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Sample SAICA ITC Practice Questions
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1Company X acquires 80% of Company Y on 1 January 2025 for R80 000 000. At acquisition date, Company Y's net identifiable assets have a book value of R70 000 000 and fair value of R90 000 000. NCI is measured at fair value, which is valued at R20 000 000. Under IFRS 3, what is the goodwill recognized at acquisition date?
A.R10 000 000
B.R20 000 000
C.R30 000 000
D.R0
Explanation: Under the full goodwill method in IFRS 3: Goodwill = Consideration transferred (R80m) + NCI fair value (R20m) - Fair value of net identifiable assets (R90m) = R100m - R90m = R10 000 000.
2Under IAS 16 Property, Plant and Equipment, an entity acquires machinery for R2 000 000, incurs initial delivery costs of R100 000, installation costs of R150 000, administrative overheads of R50 000, and initial operating losses of R80 000 before reaching full capacity. What is the initial cost of the machinery recognized under IAS 16?
A.R2 250 000
B.R2 300 000
C.R2 380 000
D.R2 000 000
Explanation: Under IAS 16.16-19, initial cost includes purchase price (R2 000 000) plus directly attributable costs to bring the asset to location and condition necessary for operation: delivery (R100 000) + installation (R150 000) = R2 250 000. Administrative overheads (R50 000) and initial operating losses (R80 000) are explicitly excluded and expensed.
3Under ISA 315 (Revised), what is a 'significant risk' in audit planning?
A.An identified and assessed risk of material misstatement that, in the auditor's judgment, requires special audit consideration
B.Any risk that causes stock prices to fluctuate by more than 5%
C.A risk that relates exclusively to petty cash disbursements
D.A risk that management refuses to discuss during audit planning
Explanation: ISA 315.4 defines a significant risk as an identified risk of material misstatement that lies close to the upper spectrum of inherent risk or involves non-routine transactions or significant management judgment, requiring special audit consideration.
4A South African company has taxable income of R8 000 000. It qualifies for the Section 12C manufacturing asset allowance on a machine purchased for R4 000 000 (40% in Year 1). Accounting depreciation is 20% per year (R800 000). Corporate tax rate is 27%. What is the temporary difference and deferred tax liability created in Year 1 under IAS 12 Income Taxes?
A.Temporary difference R800 000; Deferred tax liability R216 000
B.Temporary difference R1 600 000; Deferred tax liability R432 000
C.Temporary difference R400 000; Deferred tax liability R108 000
D.Temporary difference R0; Deferred tax liability R0
Explanation: Carrying Amount = R4 000 000 - R800 000 (accounting dep) = R3 200 000. Tax Base = R4 000 000 - R1 600 000 (40% tax allowance) = R2 400 000. Taxable Temporary Difference = Carrying Amount (R3.2m) - Tax Base (R2.4m) = R800 000. Deferred Tax Liability = 27% × R800 000 = R216 000.
5Under Marginal Costing vs Absorption Costing principles in managerial accounting, why does net profit under absorption costing exceed net profit under marginal costing when production volume exceeds sales volume?
A.Absorption costing defers a portion of fixed manufacturing overheads in ending inventory balances
B.Absorption costing expenses all fixed manufacturing overheads immediately in full
C.Marginal costing includes administrative overheads in product cost
D.Marginal costing overvalues closing inventory
Explanation: When production > sales, inventory increases. Under absorption costing, fixed manufacturing overhead is allocated to unit costs, so ending inventory carries forward a portion of fixed overhead to future periods. Marginal costing expenses all fixed overhead in the current period, resulting in lower current profit.
6Under IFRS 16 Leases, a lessee enters into a 4-year lease with annual payments of R100 000 at year-end. Present value of lease liability is R316 987 at inception (discount rate 10%). What is the interest expense recognized in Profit or Loss in Year 1?
A.R31 699
B.R40 000
C.R10 000
D.R100 000
Explanation: Interest expense in Year 1 = Opening Lease Liability × Discount Rate = R316 987 × 10% = R31 698.70 (rounded to R31 699).
7Under ISA 700 (Revised), what is the mandatory position of the 'Opinion' section in the auditor's report?
A.The Opinion section must be placed first in the auditor's report, followed immediately by the Basis for Opinion section
B.The Opinion section must be placed at the very end after the signature
C.The Opinion section is placed inside the Emphasis of Matter note
D.Positioning is optional and decided by management
Explanation: ISA 700 (Revised).21 dictates that the Opinion section shall be placed first in the auditor's report, immediately followed by the Basis for Opinion section, enhancing report clarity.
8Under South African Income Tax Act Section 11(j), what is the tax treatment of doubtful debt allowances for a company not applying IFRS 9 simplified model?
A.A statutory tax allowance equal to 25% of doubtful debts that meet SARS criteria
B.100% tax deduction for all general debt provisions
C.0% allowance allowed
D.50% deduction of total accounts receivable balance
Explanation: Under Section 11(j) of the Income Tax Act, taxpayers not applying IFRS 9 impairment models are granted a statutory doubtful debt allowance of 25% of qualifying specific doubtful debts (which is added back in the following tax year).
9A SAICA candidate calculates variance analysis for a factory. Standard cost per unit: 2 kg at R10/kg. Actual production: 5 000 units using 11 000 kg of raw material purchased at R11/kg. What is the Direct Materials Usage (Quantity) Variance?
A.R10 000 Adverse
B.R11 000 Adverse
C.R10 000 Favorable
D.R1 000 Adverse
Explanation: Standard Quantity allowed = 5 000 units × 2 kg = 10 000 kg. Actual Quantity used = 11 000 kg. Material Usage Variance = (Actual Quantity - Standard Quantity) × Standard Price = (11 000 kg - 10 000 kg) × R10/kg = 1 000 kg × R10 = R10 000 Adverse (used more material than standard).
10Under IAS 37, how is a onerous contract defined and measured?
A.A contract in which the unavoidable costs of meeting obligations exceed the economic benefits expected to be received; measured at lower of cost of fulfilling and penalty for exiting
B.Any contract that yields a profit margin below 5%
C.A loan agreement with a variable interest rate
D.A sales contract cancelled within 24 hours of signing
Explanation: IAS 37.66-68 defines an onerous contract as one where unavoidable fulfillment costs exceed expected economic benefits. The present obligation is recognized as a provision measured at the lower of net cost to fulfill and exit penalties.
About the SAICA ITC Exam
The Initial Assessment of Competence (IAC / ITC) is SAICA's first qualifying examination for CA(SA) candidates written after obtaining CTA. The real exam is a set of long-form scenario papers marked against a rubric, not a multiple-choice test. It tests technical competence across financial accounting, auditing, tax, and managerial finance.
Assessment
3 long-form scenario papers of 4 hours each (120 marks per paper, 360 marks total) written over 3 consecutive days, testing technical accounting, auditing, taxation, and financial management.
Time Limit
12 hours (3 papers of 4 hours over 3 days)
Passing Score
50%
Exam Fee
R6,200 (South African Institute of Chartered Accountants (SAICA))
SAICA ITC Exam Content Outline
30%
Financial Accounting & IFRS
IFRS standards, group consolidations, and technical disclosures.
25%
Auditing & Professional Ethics
ISAs, audit evidence, professional ethics, and governance.
25%
South African Taxation Law
Income tax, VAT, capital allowances, and tax compliance.
20%
Financial Management & Managerial Accounting
Costing, capital budgeting, WACC, and financial performance.
How to Pass the SAICA ITC Exam
What You Need to Know
- Passing score: 50%
- Assessment: 3 long-form scenario papers of 4 hours each (120 marks per paper, 360 marks total) written over 3 consecutive days, testing technical accounting, auditing, taxation, and financial management.
- Time limit: 12 hours (3 papers of 4 hours over 3 days)
- Exam fee: R6,200
Keys to Passing
- Work through all 100 available questions
- Review every answer and explanation
- Track weak areas and revisit them
- Use our AI tutor for tough concepts
SAICA ITC Study Tips from Top Performers
1Master core IFRS principles including IFRS 9, 15, 16, and IAS 12/36.
2Thoroughly understand SA Income Tax Act deduction and capital allowance rules.
3Practice multi-step financial management calculations including WACC and NPV.
Frequently Asked Questions
What is the SAICA ITC exam?
The Initial Assessment of Competence (ITC) is the first of two SAICA board examinations required to qualify as a CA(SA).
What are the prerequisites for writing the ITC?
Candidates must hold a SAICA-accredited CTA or Postgraduate Diploma in Accounting (PGDA).