禚 1 f y认 - accaspace · section b-all three questions are compulsory and lmust be attempted 禚...

section B-ALL THREE questions are compulsory and lMUsT be attempted

禚 1 F y认&CO and are current丨 yp丨 anning the audit Of Vl"la。 YOu

attended the p丨 anning meeting with the audit engagement partner and finance directOr|ast、 ″eek and the minutes

【Om the me刨 ng are$hOwn be丨 ow。 YOu are reviewing these as pad Of the prOcess Of prepaHng the aud⒒ 哎叼tegy

dOcument.

Ⅳlinutes of planning1η eeting for1ⅥⅡIa

①/

ヵ弘弑⒊ a洌枇 cOm∞γ 吣b∝ a咖吒跚 en屺 o 呐吣an刚洮 ∞d‘ №鸭

‘increase fmm the pre∨ iOus year.The cOmpany has llyQ至迎艮gQcess at the factory。 This resu丨 ted in expendi

As the丨 eve|

inventOry。 lt

the cO|a and fizzy dr丨 nks

丨Πg` repair丨 ng and rep丨 aci

◇〖丫删

Of production has increased} the

rented from third parties,There Nlv"丨nOw uti"ses15warehOuses;sOme

9

aking p丨 a

genera丨丨edger has been intrOduced at the e戒 t潆汛

浦秽锣

辶

丨n additiOn, M"丨 a hjg"而 cⅡΙ了7 expenditure Of$4· 5mi丨丨iOn On

rand of fizzy sOft drinks。

a℃suk σ the inc℃ase in mvenuejrf 燕嶷茧

℃岫 0

chase Outstanding

hin the prOductiOn

rOducts were

hOweve1 due tO cOmp|aints by customers about the f丨 a∨ou1 nO further

叫膊乒s i

tc) ⅡenUfy the∷枷协|Ⅱo昏 otherthan audk Ⅱsks,嘲瞰泅蚰ouⅡ oei叩押ued∶ with卜丨he日 u丬t str

for IⅥ

"Ia Co∶

aC0;and for each area provide an exampIe reIevant to the audit∶

The finance directOr has requested that the dead"ne for the20X6audit be shortened by a mOnth and has asked the

audit engagement partner tO cOnsiderif this w"丨 be pOssib丨 e。 The partner has suggested thatin ordertO rη eet this new

tighter dead"ne the firm may carry out both an interirn and final audit fOr the audit Of丨 Ⅵ

"|a tO3O September2OX6。

Ⅱ H咖岫 d岫

marks)

(30marks1

15 The debt with Pir丨 O CO shou丨 d be prOvided fOr and is rη ateria|to the f|nanc丨 a丨 statements at7· 4°/o Of prOfit befOre tax and2· 5%;Of

reven ue。 This represents a materia丨 misstatement which is materia|but not pe「 vasive,As suCh,if no adjustmentis made the auditOr

w"丨 be required to prOvide a qua"fied‘ except fOr’ Opinion。丨f the required Change is made,then nO material rη isstatement exists

and therefore the auditQr w"丨 be ab|e to issue an unmodified Opinion。

section B

16 (a) Audit risκ nd its c。 mponents

is the risk that the auditOr eXpresses an 丨napprOpriate audit OpiniOn when the financia丨 statements are materiaHy

functiOn of twO main cOmpOnents being the risks Of rη ateria| rη isstatement and detectiOn risk, Risk

is rη ade up OftWO COmpOnents, inherent risk and cOntrol risk。

丨nherent risk is the susceptib"ity Of an assertiOn about a c丨 ass of transaction,accOunt ba|ance Or disc丨 Osure tO a r1nisstatement

which cOu丨 d be rη ateria1either individua"y or when aggregated、 Ⅳith other rη isstatements,before consideration Of any re丨 ated

contro丨 s。

COntro丨 risk is the「 isk that a rnisstatement、 Ⅳhich COu丨 d OCcur in an assertiOn abOut a c丨 ass of transactiOn, accOunt ba|ance

Or disClOsure and which cOu|d be materia丨 ,either individua||y Or When aggregated with Other misstatements,wil丨nOt be

prevented,Or detected and cOrrected,On a tirη e|y basis by the entity’ s lnterna|contr° l。

DetectiOn r丨 sk is the risk that the procedures perfOrrη ed by the auditOr tO reduce audit risk tO an acceptab|y|Ow|eVel vv"丨 nOt

detect a nη isstatement which eXiSts and which cOu丨 d be mater丨 a1 either individuaHy Or when aggregated With Other

Π1isstatements。 DetectiOn risk is a秆 ected by samp"ng and nOn-sa冂 np"ng risk,

| t ∶ki∶

l ∶∶ls∶∶u:品 :∶Ig,J::⒊∶l:f:∶。ce∶s^=t ∶l∶{It:Ⅰ

i∶

∶‖ dc|assificatiOn in the financia|statements iS correct。

涕:丨吊I;『T苕 :ftr:∶∶早料丨:∶岷t革渫万(PPD

in line with lAS16Prope厂△ P/a冖 Fa冖 d Equ巾 menr。

HOweve1 丨f it re丨 ates mOre tO repairs,then it shOu丨 d be

expensed tO the statement Of prOfit or丨 oss

薯tly Cla⒂№战p

nventory counts undertaken

in aH 15warehouses.

丨tis un"kely that the auditOr、 ″

"|be ab丨

e to attend a" 15

inventOry cOunts and therefOre they need to ensure that

they obtain su矸 icient apprOpriate audit evidence Over the

inventOry counting contrO|s,and cOmpleteness and

existence Of inventory for any vvarehOuses not visited。

|nventory is stored within 15warehOuses;some are Owned The auditOr shOuld review supporting dOcumentation fOr aH

by Mi丨 |o and sOme rented frOm夕咿哕币汹唧

es· On丨 y warehouses inc丨 uded within PPE tO cOnfirrη ownership by

warehOuses Owned by Mil|a sh| |uded vvithin PPE。 h/liHa and to ensure non-current assets are nOt Overstated。

There is a risk of Oversta△emQ d understatement

a" 15

(〔l》 |母;I￡∶】刂考1琨T珲

:￡

:卩弘f误茗:f[扌Ⅰ丨岳

ystem

锱黯t链l囔嚣昆m∶Il:e吲黠苕:∶l;γ

丨n addition,the new accOunting general丨 edger system w!丨 |

require dOcumenting and the contrO丨 s Over this\″

"|need tObe tested,

i彳 :;∫

(:;tated。 Audit riSk lS a

of rnateria丨 Πlisstatement

d℃ ntal αpen 旒 capl

The auditOr ShOu丨 d assess which of the inventOry sites they

wi||attend the cOunts fOr,This w"|be any with materia丨

iⅢ enω γ α N/vh℃ hh引eah吒

FOr those nOt visited,the auditOr\″ i|丨 need tO review the

leve丨 of exceptions nOted during the cOunt and discuss\″ ith

management any issues which arose during the cOunt。

The auditOr shOu|d undertake deta"ed testing tO cOnfirrη

that aH opening ba|ances have been correctly recOrded in

the neⅥ`accOunting genera|丨

edger system。

They shOu|d dOcument and testthe new system,They

shOu|d review any management repOrts run cOmparing the

o|d and neⅥ`systern during the para"e|run to identify any

issues\″ |th the prOcessing of accOunting infOrrη ation。

17

Audit Hsk

坦|h has incu吖 ed αpe卩d”℃d⒚""On on

吒 v引O口 ng a new bra洌 d Ⅱzzy‘￡∫I∶{}{frink。 Tho αpend⒒ u⒃ 吒

research and deve|Opment und(矢 J♂β38//lp冖J姒 se铤

The哎andad℃quires research∞ sTs toYe颐Ⅱn,四

deve丨 Opment cOsts tO be capitahsed as an intangib丨 e asset。

丨fh/liHa has incOrreCt|yc丨 assified research costs as

。fening ba丨ance of$l∶ 5mi丨丨ion fOr al丨Owance fOr

receivables as !(:)CesSary。 There is a risk that

s despite having a credit

be irrecOverab丨 e and so w"|

Auditor response

0btain a breakdown of the expenditure and undertake

testing tO deterrη ine\Ⅳ hether the cOsts re|ate tO the research

Or deve丨 Opment stage。 E)iscuss the accounting treatrη ent

with the finance directOr and ensure丨 t is in accOrdance with

丨AS38。

: 烈营蚓

cash 「eceipts testing and a rev丨 ew|edger tO be perfOrrη ed tO assess

fo「 a∩ aHOwance for「eceivab|es。

=、酞

石

l\、 n卢〈l(∶JILJ阝

(r′

b撼

-/

|ity fOr the audit。

stiOning n1ind and to exercise prOfessiOna丨 sCepticism

18

M乡Extended post year-end

Of the aged receivab|es

va丨 uation and the need

Discuss with the directOr the ratiOna|e fOr re|easing the

$⒈ 5m Opening a||Owance fOr receivab丨 es。

Deta"ed cost and net rea"sab丨 e va丨 ue testing to be

perfOrrη ed tO assess hOw much the inventOry requires

writing d° wn by

Review the breakdOwn of sa|es Of damaged gOods,and

ensure that they have been accurate丨 y remOved frOm

revenue。

ThrOughout the aud丨 t,the tean∩ 、vH丨 need tO be a|ert tO this

risk。 They wi|| need to maintain pr。 fessiona|scepticisrn and

carefu丨丨y review judgementa丨 decisiOns and cOmpare

treatrη ent against priOr years。

be overstated if nOt

丨n删ditiOn,due tO the damaged inventOry there is an

inc邸 ed risk of custOmers refusing tO make payments in

fu"。

A丨 arge batch of co丨 a prOducts has been damaged in the

productiOn process and wi丨丨be in inventory at the year end。

No adjustment has been made by management.

The va|uation Of inventory as per|AS2/冖 ve/lrO″ es shou丨 d

be at the丨 ower Of cOst and net rea"sab|e va丨 ue。 Hence it is

"ke|y that this inventOry is Overva|ued。Due tO the damaged cO丨 a prOducts,a number Of custOmers

have comp|ained。丨t is丨 ike|y that fOr any Ofthe damaged

gOods sOld, IⅥ Ⅱ|a wⅡ |need to refund these customers。

Revenue is pOssib丨 y overstated if the sa|es returns are n° t

cOmp丨 etely and accurate|y recOrded。

The rη anagement Of λ月"|a receives a significant annua丨bOnus based on the va丨 ue Of year-end tOta|assets。 There is

a risk that rη anagement rη ight fee| under pressure tO

Overstate the va丨 ue Of assets thrOugh the judgements taken

or through the use of re|easing prOvisiOns。

Audit strategy document

The audit strategy sets Out the scOpe,tirη ing and directiOn Of the audit and he丨 ps the deve丨 Opment Ofthe audit p|an,|t shOu|d

cOnsider the fQ"Ow|ng main areas∶

`|ts圮Ould identify the main characteristics of the engagement which define its scOpe。 FOr MⅢ a丨 t shou丨 d COnsiderthe fO|丨Owing∶

Whether the financial infOrrη atiOn tO be audited has been prepared in accordance、 Ⅳith 丨FRSj

what extent audit evidence obta丨 ned in prev|Ou笾

h∶:∶Ⅲc鸵:∶1飞 :I∶f强:哏 :°

钔猁ves d the engageme on the tinη ing Of the audit and the nature Of the

- The audit tirη etab丨 e fOr reporting and、 ″hether there interim as we|丨 as fina丨 audit。

any audit issues arising。of meetings with Mi|la’ s managementtO

5inventOry cOunts。

with management regarding the repOrts tO be issued。

- The tirη ings Of the audit tean∩ meetings and revieⅥ`of work perforrη

ed。

一丨f there are any expected cOrllrnunicatiOns\″ ith third parties。

The strategy shou丨 d∞ nsider the factOrs whiCh,in the auditOr℃ prOfessiOna丨 judgement,

audit teanη’se矸orts,suCh as∶

are significant in directing VliHa’ s

in gathering and eva|uating aud丨 t

Organisation

LocatiOn

y disq

tirnings

discuss

|t should Consider the resu丨 ts Of pre"nη inary audit

Other engagements fOr I、、∫′lH丨 a is re|evant,such as∶

p|anning acti∨ ities and, where app"cab丨 e` whether know丨 edge ga丨 ned on

Resu|‘ Of previOus audits and the℃ su|ts Of any tes‘ Over t【qeRe"veness

Evidence of rη anagement′ s cOr11rnitment tO the design, imp|ementaa

- Vo丨 ume Of transactions,whiCh may deterrη ine whetheritis mOre e仟 icient fOr the audit team

- Significant business deve|Opments a仟 ecting N四 i"a, such as the change in the accOunting

expenditure on an Overhaul Of the factOry。

The audit strategy shOu丨 d ascertain the nature,tirη 丨ng and extent Of resOurces necessary tO perfOrrη the

- The se|ectiOn Of the audit teann with experience Of this type Of industry。

- Assignment Of audit work to the team members。

- Sett丨 ng the audit budget。

TutoriaI note:「 he a冂 SWe厂 ′S/Orlge厂 F幻 al,reqt/〃ecy/or FOtJr rrla厂 ks btJr厂 e/9厂eserlrs a reac幻

`r,ga`cy。

Differences between an interirn and a fina∶ audit

InteriΠ l audit

The interirn audit is that part Of the audit\″ hiCh takes p|ace befOre the year end.The auditOr uses the interirll audit tO carry

out prOcedures which wOu丨 d be di{fiCu丨 t tO perforrη at the year end because Of tirη e pressure。 There is nO requirement tO

undertake an丨 nterirll audit;factOrs tO cOnsider、 ″hen deciding upOn whether tO have One inc|ude the size and comp丨 exity Of

the company a|ong、″ith the e矸 ectiveness of interna|cOntro|s。

FinaI audit

The fina丨 audit、″i丨丨take p|ace after the year end and cOnc|udes、 ″ith the auditOr fOrrη ing and expressing an opiniOn On the

financia|statements fOr the whO丨 e year su圳 ect to audit,lt is impOrtant tO nOte that the fina|OpiniOn takes accOunt Of

cOnc丨 usions fOrrη ed at bOth the inter丨 rn and fina丨 audit。

(e) PrOcedures、 ″hich cOu|d be undertaken during the interirll audit inc丨 ude∶

- RevieⅥànd updating Of the dOcumentatiOn Of accounting systems at丨

ⅥH|a。

- DisCussions with management On the recent grOⅥ`th and any Other changes within the business which have Occurred

during the year tO date at IⅥ H|a to update the auditOr′ s understanding Of the COmpany。

- Assessment of「 isks whiCh Wi||impact the fina丨 audit of Mil丨 a,

- tJndertake tests Of cOntrO|s On VliHa’ s key transaction cyc丨 es Of sa丨 es, purchases and 丨nventOry,and Credit cOntrO丨 .

- PerfOrrη substantive prOcedures On prOfit and |Oss transact丨 Ons fOr the year to date and any Other cOmp丨 eted materia丨

transactions.

lrη pact of interiΠ 1audit on final

丨f an interirn audit is undertaken at IⅥ H丨 a, then it、 /\ì|| have an impact On the fina|audit and the extent Of\`\Òrk undertaken

after the year end。 First, as sOme testing has a丨 ready been undertaken, there wH| be|ess wOrk tO be perfOrrη ed at the fina丨

audit,、″hiCh may resu⒒ in a shOrter audit and audited financia|statements pOssib丨 y being avaHab|e ear|ier。 The Outcome of

the cOntrO丨 s testing undertaken during the interirIl audit、 /\`H丨 impact the丨 eve|Of substantive testing tO be undertaken. |f the

contrO丨 s tested have proven tO be Operating e仟 eCtive|y,then the auditOr rη ay be able tO reduce the丨 eve|Of detai丨 ed substantive

test丨 ng required as they、 ″"丨

be ab丨e tO place re"ance on the cOntrO|s。丨n additiOn, if substantive prOcedures vvere undertaken

at the interirn audit,then Only the periOd frOn∩ the interirll audit tO the year end wH|require tO be tested。

tO re|y

system

interna丨 cOntro丨 .

on interna丨 cOntrO|,

and the significant

audit,such as∶

(d)

19

Provided by Academy of Professional Accounting (APA)

Professional Accounting Education

Copyright © ACCAspace.com ACCAspace 中国ACCA特许公认会计师教育平台

ACCA 特许会计师公会 F8 Audit and Assurance 审计与鉴证 – 真题串讲

Specimen Exam applicable from Sept 2016

Section B: Q 16- Quick Revision

Lecturer: James Zhou

Copyright © ACCAspace.com ACCAspace 中国ACCA特许公认会计师教育平台 2

F8 Audit and Assurance Exam Format

Exam Format (Sept 2016 onwards) Weight

I. 3 x 10 mark OT* case 30%

II. 1 x 30 mark CR (Covered in this lecture) 30%

III. 2 x 20 mark CR (Covered in this lecture) 40%

Total 100%


Learning Outcomes (LOs) in Q 16

A. Audit Risks Representative Tasks

1. Types of audit risks

Be able to identify risks in terms

of business risk (the business

entity itself) & detection risk (the

auditors themselves)

2. Responses to audit risks Be able to propose appropriate

responses to risks

3. Further issues regarding materiality

and risk assessment

Be able to distinguish the term

‘materiality’ and ‘performance

materiality’.



B. Types of audit by the point of time Representative Tasks

1. Interim Audit Be able to give the definition or

be able to list the tasks involved.

2. Final Audit

Be able to give the definition or

be able to list the tasks involved.

3. Relationship

Compare interim and final audit

and discuss the relationship

between.



C. Audit Strategy and Audit Plan Representative Tasks

1. Audit Strategy Be able to give the definition of it.

2. Audit Plan Be able to give the definition of it.

3. Relationship Be able to discuss the

relationship between them.


Exam Approach

1. Read the requirement FIRST.

Avoid answering the question that you want rather than asked.

2. After scanning all the requirements, then quickly scan and

HIGHLIGHT key words.

This enables you be able to have a through understanding of the

subject matter (the thing examiner expected you to answer).

3. Using the ‘key words’ to read the whole scenario with

PURPOSE.


Audit Risks

Types of Audit Risks Definition

1. Business’s risk

Risk arise from the entity itself –

control risk and inherent risk.

From the business nature, it can

be divided into operational,

financial and compliance risk.

2. Auditors’ risk

The risk that auditor expresses

an inappropriate opinion when

FSs are materially misstated.

3. Comparison

前者来自企业自身，和会计师无关；而后者，和审计人员的操作有关：抽样方法，样本大小都是有关的。*Professional

judgement


Audit by time and Audit Visits

Audit by time Definition

1. Interim Audit

The interim audit will be carried

out during the financial year.

Very often 2/3 by time. Sept./Oct.

for a Dec. year end.

2. Final Audit

The final audit will take place

after the year end and is

designed to seek evidence that

financial statements give a true

and fair view and the compliance

with applicable FR framework.

3. Relationship

Determining if the systems have

changed between the interim

audit and internal control.


Audit strategy & Audit plan

C. Audit Strategy and Audit Plan Representative Tasks

1. Audit Strategy

The general & directional

guidance for how the audit

should be conducted.

2. Audit Plan

A much detailed document than

audit strategy which convers the

nature, time and extent of the

whole audit.

3. Relationship

审计战略是最高的级别，控制总体的审计方向；具体的审计流程实施是依靠审计计划。


Additional Course Notes


Scratch Paper a

Explain audit risk and the components of audit risk.


Scratch Paper b

Using the minutes provided, identify and describe

SEVEN audit risks, and explain the auditor’s response

to each risk, in planning the audit of Milla Cola Co.


Scratch Paper c

Identify the main areas, other than audit risks, which

should be included within the audit strategy document for

Milla Cola; and for each area provide an example

relevant to the audit.


Scratch Paper d

Explain the difference between an interim and a final

audit.


Scratch Paper e

Explain the procedures which are likely to be performed during an interim

audit of Milla and the impact which it would have on the final audit.

Provided by Academy of Professional Accounting (APA)

Professional Accounting Education

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