ICAM Chartered Accountant Malawi CA(M) Qualification (Malawi)

A CA(M) trainee is told that decision-useful financial information must both be capable of affecting users' decisions and depict the underlying economic phenomena completely, neutrally, and without error. Which two Conceptual Framework characteristics are being described?

• ARelevance and Faithful Representation
• BComparability and Understandability
• CVerifiability and Timeliness
• DPrudence and Substance Over Form

Under IFRS 15 (Revenue from Contracts with Customers), what is the core 5-step model criterion for identifying when an entity should recognize revenue?

• AImmediately upon signing a legally binding multi-year sales contract
• BWhen (or as) the entity satisfies a performance obligation by transferring a promised goo…
• CWhen the customer remits full advance cash payment into the company's bank account
• DAt the financial year-end regardless of whether delivery has occurred

Under IFRS 16 (Leases), how must a lessee initially account for virtually all commercial leases on its Statement of Financial Position, subject to short-term and low-value recognition exemptions?

• ARecord the full contractual commitment as an off-balance-sheet contingent liability
• BCharge all lease payments directly to operating expenses on a straight-line basis
• CRecognize a Right-of-Use (ROU) asset and a corresponding lease liability
• DClassify the arrangement as an operating lease and disclose payments in notes only

Under IAS 37 (Provisions, Contingent Liabilities and Contingent Assets), what three criteria must be met before a provision can be recognized in the financial statements?

• AA legal obligation, remote economic outflow, and written agreement from creditors
• BA possible obligation resulting from future events, certain cash outflow, and board appro…
• CA future operating commitment, probable cash receipt, and approval from the external audi…
• DA present obligation resulting from a past event, probable outflow of economic resources,…

Under IFRS 3 and IAS 36, how must goodwill acquired in a business combination be subsequently accounted for?

• ATested for impairment annually (or more frequently if indicators exist) and never amortiz…
• BAmortized on a straight-line basis over a statutory maximum period of 10 years
• CRevalued annually to fair value with gains credited to other comprehensive income
• DWritten off directly to retained earnings in the year of acquisition

At year-end, a wholesaler has inventory costing MK 30,000,000. Its estimated selling price is MK 31,000,000, with MK 1,000,000 of completion costs and MK 1,500,000 of selling costs. At what amount should the inventory be measured under IAS 2?

• AMK 30,000,000
• BMK 28,500,000
• CMK 31,000,000
• DMK 29,500,000

On 1 January 2025, Parent Co acquired 80% of the 1,000,000 ordinary shares of Sub Co for MK 320,000,000 cash. At that date, Sub Co's identifiable net assets had a fair value of MK 350,000,000. Parent Co elected to measure non-controlling interest (NCI) at proportionate share of net assets. What is the goodwill arising on acquisition?

• AMK 70,000,000
• BMK 20,000,000
• CMK 40,000,000
• DMK 50,000,000

At 31 December 2025, an entity has plant with a carrying amount of MK 24,000,000 and a tax base of MK 16,000,000. The enacted corporate tax rate in Malawi is 30%. The entity had an opening deferred tax liability of MK 1,800,000. Assuming no other temporary differences, what is the deferred tax expense recognized in profit or loss for 2025 under IAS 12?

• AMK 1,800,000
• BMK 2,400,000
• CMK 800,000
• DMK 600,000

On 1 January 2024, Blantyre Breweries issued MK 100,000,000 6% convertible debentures at par. Interest is payable annually in arrears. The debentures are redeemable on 31 December 2026 at par or convertible into ordinary shares. The market interest rate for similar debt without conversion rights is 9% per annum. Present value factors at 9% are: Year 1 = 0.917; Year 2 = 0.842; Year 3 = 0.772. Under IAS 32, what is the value assigned to the equity conversion option at initial recognition?

• AMK 7,614,000
• BMK 92,386,000
• CMK 15,186,000
• DMK 6,000,000

A parent company sold inventory costing MK 40,000,000 to its 80%-owned subsidiary for MK 50,000,000 during the year. At the reporting date, 30% of these goods remained unsold in the subsidiary's warehouse. How is the unrealized intra-group profit eliminated in the consolidated financial statements?

• ADebit Consolidated Inventory MK 3,000,000; Credit Consolidated Revenue MK 3,000,000
• BDebit Consolidated Cost of Sales MK 3,000,000; Credit Consolidated Inventory MK 3,000,000
• CDebit Consolidated Cost of Sales MK 10,000,000; Credit Consolidated Inventory MK 10,000,0…
• DDebit Non-Controlling Interest MK 600,000; Credit Consolidated Inventory MK 600,000

Under IAS 23 (Borrowing Costs), which of the following conditions must be met before an entity begins capitalizing borrowing costs directly attributable to the acquisition or construction of a qualifying asset?

• AConstruction has reached at least 50% physical completion verified by an independent quan…
• BThe board of directors has formally approved the project budget and signed bank facility…
• CExpenditures for the asset are being incurred, borrowing costs are being incurred, and ac…
• DThe loan proceeds have been fully disbursed and commercial operations have commenced

Under IFRS 9 (Financial Instruments), what is the classification criterion for a debt instrument to be measured at Amortised Cost?

• AThe instrument is a derivative contract designated as a speculative trading hedge
• BThe asset is an equity investment quoted on a recognized international securities exchange
• CThe entity intends to trade the instrument actively within 30 days to capture short-term…
• DThe asset is held within a business model whose objective is to collect contractual cash…

Under IAS 20 (Accounting for Government Grants), an enterprise receives a cash grant of MK 15,000,000 from the Government of Malawi towards the purchase of pollution-control equipment costing MK 60,000,000 with a 5-year useful life. What are the two acceptable accounting presentations under IAS 20?

• ASet up as deferred income recognized in profit or loss over 5 years, or deduct the grant…
• BCredit the entire MK 15,000,000 immediately to revenue, or credit directly to revaluation…
• CRecognize the grant as a permanent liability, or credit directly to retained earnings wit…
• DDeduct the grant from annual sales revenue, or treat as a reduction in corporate tax paya…

A Malawi reporting group acquires 30% of another entity's voting rights and obtains significant influence but not control or joint control. How should the group account for that investee in its consolidated financial statements?

• AConsolidating 100% of the associate's assets and liabilities line-by-line with a non-cont…
• BUsing the equity method: initial cost plus investor's share of post-acquisition profits/l…
• CAt fair value through profit or loss with all changes recognized in operating profit
• DAt historical cost less accumulated depreciation over 20 years

Under IAS 33 (Earnings Per Share), an entity has 10,000,000 ordinary shares in issue at 1 January 2025. On 1 July 2025, it made a 1-for-5 bonus issue of ordinary shares funded from share premium. Profit after tax for 2025 was MK 480,000,000. What is the basic earnings per share (EPS) for the year ended 31 December 2025?

• AMK 48.00
• BMK 43.64
• CMK 40.00
• DMK 36.36

Under IAS 40 (Investment Property), an entity purchases a commercial office building for MK 120,000,000 to earn rental income. The entity chooses the fair value model. At the end of Year 1, the fair value is MK 135,000,000. How should the MK 15,000,000 increase in fair value be recognized?

• ADeferred on the balance sheet and amortized over the remaining building life
• BCredited to a Revaluation Surplus in Other Comprehensive Income
• CCredited to a non-distributable capital reserve in equity
• DRecognized as a gain in the Statement of Profit or Loss

A cash-generating unit (CGU) has the following carrying amounts: Goodwill MK 20,000,000; Property, Plant & Equipment (PPE) MK 60,000,000; Patent MK 20,000,000. Total carrying amount = MK 100,000,000. Following an economic downturn, the recoverable amount of the CGU is assessed at MK 65,000,000. Patent's fair value less costs of disposal is confirmed at MK 18,000,000. What is the revised carrying amount of the PPE following the impairment allocation under IAS 36?

• AMK 47,000,000
• BMK 48,750,000
• CMK 39,000,000
• DMK 50,000,000

On 1 January 2025, Alpha Ltd sold a headquarters building with a carrying amount of MK 50,000,000 to a financial institution for its fair value of MK 80,000,000, immediately leasing it back for 10 years at market rentals of MK 10,000,000 per annum payable in arrears. The present value of the lease payments is MK 48,000,000, and the transfer qualifies as a sale under IFRS 15. Under IFRS 16 sale-and-leaseback rules, what gain on sale is recognized in profit or loss by Alpha Ltd?

• AMK 30,000,000
• BMK 12,000,000
• CMK 18,000,000
• DNil (gain is deferred entirely)

On 1 January 2025, Parent Co held a 70% subsidiary, Beta Ltd, with goodwill of MK 10,000,000 (NCI measured at fair value). On 30 June 2025, Parent Co sold a 10% interest for MK 25,000,000 cash, retaining a 60% controlling interest. At the disposal date, Beta Ltd's net assets were MK 180,000,000. How should Parent Co account for this transaction in its consolidated financial statements under IFRS 10?

• ADeduct the MK 25,000,000 proceeds from consolidated goodwill
• BRecognize a gain on disposal of MK 6,000,000 in consolidated profit or loss
• CAs an equity transaction: adjust NCI by MK 19,000,000 and credit parent equity (retained…
• DDeconsolidate Beta Ltd and re-measure the remaining 60% investment at fair value

Under IFRS 2 (Share-based Payment), how should a cash-settled share-based payment transaction (such as share appreciation rights) be measured at each reporting date until settlement?

• AAt nominal share value only when employees exercise their conversion rights
• BAt the grant-date fair value of the equity instruments, without subsequent remeasurement
• CAt intrinsic value at grant date, amortized straight-line over the vesting period to reta…
• DAt fair value of the liability at each reporting date and settlement date, with changes r…

A client asks its external auditor to guarantee that the financial statements contain no misstatement of any size. What level of assurance does ISA 200 actually require for the audit opinion?

• AReasonable assurance
• BAbsolute assurance
• CLimited assurance
• DModerate assurance

Under ISA 240 (The Auditor's Responsibilities Relating to Fraud in an Audit of Financial Statements), who bears the primary responsibility for the prevention and detection of fraud within an organization?

• AThe external statutory audit firm conducting the annual audit
• BBoth those charged with governance and management of the entity
• CThe Malawi Police Service and the Anti-Corruption Bureau (ACB)
• DThe internal audit department alone

What is the primary purpose of establishing 'performance materiality' during the planning phase of an audit under ISA 320?

• ATo set the legal monetary limit above which directors can be personally prosecuted
• BTo determine the maximum fee that the audit firm can bill the client for overtime work
• CTo reduce to an appropriately low level the probability that aggregate uncorrected and un…
• DTo evaluate the commercial productivity and hourly speed of junior audit team members

Which of the following describes an 'advocacy threat' to professional independence under the IFAC / ICAM Code of Ethics for Professional Accountants?

• AA senior auditor is pressured by client directors with threats of audit contract terminat…
• BAn audit team member audits a financial system that they personally designed and implemen…
• CAn auditor has a direct material financial interest in an audit client's shares
• DAn audit partner promotes the client's position or shares to third parties to the point t…

Under ISA 700 (Forming an Opinion and Reporting on Financial Statements), which of the following is a mandatory element of an independent auditor's report on audited financial statements?

• ABasis for Opinion paragraph positioned directly following the Opinion section
• BA detailed budget forecast certifying expected commercial profits for the next three years
• CA comprehensive list of all tax deductions submitted to the Malawi Revenue Authority
• DThe personal bank account details of all executive directors

Under ISA 315 (Identifying and Assessing the Risks of Material Misstatement), which of the following is NOT one of the five interrelated components of an entity's system of internal control?

• AControl environment
• BExternal regulatory inspection
• CThe entity's risk assessment process
• DInformation system and communication

When designing and performing substantive analytical procedures under ISA 520, what sequence of steps is required of the auditor?

• ARely entirely on management's verbal explanations for fluctuations without independent co…
• BCompare current figures to prior year figures and accept any difference less than 50% of…
• CDevelop an independent expectation, determine an acceptable threshold for unexplained dif…
• DLimit analytical review strictly to calculating the current liquidity ratio

When auditing complex accounting estimates (such as expected credit loss allowances under IFRS 9 or fair value measurements) under ISA 540 (Revised), which approach is an acceptable audit procedure?

• ARequiring management to eliminate all subjective estimates from the financial statements
• BAccepting management's point estimate provided it was calculated by the chief financial o…
• CSubstituting the estimate with historical cash flows from five years ago
• DTesting how management made the estimate (including data, assumptions, and models) or dev…

Under ISA 701 (Communicating Key Audit Matters in the Independent Auditor's Report), what defines a 'Key Audit Matter' (KAM) in the audit of listed entities on the Malawi Stock Exchange?

• AThose matters that, in the auditor's professional judgment, were of most significance in…
• BAny transaction that involved foreign currency exchange exceeding MK 10,000,000
• CEvery control deficiency reported to the audit committee in the interim management letter
• DA matter that resulted in a qualified or adverse audit opinion

A Malawi parent has an overseas subsidiary audited by a different firm. For the consolidated audit, which statement best describes the group engagement partner's responsibility for the component auditor's work?

• AThe group engagement partner bears zero responsibility for components audited by other li…
• BThe group engagement partner is solely responsible for the direction, supervision, and pe…
• CThe group engagement partner must divide the audit opinion into proportionate liability s…
• DThe component auditor's report is photocopied and attached to the group accounts without…

Under ISA 530 (Audit Sampling), what is 'sampling risk' and how does it affect the auditor's substantive conclusions?

• AThe risk that the client's internal auditors fail to cooperate with external staff
• BThe risk that the auditor selects the wrong computer auditing software to extract data
• CThe risk that the auditor's conclusion based on a sample may be different from the conclu…
• DThe risk that management intentionally alters invoices after the sample has been selected

When an auditor conducts an initial audit engagement under ISA 510 (Initial Audit Engagements — Opening Balances), what is the auditor's objective regarding opening balances?

• ATo assume full legal liability for any undetected frauds occurring during the predecessor…
• BTo re-audit all financial transactions of the prior five years in complete detail
• CTo reissue the prior year's audit report under the new audit firm's letterhead
• DTo obtain sufficient appropriate evidence that opening balances do not contain misstateme…

Under ISA 580 (Written Representations), how do management's written representations function as audit evidence?

• AThey provide necessary audit evidence, but do not provide sufficient appropriate audit ev…
• BThey serve as an absolute substitute for performing substantive testing on high-risk acco…
• CThey relieve the auditor of any responsibility to test internal controls or inspect physi…
• DThey are only required if the auditor plans to issue a qualified or adverse audit opinion

Under ISA 250 (Consideration of Laws and Regulations in an Audit of Financial Statements), what is the auditor's specific responsibility regarding laws and regulations that do not have a direct effect on financial statements but are fundamental to the entity's operating viability (e.g. environmental or operating licensing laws)?

• ATo perform exhaustive legal compliance audits across all operating plant locations
• BTo perform specified audit procedures to help identify non-compliance that may have a mat…
• CTo guarantee that the entity has adhered to every national labor and environmental statut…
• DTo ignore non-compliance unless prosecuted by the Attorney General in the High Court

An auditor is unable to obtain sufficient appropriate audit evidence regarding opening balances, physical inventory, and trade receivables due to client destruction of accounting records. The potential effects of undetected misstatements are both material and pervasive to the financial statements. What opinion must the auditor issue under ISA 705?

• AQualified Opinion ('Except for')
• BAdverse Opinion
• CDisclaimer of Opinion
• DUnmodified Opinion with an Emphasis of Matter

Under ISA 706 (Revised), what is the critical restriction regarding the use of an 'Emphasis of Matter' paragraph in an independent auditor's report?

• AIt must replace the Basis for Opinion paragraph whenever an unmodified opinion is issued
• BIt must be used whenever the auditor discovers an immaterial clerical transposition error…
• CIt can be used to disclose confidential client data that management chose to omit from th…
• DIt can only be used to refer to a matter appropriately presented or disclosed in the fina…

Under Section 11 of the Malawi Taxation Act, what is the foundational jurisdictional basis upon which income is assessed to tax in Malawi?

• AThe source principle: tax is levied on all income deemed to have accrued from a source wi…
• BThe worldwide citizenship principle: Malawian passport holders are taxed on global income…
• CThe residence principle taxing only foreign income remitted through the Reserve Bank
• DThe territorial consumption principle taxing solely retail commercial sales

Following national budget harmonization reforms in Malawi, what is the corporate income tax rate applicable to permanent establishments (branches) of non-resident foreign companies operating in Malawi?

• A35% (the historical permanent establishment surcharge rate)
• B30% (matching locally incorporated domestic companies)
• C25% (preferential foreign direct investment rate)
• D15% (standard export processing zone rate)

What is the statutory withholding tax rate deductible by a Malawian resident company when declaring and paying dividends to resident individual shareholders?

• A20%
• B15%
• C10%
• DZero (dividends are completely exempt from withholding tax)

Under the Malawi Value Added Tax Act, what is the statutory annual taxable turnover threshold above which a commercial enterprise must mandatorily register for VAT with the Malawi Revenue Authority?

• AMK 5,000,000 per annum
• BMK 10,000,000 per annum
• CMK 50,000,000 per annum
• DMK 25,000,000 per annum

Within what statutory period following the end of its financial year must an incorporated company in Malawi submit its annual tax return and audited financial statements to the Malawi Revenue Authority?

• AWithin 180 days (6 months) after the end of the accounting year
• BWithin 30 days after the end of the accounting year
• CWithin 90 days (3 months) after the end of the accounting year
• DBy 31 December regardless of when the company's financial year ends

Under the progressive Pay-As-You-Earn (PAYE) income tax schedule in Malawi, what is the highest marginal tax bracket rate applicable to high-income earners whose monthly taxable earnings exceed MK 10,000,000?

• A35%
• B40%
• C30%
• D50%

What are the application criteria and rate of the Minimum Alternative Tax (MAT) introduced into the Malawi Taxation Act for large commercial enterprises?

• AA minimum tax of 5% of gross assets levied on all commercial banking institutions
• BA flat tax of MK 100,000,000 levied on all companies listed on the Malawi Stock Exchange
• CA tax of 0.5% levied on annual gross turnover for companies with turnover exceeding MK 5,…
• DA tax of 10% on gross salary wage rolls for enterprises employing more than 50 workers

In the Malawian corporate tax system, what is the 'supernormal profit tax' rate and to what threshold of taxable corporate income does it apply?

• AA 5% windfall tax applied to retail commercial supermarkets
• BA flat rate of 50% applied to the entire net profit of companies with income above MK 1 b…
• CAn additional 10% levy on all foreign exchange earnings of agricultural exporters
• DA rate of 40% applied to the portion of taxable profit exceeding MK 5,000,000,000 (with p…

Under Section 127A of the Malawi Taxation Act and the Taxation (Transfer Pricing) Regulations, what is the core standard required for transactions between associated commercial enterprises?

• ATransactions must be priced on an 'Arm's Length' basis as if conducted between independen…
• BAll goods must be transferred at historical production cost with zero gross profit mark-up
• CAssociated companies must obtain prior written pricing permits from the Reserve Bank of M…
• DCross-border group sales must always be priced 20% higher than local domestic sales

What is the main tax-policy purpose of thin-capitalization rules applied to financing from related non-resident parties?

• ATo turn every related-party loan into a criminal fine
• BTo restrict deductions attributable to excessive related-party debt that could shift taxa…
• CTo authorize the Registrar General to convert all foreign debt into shares
• DTo exempt cross-border interest from all income tax