ACCA F8 - Audit and Assurance Revision Kit 2016

Part (c) requires you to put yourself in the finance director’s shoes and come up with the factors to consider before
establishing an internal audit department. Cost will always be a factor for a finance director, as will the role any
potential internal audit department will play.
Easy marks. In part (a) you should have found it relatively easy to generate sources of information.
Marking scheme
(a)
(b)
(c)
Marks
½ mark for source of documentation and ½ mark for information expect to
obtain, max of 2½ marks for sources and 2½ marks for information expect.
Prior year audit file
Prior year financial statements
Accounting systems notes
Discussions with management
Permanent audit file
Current year budgets and management accounts
Sunflower’s website
Prior year report to management
Financial statements of competitors 5
Up to 1 mark per well explained risk and up to 1 mark for each well explained
response. Overall max of 5 marks for risks and 5 marks for responses.
Treatment of $1.6m refurbishment expenditure
Disposal of warehouse
Bank loan of $1.5m
Attendance at year-end inventory counts
Inventory valuation
Transfer of opening balances from supermarkets to head office
Increased inherent risk of errors in finance department and new financial
controller 10
Up to 1 mark per well described point
Costs versus benefits of establishing an internal audit (IA) department
Size and complexity of Sunflower should be considered
The role of any IA department should be considered
Whether existing managers/employees can undertake the roles required
Whether the control environment has a history of control deficiencies
Whether the possibility of fraud is high 5
20
(a)
Information sources
Information source
Permanent audit file
Prior year audit file
Expect to obtain:
Information on matters of continuing importance for
the company and the audit team, such as governing
documents, share certificates and ongoing
contractual agreements.
An awareness of issues arising in the prior year audit
and the implications for the current year audit,
especially the risk assessment where issues in the
prior year suggest a particular area is more
susceptible to misstatements.
236 Mock exam 2: answers