ACCA F8 - Audit and Assurance Revision Kit 2016

(b)
For listed entities, a statement that the engagement team and others in the firm, the firm, and
network firms have complied with relevant ethical requirements regarding independence, any
relationships between the firm and entity that might affect independence, and safeguards
applied to eliminate identified threats to independence or reduce them to an acceptable level
(Note: Only three matters were required.)
Purchasing and payments system
Board of Directors
Fox Industries Ltd
Trading Estate
Any Town
AB1 3DE
To the Board of Directors, Fox Industries Ltd,
Financial statements for the year ended 30 April 20X3
ABC Auditors
Any Street
Any Town
AB1 2YZ
1 June 20X3
Please find enclosed in an Appendix to this letter the report to management detailing deficiencies in internal control
found within the purchases and payments system during our recent external audit. This details only the significant
deficiencies identified during our audit. If more extensive procedures on internal control had been carried out, we
might have identified and reported more deficiencies.
This report to management is solely for the use of Fox Industries Co. It must not be disclosed to a third party, or
quoted or referred to, without our consent. No responsibility is assumed by us to any other person.
Yours faithfully,
ABC Auditors
Appendix
Deficiency Implication Recommendation
Purchase orders are not
reviewed by a second person
before the order is sent out
unless the amount is greater
than $5,000.
The purchase order clerk
chooses the supplier based
on the supplier who can
deliver the goods fastest.
Purchase orders are not
sequentially numbered.
Purchase invoices are not
matched back to the purchase
order before being input onto
the system.
Orders can be made for
unauthorised goods up to a
value of $5,000.
Goods of poor quality could be
ordered or a higher price may
be paid for goods from
particular suppliers.
Purchase orders can be lost and
there is no way of keeping track
of unfulfilled orders.
Invoices for incorrect amounts
and incorrect goods may be
entered onto the system and
paid for.
All orders should be reviewed before the
order is placed and signed off and dated
as authorised by a more senior team
member. Delegated levels of authority
should be in place.
An approved suppliers list should be in
place so that the company knows
exactly who the supplier is and how
much the goods cost.
Purchase orders should be sequentially
numbered and multi-part. Order forms
should be filed in sequential order and
reviewed on a weekly basis to flag any
unfulfilled orders for chasing up.
Purchase invoices should be matched
back to the purchase order to ensure
they tally up before being input onto the
system. A copy of the order should be
attached to the invoice and filed away.
202 Mock exam 1: answers