ACCA F8 - Audit and Assurance Revision Kit 2016

Section B
Question 16
Text reference. ISA 260 is covered in Chapter 3. Controls over the purchasing system are discussed in Chapter 10.
Reports to management are covered in Chapter 19. Application controls can be found in Chapter 9. Substantive
audit procedures relating to bank and cash are set out in Chapter 15.
Top tips. The requirements for this question are typical for question 16 of the F8 paper, with the scenario being
about control deficiencies within a particular system. There is a lot to do in this question, so there is a risk of overrunning
on the time. Make sure you stick to time for each part of the question and move on to the next requirement
once the time is up.
Part (b) should be presented in a tabular format for the deficiencies, impacts and recommendations but do note the
requirement for a covering letter – this is relatively unusual for this type of question. Note also that there are two
presentation marks available, so make sure your covering letter is addressed and dated appropriately and that you
use a ruler for the table and headings. These two marks could be the difference between passing and failing. You
must ensure that you identify deficiencies from both the purchases system and the payments system – go through
the scenario line-by-line and make notes on areas where there are weaknesses. Your recommendations need to be
sufficiently detailed and useful to the organisation. Imagine that you are drafting a real report to management to a
real client. Saying things like ‘Discuss with management’ or ‘Reconciliations’ will not score many marks.
Part (c) is on application controls. This is a notorious area of weakness for F8 students. Make sure you know the
difference between application and general IT controls and that the controls you describe are relevant to the
scenario in the question.
Easy marks. Part (a) on ISA 260 is knowledge-based for five marks and relatively straightforward. Part (d) asks for
substantive procedures for bank and cash. This is worth seven marks and provided your procedures are adequately
detailed, you should be able to score well here.
Marking scheme
(a) (i) Up to 1 mark per well explained point
Marks
(b)
(ii)
– Assists the auditor and those charged with governance in
understanding matters related to the audit
– Obtains information relevant to the audit
– Helps those charged with governance in fulfilling their
responsibility to oversee the financial reporting process 2
Up to 1 mark for each example matter to be communicated to
those charged with governance 3
Up to 1 mark per well explained deficiency, implication and
recommendation. If not well explained then just give ½ mark for each.
Overall maximum of 4 marks each for deficiencies, implications and
recommendations.
2 marks for presentation: 1 for address and intro and 1 for conclusion.
– No approved suppliers list
– Purchase orders not sequentially numbered
– Orders below $5,000 are not authorised by a responsible official
– No application controls over input of purchase invoices
– Purchase ledger manually posted to general ledger
– Saving (deposit) bank accounts only reconciled every two months
– Payments to suppliers delayed
– Finance director only reviews the total of the payment list prior to
payment authorising 14
200 Mock exam 1: answers