ACCA F8 - Audit and Assurance Revision Kit 2016

Deficiencies
The same order clerk takes the orders, checks the
order forms and sends the order forms onto the
accounts and dispatch departments.
The lack of segregation of duties increases the risk
of error and fraud.
Customers are able to exceed their agreed credit
limit by 10% when they place their orders online.
This increases the risk that customers with bad
credit histories are accepted, leading to slow-moving
or bad debts.
Goods do not appear to be checked to the original
order before dispatch.
This increases the risk of errors in fulfilling the
order.
The signed dispatch notes are not sent to the
accounts department.
This could result in delays in invoicing, leading to
loss of revenue.
Discounts are manually entered by the sales clerk
onto the invoice.
This creates the risk of discounts being omitted by
error.
More importantly, the lack of authorisation process
increases the risk of unauthorised discounts being
given, leading to loss of revenue.
Extra accounts staff have been allocated to produce
the sales invoices.
The extra staff's lack of experience and training
increases the risk of errors on the invoices, resulting
in customers being over- or under-charged.
Recommendations
Each telephone order taken should be cross-checked
by another order clerk. The check should be
evidenced by signature.
The online ordering system should be modified to
reject orders which would cause credit limits to be
exceeded.
Customers' credit limits should be assessed on a
regular basis by a responsible official. Credit limits
could be extended for customers with good credit
histories.
Order forms for goods on the pick list should be
printed on a daily basis. Goods should be checked to
the order forms before being dispatched.
Copies of the signed dispatch notes should be
forwarded to the accounts department once the
goods have been delivered. Invoices should be
raised based on the dispatch notes in a timely
manner, and the dispatch notes filed by the accounts
team along with evidence that the related invoices
have been processed.
Discounts should be approved by a responsible
official. The authorised discount levels should be
recorded automatically in the customer master file,
so that they appear on the invoices without manual
input.
The invoicing system should be modified to prevent
the manual processing of discounts.
Only sales clerks with the appropriate experience
should be allowed to produce sales invoices.
Oregano could consider recruiting and training
permanent staff with the appropriate experience.
Question 18
Text references. Chapters 5 and 6
Top tips. This question tests risk assessment both in terms of gaining an understanding of a client and in relation
to identifying and responding to specific audit risks.
In (a) you should make sure you both identify information sources and describe what you expect to obtain.
Part (b) is a common requirement for F8 and on these questions a tabular approach will help to show the
examination team you have addressed both the risk and the response. To adequately describe a risk you need to
show how it impacts on a financial statement assertion or area. Your responses to risks should be clear and include
a full explanation of any relevant procedure or action. Your responses should be responses of the auditor, not those
of management.
Mock exam 2: answers 235