ACCA F8 - Audit and Assurance Revision Kit 2016

Currently profit and assets are overstated by $285,000. Therefore the correct option is C.
14 A Writing to the customer/agreeing to invoices, while valid procedures during the audit to verify the
existence of an outstanding balance, would not allow the auditor to assess the recoverability of the
balance which is the key issue in determining whether an adjustment is required. Therefore options 3
and 4 are incorrect.
Post year-end cash testing is the best way for the auditor to assess if the balance is recoverable
wholly or in part and therefore the cash book should be reviewed for any receipts which will change
the assessment of the debt after the year end. The issue should also be discussed with management
to understand their reasons for not wanting to amend the financial statements as this may be due to
a change in circumstances.
15 D The debt with Pirlo Co should be provided for and is material to the financial statements at 7·4% of
profit before tax and 2·5% of revenue. This represents a material misstatement which is material but
not pervasive. As such, if no adjustment is made the auditor will be required to provide a qualified
'except for' opinion. If the required change is made, then no material misstatement exists and
therefore the auditor will be able to issue an unmodified opinion.
258 Mock exam 3 (Specimen exam): answers