ACCA F8 - Audit and Assurance Revision Kit 2016

114 The correct answer is:
5 March 20X8
The date of the letter must be as near as practicable to the date of the auditor's report but not after.
115 Greenfields
Text reference. Chapters 11, 18 and 19.
Top tips. Part (a) should not have caused you too many problems as you should be familiar with the sorts of
procedures an auditor might carry out to gain evidence over an accounting estimate. Note that the requirement
does not limit you to substantive procedures or tests of controls in this instance, so any valid procedures can be
suggested, including testing the operating effectiveness of controls.
Part (b) requires a discussion in (i). Make sure you do present a discussion on questions like this. In terms of
written representations it is very important that you realise they are used to support other evidence (not as stand
alone evidence), particularly in areas of judgement such as accounting estimates. You should have weighed up the
appropriateness of written representations using the relevant rules for evidence – written evidence is better than
verbal, but internal evidence is not as good as external. However you should have taken care to apply those rules to
the specific situation described in the scenario, as just stating general rules without applying them is not sufficient
for a exam at this level. For both (i) and (ii), hopefully you took note of the first line of the requirement – ‘for each of
the two issues above’. This is telling you to make sure you keep your answer focused on the issues described.
Notice that part (c) has two mini requirements – first to explain the steps the auditor should take, then to explain
the impact on the auditor’s report. If you had not grasped this early on, and maybe just looked at the impact on the
auditor’s report, you will have struggled to generate the points you needed to gain the majority of the marks.
Easy marks. The easier marks were available in (a) for describing procedures for accounting estimates.
Examination Team's comments. Part (a) was answered satisfactorily. The question was not specifically related to
the two issues in the scenario and so candidates who considered general procedures relevant for any estimate such
as legal provisions or depreciation scored well.
A significant minority did not attempt (b) and where it was attempted candidates’ performance was unsatisfactory.
In the first part of the question on written representations many candidates wrote at length about written
representations in general but the question asked specifically about two situations and these needed to be
addressed. In addition many candidates did not seem to understand the difference between the two situations in
that for the receivable balance alternative evidence should exist, for example, through a receivables circularisation,
but because of the nature of the warranty provision alternative evidence was not generally available.
The second part of the question considered additional procedures that should now be performed for these two
issues. Again performance was unsatisfactory, it was clear from the scenario that the audit fieldwork had already
been performed as it was stated that the manager was performing a final review of the audit. Therefore procedures
needed to reflect that the main work on testing receivables and provisions had already been undertaken and at this
stage it was just a case of updating this knowledge.
Candidates’ performance was satisfactory in part (c) with many scoring well for the auditor’s report impact.
However, many candidates provided a scatter gun approach of suggesting every possible auditor’s report
implication. Many used terms such as “except for”, “modified” or “qualified” but the accompanying sentences
demonstrated that candidates did not actually understand what these terms meant.
Future candidates are reminded that auditor’s reports are the only output of a statutory audit and hence an
understanding of how an auditor’s report can be modified and in which circumstances, is considered important for
this exam.
Answers 169