ACCA F8 - Audit and Assurance Revision Kit 2016

(b)
Review of inventory documentation, and evidence of enquiries made of management, regarding the
value and the potential recoverability of any inventory relating to contracts with Cherry Co
Calculations regarding the amount to be recognised as an impairment loss
Selection of engagement staff
The fact that the junior had only worked on two audits before this is not a problem. However, it is important
that they be given work appropriate to their level of skill and experience. This does not appear to have
happened here, as detailed below.
No audit planning meeting
The audit planning meeting, led by the partner, is a crucial part of the audit. It is the best way of giving the
team an understanding of the client, and should discuss both the overall strategy and the detailed audit plan,
perhaps going into difficulties that have been experienced in previous years and which could come up again.
The discussion should focus on what individual members of the team need to do. This is particularly
important for less experienced and junior members of the team.
Audit manager away
The manager should not have given the senior responsibility for the audit while they were away on holiday
for three weeks. It is important that an audit is properly supervised, and it may have been more appropriate
for another manager to take responsibility for the audit.
Senior busy
Not only is there a question mark over whether they have the experience to manage the audit, but the senior
was also busy with other assignments and thus unable to devote sufficient time to this one. It is very
important that someone is available to supervise junior members of the audit team. This is not happening
here.
It is also possible that the lack of attention paid by both the manager and the senior has led to the
misstatements in respect of the trade receivables not being picked up by the audit team.
Junior auditing goodwill and inventory
Goodwill is a complex accounting area to audit, and should not be given to a junior to do. The same can be
said of inventory and in particular work-in-progress. A junior is very unlikely to have developed the
judgement needed to audit these areas. This seems to be the case here, as shown by the junior's error at the
inventory-take (see below).
Inventory count
The junior helped the client's staff to count raw materials at the inventory count, when they should instead
have been observing that the client's staff were counting them correctly and in accordance with the count
procedures. This would seem to imply that the junior had not been properly briefed on their responsibilities
at the inventory count, as this is a basic error.
It is likely that more audit evidence will be needed to be done on inventory as a result of this error.
Junior asked to challenge FD
It is not appropriate for a junior to be asked to challenge a client's finance director regarding an accounting
issue that they are unlikely to understand fully. This should have been done by either the audit manager or
the partner, as they would be in a position to understand the technical issues involved, and would carry
sufficient authority with the client to make the challenge effective.
Running out of time to complete procedures
Pressure of time is an important contributor to audit risk. Audit time budgets should allow staff enough time
to complete the audit to the required quality. It is also possible that the lack of supervision of the audit
team's work has led to the audit being conducted inefficiently, with inadequate monitoring of progress and
discussion of issues as they arise.
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