ACCA F8 - Audit and Assurance Revision Kit 2016

(ii)
(iii)
Receivables
– For those receivables who don’t respond, the team should arrange to send a follow up
circularisation if agreed by the client.
– For non-responses to the follow up, and after obtaining client consent, the audit senior should
telephone the customer and request the customer responds in writing to the circularisation
request.
– Where all follow ups are unsuccessful, alternative procedures must be carried out to confirm
receivables, such as reviewing after date cash receipts for year end receivables.
– Where responses highlight differences, these should be investigated to establish if any
amounts are disputed or require adjustment.
– Where it is found that differences are in relation to disputed invoices, they should be
discussed with management and the need for an allowance or write off assessed.
– For timing differences identified on responses or otherwise (eg cash in transit), these should
be agreed to post year-end cash receipts in the cash book and bank statement.
– For those responses highlighting an unresolved difference, the receivables ledger should be
reviewed for unusual entries that could suggest errors made when posting transactions.
(Note: Only five valid procedures were needed.)
Reorganisation
– Verify the announcement to shareholders was actually made in late October by inspecting
documentary evidence of the announcement.
– Board minutes should also be reviewed to confirm the decision to reorganise the business
was taken pre year end.
– Obtain an analysis of the reorganisation provision and confirm that only expenditure
attributable to the restructuring is included.
– Cast the breakdown of the reorganisation provision to ensure it has been correctly calculated.
– Review the expenditure and confirm retraining costs are not included.
– Agree costs included within the provision to supporting documentation to confirm the
appropriateness and accuracy of items included.
– Review the related disclosures in the financial statements to assess whether they comply with
the requirements of IAS 37 Provisions, contingent liabilities and contingent assets.
– Obtain a written representation confirming management discussions in relation to the
announcement of the reorganisation.
(Note: Only four valid procedures were needed.)
97 Donald
Text reference. Chapters 6, 8 and 16
Top tips. Part (a) was knowledge based and unrelated to a scenario. As long as you read the question correctly you
should have scored well on this.
Part (b) is a common scenario related requirement where you needed to identify and describe AUDIT risks and then
explain the auditor’s response to each risk. A tabular format would help ensure both mini requirements are
addressed.
Note that we have emphasised that the risks are AUDIT risks. For a risk to be an audit risk rather than just a general
business risk it needs to have an impact on the financial statements being audited. Therefore you should include the
assertion or area of the financial statements affected. If you do this it should become apparent if you have not come
Answers 157