ACCA F8 - Audit and Assurance Revision Kit 2016

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Another of your audit clients is Dawson Co (Dawson). The audit fieldwork for Dawson is also complete. Once againthe audit senior has raised an outstanding issue.14 Dawson's computerised wages program is backed up daily, however for a period of two months the wagesrecords and the back-ups have been corrupted, and therefore cannot be accessed. Wages and salaries forthese two months are $1.1m. Profit before tax is $10m.Which of the following correctly summarises the effect of the issue relating to wages?MaterialFinancial statement impactA No Liabilities to tax authorities may be understatedB No Profit may be overstatedC Yes Wages may be materially misstatedD Yes Proper accounting records have not been kept15 Based on the above information which of the following options correctly summarises the impact of thewages and salaries issue on the auditor’s report?Audit opinionDisclosure in the auditor’s reportA Qualified Basis for qualified opinionB Disclaimer Basis for disclaimer of opinionC Qualified Key audit matters sectionD Qualified Emphasis of matter190 Mock exam 1: questions
Section B – ALL THREE questions are compulsory and MUSTbe attemptedQuestion 16(a)(b)(c)(d)ISA 260 Communication with those charged with governance provides guidance to auditors in relation tocommunicating with those charged with governance on matters arising from the audit of an entity’s financialstatements.Required(i) Explain why it is important that auditors communicate throughout the audit with those charged withgovernance; and(2 marks)(ii) Describe THREE examples of matters that the auditors may communicate to those charged withgovernance.(3 marks)IntroductionFox Industries Co (Fox) manufactures engineering parts. It has one operating site and a customer basespread across Europe. The company’s year end was 30 April 20X3. Below is a description of the purchasingand payments system.Purchasing systemWhenever production materials are required, the relevant department sends a requisition form to theordering department. An order clerk raises a purchase order and contacts a number of suppliers to seewhich can despatch the goods first. This supplier is then chosen. The order clerk sends out the purchaseorder. This is not sequentially numbered and only orders above $5,000 require authorisation.Purchase invoices are input daily by the purchase ledger clerk, who has been in the role for many years and,as an experienced team member, he does not apply any application controls over the input process. Everyweek the purchase day book automatically updates the purchase ledger, the purchase ledger is then postedmanually to the general ledger by the purchase ledger clerk.Payments systemFox maintains a current account and a number of saving (deposit) accounts. The current account isreconciled weekly but the saving (deposit) accounts are only reconciled every two months.In order to maximise their cash and bank balance, Fox has a policy of delaying payments to all suppliers foras long as possible. Suppliers are paid by a bank transfer. The finance director is given the total amount ofthe payments list, which he authorises and then processes the bank payments.RequiredAs the external auditors of Fox Industries Co, write a report to management in respect of the purchasing andpayments system described above which:(i)(ii)(iii)Identifies and explains FOUR deficiencies in the system; andExplains the possible implication of each deficiency; andProvides a recommendation to address each deficiency.A covering letter IS required.Note: Up to two marks will be awarded within this requirement for presentation and the remaining marks willbe split equally between each part.(14 marks)Identify and explain FOUR application controls that should be adopted by Fox Industries Co to ensure thecompleteness and accuracy of the input of purchase invoices.(4 marks)Describe substantive procedures the auditor should perform to confirm the bank and cash balance of FoxIndustries Co at the year end.(7 marks)(Total = 30 marks)Mock exam 1: questions 191
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ACCA APPROVEDCONTENT PROVIDERACCA A
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PAPER F8AUDIT AND ASSURANCEBPP Lear
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About this Practice & Revision KitA
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Question indexThe headings in this
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Topic indexListed below are the key
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Revising F8Topics to reviseThe F8 p
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Understand the requirementsIt is im
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Tackling Multiple Choice Case Quest
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Useful websitesThe websites below p
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Questions1
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AUDIT FRAMEWORK AND REGULATIONQuest
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Conoy (CBE)20 minsThe following sce
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Which of the following options best
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17 Orange 39 mins(a)Explain the ext
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PLANNING AND RISK ASSESSMENTQuestio
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Which of the following statements i
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30 Having established a good unders
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35 Mason has not purchased any new
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It is expected that work in progres
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42 Recorder (12/14) 39 minsRecorder
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Required(a)(b)(c)Required(i)State M
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INTERNAL CONTROLQuestions 46 - 71 c
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52 When goods are received, the goo
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57 During the previous audit, the a
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64 You now need to gain an understa
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Greystone Co is a retailer of ladie
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Required(a) List FOUR control objec
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(iii)Describe a test of control Vio
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74 Which of the following procedure
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Which of the following options corr
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85 Tirrol Co's internal audit depar
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92 Redburn (12/09) 59 mins(a)Explai
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(c)For the audit of the inventory c
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96 Rose (12/12) 39 mins(a)Identify
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99 Bush-Baby Hotels 39 mins[This qu
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Which of the following correctly su
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108 A key supplier of Humphries Co
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[Questions 115 - 117 below do not r
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The directors have produced a cash
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Answers61
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BJM Co1 A The external audit is car
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13 D Stark is a public interest ent
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Tutorial note: There are a number o
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(b)(c)MarksUp to 1 mark per ethical
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Ethical threatA senior member of th
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(a)Client acceptance procedures(i)(
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(c)Ethical risks and steps to mitig
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EuKaRe24 The correct answer is:The
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Easy marks. In part (a), easy marks
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Audit riskThe finished goods value
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Marks- Junior asked to challenge FD
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Reduction of sample sizesIt is clea
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The following factors may increase
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Audit riskThe already short reporti
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Separate engagement teamsProcedures
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Marking schemeMarks(a) (i) ½ mark
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Audit riskThe current ratio and qui
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(b)Audit risks and auditors' respon
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45 SmoothbrushText references. Chap
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MarksProvisions:- Discuss with mana
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Suitable ControlsDamaged/obsolete g
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53 C The direction of the test is i
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Easy marks. These were available in
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ImplicationPayroll calculations not
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(d)(e)Substantive procedures - Redu
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Part (d) required candidates to use
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(ii)(iii)ImplicationThe reliance is
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(d)Additional assignments for inter
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(c)(d)Marks1 mark for each valid pr
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(d)Audit proceduresObservationObser
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Marking schemeMarks(a)(b)(c)(d)Up t
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- Select a sample of goods despatch
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The requirement for tests of contro
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Deficiencies Recommended controls T
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(c)(d)Payroll substantive procedure
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MarksRights and obligations (iii)Ve
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Top tips. Only two substantive proc
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79 The correct answer is:Accounting
Page 157 and 158: 92 RedburnText references. Chapters
Page 159 and 160: (e) (i) Define net realisable value
Page 161 and 162: (d)Inherent risks and mitigating co
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Page 165 and 166: Deficiencyanomalies noted, as the i
Page 167 and 168: 94 Springfield NurseriesText refere
Page 169 and 170: (e)(ii)(iii)Computers and motor veh
Page 171 and 172: (c)MarksEvent 2 - Explosion- Provid
Page 173 and 174: Marking scheme(a)(b)MarksUp to 1 ma
Page 175 and 176: (ii)(iii)Receivables- For those rec
Page 177 and 178: (a)Procedures to obtain audit evide
Page 179 and 180: 98 Rocks ForeverText reference. Cha
Page 181 and 182: (d)diamond industry which the firm
Page 183 and 184: Audit procedureObservation involves
Page 185 and 186: 102 The correct answer is:MaterialY
Page 187 and 188: 114 The correct answer is:5 March 2
Page 189 and 190: Obtain written representations from
Page 191 and 192: that the business may struggle to c
Page 193 and 194: the company’s overdraft which is
Page 195 and 196: Marking schemeMarks(a)(b)(c)(d)Up t
Page 197 and 198: • Perform audit procedures in res
Page 199 and 200: Mock exams181
Page 201 and 202: ACCAPaper F8Audit and AssuranceMock
Page 203 and 204: Section A - ALL 15 questions are co
Page 205 and 206: Scenario 2The following scenario re
Page 207: Scenario 3The following scenario re
Page 211 and 212: Question 18(a) (i) Identify and exp
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Page 215 and 216: Plan of attackIf this were the real
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Page 219 and 220: Marks(c)(d)Up to 1 mark per well ex
Page 221 and 222: Deficiency Implication Recommendati
Page 223 and 224: Question 17Text reference. Material
Page 225 and 226: (ii)Audit risk and responsesAudit r
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Page 229 and 230: (ii)(iii)Substantive procedures for
Page 231 and 232: ACCAPaper F8Audit and AssuranceMock
Page 233 and 234: Section A - ALL 15 questions are co
Page 235 and 236: Which of the following options corr
Page 237 and 238: 13 It is May 20X7. The directors ha
Page 239 and 240: Question 17You are a member of the
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Page 243 and 244: Plan of attackIf this were the real
Page 245 and 246: 7 The correct answers are:The signi
Page 247 and 248: Question 16Text references. Chapter
Page 249 and 250: OccurrenceAudit procedureFor a samp
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Page 255 and 256: Information sourcePrior year financ
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ACCAPaper F8Audit and AssuranceMock
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Section A - ALL FIFTEEN questions a
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Extract from Balotelli’s non-curr
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The following scenario relates to q
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Section B - ALL THREE questions are
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Question 18Vieri Motor Cars Co (Vie
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AnswersDO NOT TURN THIS PAGE UNTIL
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Plan of attackIf this were the real
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Option B is based on depreciation b
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Section BQuestion 16(a)(b)(c)(d)(e)
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If Milla has incorrectly classified
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the level of substantive testing to
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Deficiency Control recommendations
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(a)Reliance on the work of an indep
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Notes
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Review Form - Paper F8 Audit and As
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