ACCA F8 - Audit and Assurance Revision Kit 2016

Marking scheme
Marks
(a) (i) ½ mark per ratio calculation per year
Operating margin
Inventory days
Payable days
Current ratio
Quick ratio 3
(ii) Up to 1 mark per well explained audit risk, maximum of 6 marks for risks and
up to 1 mark per audit response, maximum of 6 marks for responses
Management manipulation of results
Sales cut-off
Revenue growth
Misclassification of costs between cost of sales and operating
Inventory valuation
Receivables valuation
Going concern risk 12
(b) 1 mark per well explained point – If the procedure does not clearly explain how this
will help the auditor to consider going concern then a ½ mark only should be
awarded:
Review cash flow forecasts
Review bank agreements, breach of key ratios
Review post year-end sales and order book
Review suppliers correspondence
Inquire of lawyers for any litigation
Subsequent events
Board minutes
Management accounts
Consider additional disclosures under IAS 1
Written representation 5
20
(a) (i) Additional ratios
Operating
margin
Inventory
days
Payable
days
Current ratio
20X4
20X3
PBT/Revenue 4.5/23 = 19.6% 4/18 = 22.2%
Inventories/COS
365 days
Payables/COS
365 days
Current assets/Current
liabilities
Quick ratio (Current assets –
inventories)/Current
liabilities
(Note: Only three ratios were required.)
2.1/11 365 = 70 days 1.6/10 365 = 58 days
1.6/11 365 = 53 days 1.2/10 365 = 44 days
6.6/2.5 = 2.6 6.9/1.2 = 5.8
(6.6 – 2.1)/2.5 = 1.8 (6.9 – 1.6)/1.2 = 4.4
Answers 93