, lenders, investors and supply chains increasingly require sustainability data; regulation is expanding; and demonstrating good ESG practice can improve reputation, access to finance, cost savings (e.g. energy) and competitiveness.

In ESG reporting, what is the difference between Scope 1, Scope 2 and Scope 3 greenhouse gas emissions?

Scope 1: direct emissions from owned/controlled sources (e.g. company vehicles, on-site fuel). Scope 2: indirect emissions from purchased energy (electricity, heat). Scope 3: all other indirect emissions in the value chain (suppliers, customers, business travel).

What is 'greenwashing' and why is it a risk in sustainability reporting?

Making misleading or unsubstantiated claims about a business's environmental credentials. It is a risk because it can breach the duty of integrity, mislead stakeholders, and lead to reputational damage, regulatory action or loss of trust.

Name three principles of effective written professional communication for an accountant.

Clarity (plain, unambiguous language), conciseness (no unnecessary detail), and appropriateness to the audience (tailoring technical depth/tone to the reader); also accuracy, correct structure, and professional tone.

When communicating complex financial information to a non-financial client, what technique improves understanding?

Avoiding jargon and using plain language, supporting figures with visuals (charts/graphs), giving context and comparisons, summarising key messages first, and checking the client's understanding through questions and feedback.

State the five fundamental principles of the IFA Code of Ethics.

Integrity, Objectivity, Professional competence and due care, Confidentiality, and Professional behaviour.

Under the Code of Ethics, what are the five categories of threat to compliance with the fundamental principles?

Self-interest, self-review, advocacy, familiarity, and intimidation threats.

What is the 'conceptual framework' approach used in the Code of Ethics?

An approach requiring members to identify threats to the fundamental principles, evaluate their significance, and apply safeguards to eliminate the threats or reduce them to an acceptable level; if that is not possible, decline or discontinue the engagement.

Give an example of a 'self-review threat' and one possible safeguard.

Example: a firm auditing/reviewing financial statements that the same firm prepared. Safeguard: use separate teams for the preparation and the review/assurance work, or have an independent review of the assurance engagement (or decline one of the services).

What is the typical first step a practitioner should follow when a client makes a complaint?

Acknowledge the complaint promptly, follow the firm's documented complaints-handling procedure, investigate the facts objectively and fairly, respond within the stated timescale, and escalate to the IFA's procedures/ombudsman if unresolved.

What may happen if an IFA member breaches the bye-laws or Code of Ethics (disciplinary matters)?

They may face investigation and disciplinary action by the IFA, which can result in sanctions such as a reprimand, fine, conditions on the practising certificate, suspension, or exclusion from membership.

Define 'professional scepticism'.

An attitude of having a questioning mind, being alert to conditions that may indicate possible misstatement (due to error or fraud), and critically assessing evidence rather than accepting management's assertions at face value.

What is the difference between 'professional scepticism' and 'professional judgement'?

Professional scepticism is the questioning, doubting mindset applied to evidence; professional judgement is the application of relevant training, knowledge and experience to make informed, reasoned decisions in the circumstances. Scepticism informs and supports sound judgement.

Give two examples of circumstances that should heighten an accountant's professional scepticism.

Unusual or unexpected transactions or year-end adjustments; inconsistencies in or contradictory audit evidence; management reluctance to provide information or explanations; results that are 'too good' or conveniently meet targets; and related-party dealings lacking commercial rationale (any two).