ACCA F8 - Audit and Assurance Revision Kit 2016

94 Springfield Nurseries
Text reference. Chapters 10, 12, 13 and 14.
Top tips. You shouldn't find this 30 mark case-study question on the audit of revenue, non-current assets and
inventory too tricky. Part (e) is probably the most difficult part. This question is typical of the sort of question you
should expect on any of the main classes of assets or liabilities on your exam paper. You need to be able to explain
issues and identify audit tests to gain sufficient evidence about them. You should also be ready to identify
deficiencies in part of an accounting system and then suggest how these can be rectified. Remember to relate your
answer to information provided in the scenario where possible.
Easy marks. Parts (a) and (c) are the more straightforward parts of the question.
For part (c) ensure that you deal with ownership and cost separately.
Marking scheme
(a)
(b)
(c)
(d)
(e)
Marks
Tests of controls and substantive procedures
Up to 1 mark per point to a maximum of 4
Assertions for non-current assets
Up to 1 mark per point to a maximum of 5
Evidence available
0.5 marks per source of evidence to a maximum of 2
Audit procedures
Up to 1 mark per point to a maximum of 5
Deficiencies and suggested solutions
Up to 1 mark per explained deficiency and up to 1 point per suggested
solution up to a maximum of 14
30
(a)
Procedures
(i)
(ii)
Tests of controls
Tests of controls are performed to obtain audit evidence about the operating effectiveness of controls
preventing, or detecting and correcting, material misstatements at the assertion level.
A test of control that may be carried out when auditing completeness of revenue is observing or
verifying the process of matching of goods despatch notes (GDNs) to invoices. The auditor should
also enquire how unmatched GDNs are investigated to ensure related sales are recorded where
necessary.
Substantive procedures
Substantive procedures are audit procedures performed to detect material misstatements at the
assertion level. They are generally of two types:
Substantive analytical procedures
Tests of detail of classes of transactions, account balances and disclosures
An example of a substantive procedure is comparing monthly revenue with prior years, budgets and
expectations (eg for expected seasonal peaks) and investigating any significant deviations.
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