This question focussed on due diligence, a topic that has appeared in P7 examinations several times previous to this sitting. The scenario described a due diligence assignment to be performed on the target company Mizzen Co, at the request of Baltimore Co. The history and activities of the target company was described in some detail, and some financial information provided for the last four years. For Baltimore Co this would be their first acquisition, and was being considered as a means to diversify the company’s operations.

Requirement (a) was for 6 marks, and asked candidates to discuss three benefits to Baltimore Co of a due diligence review being performed on Mizzen Co. While some reasonable answers were given, possibly by candidates who had practiced the past exam question containing a similar requirement, on the whole answers were unsatisfactory. The following factors contributed to inadequate performance in relation to this requirement:

• Writing answers that were much too brief for the marks available – it was common to see three sentences given as an answer to this requirement, which cannot be enough for a 6 mark requirement. 
• At the other extreme, some very lengthy answers were given that usually failed to answer the question requirement and instead either simply wrote in detail on how a due diligence assignment should be performed, or suggested in some detail the operational benefits to Baltimore Co of acquiring Mizzen Co. 
• Many answers failed to limit to three benefits and instead provided a bullet point list of benefits that were not discussed at all.