ACCA F8 - Audit and Assurance Revision Kit 2016

53 C The direction of the test is important here. The sample is taken from goods received notes as these
represent deliveries. The auditor can then check that each delivery is supported by a valid order. If the
sample is chosen from purchase orders (Option A) the test would confirm whether orders have been
fulfilled. Options B and D are tests of controls regarding completeness of accounting information.
54 A Bank confirmations should always be carried out by the auditor. Providing advice on the
implementation of a new payroll system would impair the internal auditors' independence. Reviewing
the financial statements on behalf of the board is the responsibility of the audit committee, not
internal audit.
55 D A Value for Money focuses on three Es: Economy, Efficiency and Effectiveness. Option A describes
economy. Option C describes effectiveness. Option B only describes one aspect of efficiency.
SouthLea
56 The correct answers are:
Cut-off of starters' and leavers' wages
Potential fraud risk factors
The facts that the foreman is authorised to issue new employee numbers, and the two wages clerks are
responsible for setting up employee records, make it more likely for bogus employees to be set up on the
system than for bona fide employees to be omitted. This is likely to give rise to questions around the
occurrence of wages, not their completeness. The fact that a wages clerk reviews the calculations for the
deductions from gross pay should reduce the risk of computerised errors.
57 The correct answer is:
Review the log of amendments to standing data for evidence of review
Reviewing overtime lists for evidence of authorisation is a test of control over the authorisation of wages.
The other two procedures can identify unauthorised amendments to standing data, but they are substantive
procedures.
58 The correct answers are:
The external auditor must maintain an attitude of professional scepticism throughout the audit, recognising
the possibility that a material misstatement due to fraud could exist.
It is not the responsibility of the external auditors to detect fraud within a client.
The work of internal auditors in reviewing the company's internal control systems helps management to
fulfill its responsibility for preventing and detecting fraud.
The need to consider the potential of management override applies mainly to the external auditors. The
external auditor's objective is to conclude whether the financial statements are free from material
misstatement, whether from error or fraud. Audit procedures that are effective in detecting error may not be
appropriate in detecting fraud due to the nature of fraud.
59 The correct answers are:
The chief internal auditor should be appointed by the board of directors.
The chief internal auditor should report to the board of directors.
In the absence of the audit committee the work of the internal audit department should be directed by the
board. The scope being set by the finance director reduces independence.
60 The correct answers are:
Full testing procedures using test data when developing computer applications
Disaster recovery procedures
One for one checking and hash totals are application controls.
Answers 105