ACCA F8 - Audit and Assurance Revision Kit 2016

– Select a sample of goods despatched notes just before and just after the year end ensure the related
invoices are recorded in the correct accounting period.
– Review a sample of credit notes raised after the year end to identify any that relate to pre year-end
transactions and confirm that they have not been included in receivables.
– Review the aged receivables ledger for any credit balances and inquire of management whether these
should be reclassified as payables.
Top tips: Eight substantive procedures like the ones shown above were enough to gain the 8 marks
available. However other valid procedures you may have come with are shown below.
– For slow moving/aged balances, review customer correspondence files to assess whether there are
any invoices in dispute which require an allowance.
– Review board minutes to assess whether there are any material disputed receivables.
– Select a sample of year-end receivable balances and agree back to a valid GDN and sales order to
ensure existence.
(c)
Controls to reduce the risk of fraud reoccurring and explanation of how the risk is mitigated
Control
Related members of staff should not be allowed to
work in the same department where they can seek
to override segregation of duty controls.
Customer statements should be sent out each
month to all customers. The receivables ledger
supervisor should check that all customers have
been sent statements.
Bank reconciliations should be reviewed regularly
by an appropriate level of management who is not
involved in its preparation. Unreconciled amounts
should be investigated and resolved at the time of
review.
Explanation of how risk is mitigated by control
The risk of related staff colluding and being able to
commit a fraud without easily being discovered will
be reduced.
Customers receiving statements may notice
anomalies in the allocation of payments (either
timing or amount) and may alert the company of
these anomalies. This may draw attention to the
sort of fraud that occurred at Tinkerbell (known as
'teeming and lading').
Any compensating material balances netted off to a
small difference on the bank reconciliation will be
discovered quickly, increasing the probability of
uncovering fraud on a timely basis.
Top tips: Three controls such as those shown above along with three explanations were enough to gain the
6 marks available. However other valid controls and explanations are given below.
Control
Two members of staff should process cash receipts
Staff within the finance department should rotate
duties on a regular basis.
Explanation of how risk is mitigated by control
This would mean another collusion would be
necessary (on top of the one that has already
occurred) to steal cash receipts. This therefore
reduces the risk of re-occurrence.
Rotation will act as a deterrent to fraud. This is
because staff will be less likely to commit
fraudulent activities due to an increased risk of the
next person to be rotated to their position
uncovering any wrongdoing.
Answers 125