ACCA F8 - Audit and Assurance Revision Kit 2016

Marks
(c)
Up to 1 mark per well explained point.
Review cash flow forecasts
Sensitivity analysis
Discuss if sales director replaced and new customers obtained
Review post year-end sales and order book
Review the loan agreement and recalculate the covenant breached to confirm
timing and amount of the loan repayment
Review bank agreements, breach of covenants
Review bank correspondence
Discuss if alternative finance obtained
Review shareholders’ correspondence
Review suppliers’ correspondence
Enquire of lawyers any further litigation by suppliers
Subsequent events
Board minutes
Management accounts
Consider going concern basis appropriate
Written representation 6
(d) (i) Up to 1 mark per well explained point
Events or conditions constitute a material uncertainty
Use of the going concern assumption is appropriate
Adequacy of disclosures in the financial statements 2
(ii)
Up to 1 mark per well explained point
Not going concern therefore modified opinion
Adverse opinion
Basis for adverse opinion paragraph, going concern basis not
appropriate
Opinion paragraph, financial statements not true and fair 3
20
(a)
(b)
Three stages of an audit when analytical procedures can be used
In accordance with ISA 520 Analytical procedures and ISA 315 Identifying and assessing the risks of
material misstatement through understanding the entity and its environment, analytical procedures must be
used:
– As risk assessment procedures at the planning stage of the audit to identify the risks of material
misstatement by obtaining an understanding of the entity
– At the final review stage of the audit to assist the auditor in coming to an overall conclusion as to
whether the financial information is consistent with his understanding of the business
They can also be used as a substantive procedure as a means of obtaining sufficient appropriate audit
evidence as part of the detailed testing work in a final audit.
Going concern indicators
(i)
(ii)
(iii)
A major customer who owes Strawberry $0.6m has ceased trading and is unlikely to pay. This nonpayment
has a significant impact on current cash flow and the loss of the customer will also affect
revenue and profits in future unless significant new customers can be found.
The sales director has left and has not been replaced. Without a sales director it will be difficult to
generate new sales which is a particularly pressing issue with the recent loss of a major customer.
The monthly cash flow has been negative for the last two months and is forecast to be negative for
the forthcoming year. Unless the company has other sources of funds this will lead to an increase in
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