Top PDF ACCA Paper F8 Auditiing and Assurance F8AA(Int)MT1A As j08

ACCA Paper F8 Auditiing and Assurance F8AA(Int)MT1A As j08

ACCA Paper F8 Auditiing and Assurance F8AA(Int)MT1A As j08

The resignation of Past & Co may have been prompted by disagreement (eg over the truth and fairness of the view shown by Clover’s accounts) or the loss of professional understanding between the two parties. This may cast doubt on the directors’ integrity and Future & Co. must carefully consider their involvement with the client.

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ACCA Paper F8 Auditiing and Assurance F8AA(Int)DSGuide d08

ACCA Paper F8 Auditiing and Assurance F8AA(Int)DSGuide d08

2 Regulatory environment – statutory audit Questions have been set on the due process of developing auditing standards and the removal of auditors. So all of the topics in this session cannot be ignored even if you think they are not core areas. After studying this session you should be able to: ¾ explain the development and status of

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ACCA Paper F8 Auditiing and Assurance F8AA(INT)MT2A Qs j08

ACCA Paper F8 Auditiing and Assurance F8AA(INT)MT2A Qs j08

3 You are the senior in charge of the audit of Phoenix, a private limited liability company, which manufactures super alloys from imported zinc and aluminium. The company operates three similar foundries at different sites. The draft accounts for the year ended 31 March 2008 show profit before taxation of $1·7m (2007 – $1·5m).

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ACCA Paper F8 Auditiing and Assurance F8AA(Int)RQB Conts d08

ACCA Paper F8 Auditiing and Assurance F8AA(Int)RQB Conts d08

Although IAS 1 does not become effective until periods on or after 1 January 2009, earlier adoption is permitted. ACCA operates a six month rule in its examinations based on issue date, whereby accounting standards will not be examined until six months have passed from their date of issue. Therefore the revised IAS 1 falls to be examined from the June 2008 examinations.

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ACCA Paper F8 Auditiing and Assurance F8AA(Int)SOverview d08

ACCA Paper F8 Auditiing and Assurance F8AA(Int)SOverview d08

AUDIT AND ASSURANCE F8 – STUDY OVERVIEW 1 Stage of study System Study Sessions Syllabus coverage INTRODUCTORY Note: All topics to be covered before taking Monitoring Test 1 1 [r]

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ACCA Paper F8 Auditiing and Assurance F8AA(Int)RQB Qs d08

ACCA Paper F8 Auditiing and Assurance F8AA(Int)RQB Qs d08

(c) The audit revealed a major control weakness in the management of investments. The company recently recruited a financial analyst, as an employee, to manage the investment of surplus funds. Company policy is to invest in the shares of large quoted companies. The audit discovered a number of situations where the financial analyst had made substantial profits for the company by speculating in risky investments such as derivatives. Such investments could result in massive losses. The matter was reported in writing to the chief financial officer four months ago but no action has yet been taken. (5 marks) (d) One of the company’s oil tankers has just run aground on the coast of California. There is a risk of a serious oil spill which could have a significant effect on the future of the company. Further information will not be available until after the auditor’s report has been signed.
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ACCA Paper F8 Auditiing and Assurance F8AA(Int)Mock1 Qs j08

ACCA Paper F8 Auditiing and Assurance F8AA(Int)Mock1 Qs j08

Internet customers view the company’s website and place their orders using the industry standard “shopping basket” approach. When a customer selects a toy on the website, the system transfers the product detail (eg description, product code, price) from the product database to the “checkout” programme for the customer to view. On completing their order, customers proceed to the “checkout” to make a final confirmation of their order, complete delivery details and enter their credit card details. All of this data is taken directly from the web screen by the program and stored in the orders file on TopNotch4U’s secure server. Once an order has been confirmed by the customer, the system prints out a two-part despatch note used by the despatch manager to locate the toys within the shop and warehouse, pack them with the customer’s copy of the despatch note, and despatch the toys. At the end of each day, the second copy of the note is sent to the accounts department. The despatch notes are not pre-numbered by the system. Only the customer’s copy is signed by the manager.
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ACCA Paper F8 Auditiing and Assurance F8AA(INT)MT1A Qs j08

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

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.

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ACCA Paper F8 Auditiing and Assurance  F8AA(Int)Mock1 As j08

ACCA Paper F8 Auditiing and Assurance F8AA(Int)Mock1 As j08

An acceptable procedure would be to apply alternative procedures to all balances, eg establish existence, makeup of balance, after date cash received PROVIDED a strong systems approach (manual or CAATs) had been applied and made clear in the answer. NOTE: Award no marks for any suggestion of using CAATs to select balances etc. As there are only ten balances, this would clearly be inappropriate. CAATs would be appropriate to establish closing balances from initiating records which could then be tested for after date cash. )

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ACCA Paper F8 Auditiing and Assurance F8AA(Int)MT2A As j08

ACCA Paper F8 Auditiing and Assurance F8AA(Int)MT2A As j08

The model answers to the questions are longer and more detailed than would be expected from a candidate in the examination. However, the model answer may not include all valid points mentioned by students – credit will be given to students mentioning such points.

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ACCA Paper F8 Auditiing and Assurance F8AA SQB Qs j08

ACCA Paper F8 Auditiing and Assurance F8AA SQB Qs j08

Your firm has recently been appointed as external auditor to EWheels. EWheels is a private “dot.com” company that operates an internet auction service for the sale of used motor vehicles. You are planning the audit of the financial statements. The company has been in existence for four years and has grown rapidly. It was founded by three individuals who are a former car auctioneer, an internet specialist with an interest in cars, and an accountant. The company now has three offices and some 100 employees. The on-line car auction market is very competitive. The company is the biggest provider of the service in the south of the country, but the directors have ambitious plans which include an aggressive marketing campaign, the take-over of a number of target competitors and additional office space and staff, all of which will require considerable additional finance.
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ACCA Paper F8 Auditiing and Assurance F8AA SQB As j08

ACCA Paper F8 Auditiing and Assurance F8AA SQB As j08

„ The main problem in practice in relation to many of these requirements results from the fact that the auditor is not an expert in the evaluation of accounting estimates and he is required to rely on the work of experts who at a minimum, review the work of the expert employed by the client to perform the original calculations. This not only involves time and cost, but also requires the co-operation of both the client and the client’s expert. The auditor is then in the position of having to “adjudicate” between possibly conflicting findings of experts and to form an opinion as to whether the findings are so different or sensitive, as to have a material effect on the financial statements. It is not uncommon for auditors to have findings covering a very wide range of values, all of which are reasonable and consistent with the auditor’s knowledge of the business and management intentions.
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ACCA Paper F8 Auditiing and Assurance F8AA(IntRQB As d08

ACCA Paper F8 Auditiing and Assurance F8AA(IntRQB As d08

„ It appears that invoice 6210 for $4,735 has not been included on Tollerton’s purchase ledger. As this invoice is dated some time before the year end, the first question to ask is whether the goods have been received. I will check whether the goods have been received by looking for the appropriate goods received note (I may have to ask Carlton for details of this item, if no invoice can be found at Tollerton). If the goods have been received, I will check if there is a purchase invoice. If there is a purchase invoice, I will ask the purchases department why the invoice has not been posted to the purchase ledger. This will probably be because of a dispute, normally either an incorrect price, the wrong quantity or some faults with the goods. If the goods relating to this invoice are in inventory (or have been sold) a purchase accrual should be made for this item. If an excessive price has been charged for the items, a lower price can be used, provided the same price is used to value the inventory. If there is a short delivery, the purchase accrual would be for the actual goods received, rather than for those on the invoice.
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ACCA Paper F8 Auditiing and Assurance F8AA SQB Conts j08

ACCA Paper F8 Auditiing and Assurance F8AA SQB Conts j08

Editorial material Copyright  Accountancy Tuition Centre (International Holdings) Limited, 2008. All rights reserved. No part of this training material may be translated, reprinted or reproduced or utilised in any form either in whole or in part or by any electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording, or in any information storage and retrieval system, without permission in writing from the Accountancy Tuition Centre Limited.

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ATC F8 materials  FF8 AA (Int)Session01 j08

ATC F8 materials FF8 AA (Int)Session01 j08

¾ Obtain management representations – The auditor asks management to formally confirm in writing that they are responsible for the fair presentation of the financial statements, the design and implementation of internal control to prevent and detect fraud; that they have recognised and carried out their legal and governance responsibilities and that they approve the financial statements. Representations may also be required from management to support audit evidence (e.g. that all obligations and liabilities have been fully disclosed; that the entity has good title to all assets). See Session 20.
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ATC F8 materials  FF8 AA (Int)Session03 j08

ATC F8 materials FF8 AA (Int)Session03 j08

¾ Enables non-executive directors to contribute independent judgement on matters of critical importance in running the enterprise (e.g. investment decisions, risk analysis) and play a positive role in areas for which their skills are particularly fitted. It is of particular importance that the chief executive of the enterprise and the chairman of the audit committee are able to develop a respected, transparent, trusted and professional working relationship.

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ATC F8 materials  FF8 AA (Int)Session02 j08

ATC F8 materials FF8 AA (Int)Session02 j08

¾ The PIOB also maintains active liaison with independent audit regulators/monitors around the world, many of which were also established in response to Enron et al. Note that before Enron, the regulation of auditors was primarily undertaken by a member body (eg ACCA). Post Enron, many jurisdictions required that the monitoring of (at least) listed and public interest company auditors be carried out by an independent body.

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ATC F8 materials  F8 AA (Int)Session00 j08

ATC F8 materials F8 AA (Int)Session00 j08

‰ 1 mark per relevant point clearly expressed and explained (eg point, explain, example). Remember that you must give reasons why particular actions are taken and not just say “do it”, eg do not say “inspect purchase invoice” without saying exactly what you are inspecting on the invoice and why (always refer to a

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ATC F8 materials  FF8 AA (Int)Session07 j08

ATC F8 materials FF8 AA (Int)Session07 j08

¾ A description of the nature, timing and extent of planned risk assessment procedures. These procedures must be sufficient to assess the risks of material misstatement in accordance with ISA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment (see Session 9).

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ATC F8 materials  FF8 AA (Int)Session04 j08

ATC F8 materials FF8 AA (Int)Session04 j08

All of the current Big 4 firms were formed through the mergers of major firms (originally referred to as the “Top 10”). As the number of audit & assurance firms reduced, it was not uncommon for two major competitor companies to find that they became clients of the same firm. Despite assurances given concerning the confidentiality of information and being able to minimise and control conflicts of interest, many competitor companies decided between them that one of them would need to change advisors.

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