ACCA F8 - Audit and Assurance Revision Kit 2016

67 Greystone
Text reference. Chapters 5, 9, 10, 16 and 19.
Top tips. Part (a) is a standalone requirement which asks for an explanation of matters to be considered when
determining whether a deficiency is significant. So, assuming a deficiency has been identified, what would make it a
significant one? Remember that a significant deficiency is one that the auditor judges to be of sufficient importance
to merit the attention of those charged with governance (TCWG) – so even if you couldn't remember the factors
listed in the ISA, you could have tried to think of what sort of factors will influence the need to report to TCWG and
which might not.
In Part (b), you don't want miss out on the two marks for the presentation of your answer, so make sure you
include a suitable covering letter with your report to management. As you look through a scenario such as this, you
should be alive to any clue you are given that there is a deficiency in a particular area. For example, here there is a
lot of potential for running out of inventory where you have a four week wait for orders to arrive. In the absence of a
robust control, you should be able to pick up that the current ordering system is not up to the job and suggest
viable improvements, such as setting minimum re-order levels.
Part (c) is a relatively straightforward requirement if you know your trade payables substantive procedures.
Remember to focus on year end trade payable procedures and only include substantive procedures, not tests of
controls.
For part (d) you may well be familiar with the sorts of assignments internal audit carry out. You should always bear
the scenario in mind though and prioritise your suggestions according to how well they fit the scenario.
Easy marks. You should be very comfortable with substantive procedures over trade payables, making (c) relatively
straightforward.
Examination Team's comments. Part (a) was unrelated to the Greystone Co scenario and hence tested candidates'
knowledge as opposed to application skills. This question related to ISA 265 Communicating Deficiencies in Internal
Control to those Charged with Governance and Management, and candidates performed inadequately on this part of
the question. The main reason for this is that candidates failed to read the question properly or did not understand
what the requirement entailed. The question asked for matters which would mean internal control deficiencies were
significant enough to warrant reporting to those charged with governance. The question was not asking for
examples of significant internal control deficiencies, however this is what a majority of candidates gave.
Part (b) was answered well by the vast majority of candidates with some scoring full marks. The scenario was quite
detailed and hence there were many possible deficiencies which could gain credit. Where candidates did not score
well this was mainly due to a failure to explain the deficiency and/or the implication in sufficient detail.
Many candidates failed to score the full 2 marks available for presentation as they did not produce a covering letter.
A significant minority just gave the deficiencies, implications and recommendations without any letter at all; this
may be due to a failure to read the question properly. Also even when a letter was produced this was often not
completed.
The question asked for four deficiencies, implications and recommendations, however many candidates provided
much more than the required four points. It was not uncommon to see answers which had six or seven points.
Whilst it is understandable that candidates wish to ensure that they gain credit for four relevant points, this
approach can lead to time pressure and subsequent questions can suffer.
Part (c) was answered satisfactorily for many candidates. The most common mistake made by some candidates
was to confuse payables and purchases and hence provide substantive tests for purchases such as 'agree purchase
invoices to goods received notes'. The requirement verb was to 'describe' therefore sufficient detail was required to
score the 1 mark available per test. Candidates are reminded that substantive procedures is a core topic area and
they must be able to produce relevant detailed procedures. Answers such as 'discuss with management to confirm
ownership of payables' is far too vague to gain credit as there is no explanation of what would be discussed and
also how such a discussion could even confirm ownership.
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