ACCA Paper F8 Auditiing and Assurance F8AA(INT)MT1A Qs j08






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Monitoring Test MT1A

Audit and Assurance



Time allowed 1.5 hours

All FOUR questions are compulsory and MUST be attempted.

Do NOT open this paper until instructed by the supervisor.

Accountancy Tuition Centre Ltd



 Accountancy Tuition Centre (International Holdings) Ltd 2008 2

1 You are an audit partner in Future & Co, a firm of certified accountants. You have recently been approached by the directors of Clover, a multi-national listed company, who wish to appoint your firm as auditors of the company. The existing auditors, Past & Co, are resigning at the request of the directors.


Describe the ethical and practical matters which you would consider prior to accepting appointment as external auditor of Clover.

(9 marks) 2 Your firm has recently been appointed as auditor of Edco, a privately owned hotel, and you

are to be the senior in charge of the audit. Your firm is not familiar with the hotel industry. The hotel has:

(1) bedrooms, 25 of which are single (2) conference centre facilities

(3) two restaurants and a bar, which are also open to non-residents.

A variety of discounts are offered to customers depending on the type of customer (eg conference, business or private) and the time of week or year. The management has sought to increase the room occupancy of the hotel in recent years by offering weekend discounts to tourists.

The hotel has recently experienced difficulty in retaining staff and, consequently, both staff turnover and the numbers of part-time staff employed are high.

All bookings and accounting transactions are maintained on two microcomputers, one of which is kept in reception and the other in the administration office. The bar and restaurants record transactions on electronic tills.


(a) Describe basic sources of information you would find useful when familiarising yourself with the nature of business in which Edco is involved. (5 marks)

(b) Describe the possible assertions risk areas within Edco (eg consider inherent risk and control risk as defined within ISA 200). (9 marks)

(c) List the internal control objectives of Edco in respect of: (i) room lettings; and

(ii) part-time employee wages. (6 marks)


 Accountancy Tuition Centre (International Holdings) Ltd 2008 3

3 You are the audit client partner for Excelm Plc, a listed company. A requirement of the legislative environment under which the company operates, is that all listed companies must have an operative audit committee of at least three independent members. Excelm’s audit committee has been in operation for three years.


(a) Briefly explain FIVE responsibilities of the audit committee. (5 marks)

(b) Explain the communications you will have with the audit committee at various stages throughout the audit process. (7 marks)

(12 marks) 4 “When obtaining audit evidence from substantive procedures, the auditor should consider the

sufficiency and appropriateness of audit evidence from such procedures together with any evidence from tests of control to support financial statement assertions ...”

ISA 500 Audit evidence


Discuss the extent to which each of the following sources of audit evidence is sufficient and appropriate:

(i) initials on a grid stamp for quantity, price and extensions on purchase invoices (ii) year-end bank report for audit purposes

(iii) comparison of weekly till rolls (of a cash register) and cash bankings (ie paid into a bank account).

(9 marks)