ACCA F8 - Audit and Assurance Revision Kit 2016

The requirement for tests of controls was answered unsatisfactorily. Many candidates are still confusing
substantive procedures and test of controls. A significant number of candidates suggested substantive procedures
such as 'recalculating gross and net pay calculations', rather than a test of control which might be to 'review
evidence of the recalculation of payroll'. Candidates need to review their understanding of these different types of
audit procedures and ensure that they appreciate that substantive tests focus on the number within the financial
statements whereas test of controls are verifying if client procedures are operating.
In many instances candidates focused on re-performing the control rather than testing it had operated. Observation
of a control was commonly suggested by candidates, however in many cases this is not an effective way of testing
that a control has operated throughout the year. Part (c) was answered very poorly by a significant number of
candidates, demonstrating a worrying lack of knowledge about substantive procedures and tests of controls. This is
an important area which needs to be addressed.
Part (b) was generally answered well by candidates. A minority of candidates incorrectly suggested that planning
procedures would be undertaken at the interim audit and that they were undertaken by internal auditors. Also a
significant minority confused this requirement with a comparison of internal and external audit roles. Candidates
must remember to read the question carefully and think and plan before writing to ensure that they answer the
question asked.
Marking scheme
Marks
(a)
(b)
(c)
Internal control deficiencies, recommendations and tests of control
Up to 1 mark per well explained deficiency, up to 1 mark for each well explained
recommendation and up to 1 mark for each well described test of control. Overall
maximum of 5 marks each for deficiencies, controls and tests of control.
Payroll calculations not checked
Payroll clerks update standing data for wages increases
Authorisation of overtime sheets only undertaken if overtime exceeds 30% of
standard hours
Time off as payment for overtime not checked to overtime worked report
Review of overtime worked reports by department heads
Authorisation of overtime sheets when department heads on annual leave
Finance director only reviews totals of payroll records and payments list
Maximum marks 15
Final audit and interim audit
Up to 1 mark per well explained point, maximum of 3 marks each for interim and
final audit, overall maximum of 5 marks.
Interim audit
Final audit 5
Up to 1 mark per well described substantive procedure.
Agree wages and salaries per payroll to trial balance
Cast payroll records
Recalculate gross and net pay
Recalculate statutory deductions
Compare total payroll to prior year
Review monthly payroll to prior year and budget
Proof in total of payroll and agree to the financial statements
Verify joiners/leavers and recalculate first/last pay
Agree wages and salaries paid per payroll to bank transfer list and cashbook
Agree the individual wages and salaries as per the payroll to the personnel
records
Agree sample of weekly overtime sheets to overtime payment in payroll records 6
Answers 127