ACCA F8 - Audit and Assurance Revision Kit 2016

Section A – ALL 15 questions are compulsory and MUST be
attempted
Each question is worth 2 marks
Scenario 1
The following scenario relates to questions 1 - 5
You are an audit manager in NAB & Co, a large audit firm which specialises in the audit of retailers. The firm
currently audits Goofy Co (Goofy), a food retailer, but Goofy’s main competitor, Mickey Co (Mickey), has
approached the audit firm to act as auditors. Both Goofy and Mickey are listed companies. Goofy is concerned that
if NAB & Co audits both companies then confidential information could pass across to Mickey.
1 The ACCA Code of Ethics and Conduct requires that an external auditor implement appropriate safeguards to
ensure that a conflict of interest is properly managed.
Which of the following actions should NAB & Co take in the above situation?
(1) Inform the audit committees of both Goofy and Mickey of the potential conflict of interest and obtain
their consent to act for both parties
(2) Use separate audit teams for each audit with a common independent review partner to determine
whether confidentiality has been maintained
(3) Draw up confidentiality agreements to be signed by the Board of Directors of Goofy and Mickey
(4) Prevent unauthorised physical access to the information relating to the both company audits
A 1, 3 and 4
B 1 and 4 only
C 1, 2 and 4
D 1, 2 and 3
The audit engagement partner for Goofy has been in place for approximately six years and her daughter,
Emma, has just accepted a job offer from Goofy as a warehouse manager. Emma’s employment contract
states that if a bonus is to be paid it will be awarded as shares in Goofy rather than in cash. Goofy is offering
NAB & Co a 5% bonus on top of the audit fee if this year’s audit can be completed three weeks earlier than
last year. This is to reduce the demands on the finance director’s time as he is busy working on other
projects.
2 From a review of the information above, your audit assistant has highlighted some of the potential risks to
independence in respect of the audit of Goofy.
(1) Audit engagement partner has been in the position for six years
(2) Audit engagement partner’s daughter works for Goofy
(3) Audit engagement partner’s daughter’s bonus would be in the form of shares
(4) 5% bonus offered if audit is completed three weeks earlier than last year
Which of the following options correctly identifies the valid threats to independence and allocates the
threat to the appropriate category?
Familiarity
Self-interest
A 1 and 3 2 and 4
B 2 and 4 1 and 3
C 1 and 2 3 and 4
D 2 and 3 1 and 4
Mock exam 1: questions 185