ACCA F8 - Audit and Assurance Revision Kit 2016

Section A
Objective test answers
1 The correct answer is:
SGCC should appoint a new Chief Executive Officer or board chairman
Corporate governance codes indicate that there should be a clear division of responsibilities between
running the board of directors and running the company’s business so that no individual has unfettered
powers of decision.
2 The correct answer is:
SGCC should appoint three new non-executive directors to the board
Corporate governance codes indicate that the Board should have a balance of executive and non-executive
directors. SGCC currently has five executive and two non-executive directors and should therefore appoint a
further three non-executive directors in order to balance the Board.
3 The correct answers are:
Once SGCC has an audit committee and an internal audit department, the head of the internal audit
department should report to the audit committee
SGCC should not rely on the external audit to inform them of deficiencies in internal controls
SGCC should establish an Audit Committee with at least three non-executive directors.
Listed companies should review the need for an internal audit department at least annually. They are not
automatically required to have an internal audit department.
4 The correct answer is:
Taking responsibility for the implementation of a new sales ledger system
The internal audit function is a review and monitoring function. It should not take operational responsibility
for any part of the accounting or information systems.
5 The correct answer is:
Employed by SGCC Outsourced
4 only 1, 2 and 3
Where the internal audit department is outsourced to an external firm; SGCC is likely to benefit from
specialist industry skills and receive a more cost effective service. SGCC may however suffer resistance from
current staff due to the changes to the business. The outsourced firm are unlikely to have as good an
understanding of SGCC’s systems and operations as an employee would have.
6 The correct answer is:
Interim audit
Final audit
(1) and (4) (2) and (3)
Audit procedures performed during an interim audit are likely to include analytical procedures, tests of
controls, updating risk assessments and substantive testing of transactions which have occurred during the
first part of the year.
When it comes to the final audit a trial balance or draft set of financial statements will be available, so
detailed substantive testing of year end balances will be conducted. This is in addition to completing the
tests of controls and substantive procedures started during the interim audit.
226 Mock exam 2: answers