ACCA F8 - Audit and Assurance Revision Kit 2016

PLANNING AND RISK ASSESSMENT
Questions 19 – 45 cover Audit planning and risk assessment, the subject of Part B of the BPP Study Text for F8.
Bridgford (CBE)
20 mins
The following scenario relates to questions 19 - 23.
You are an audit senior of Ovette & Co and your firm has recently been appointed as the auditor to Bridgford
Products (‘Bridgford’), a large company which sells televisions, DVD players and Blu-ray Disc players to electrical
retailers.
19 You are planning the audit for the year ended 31 January 20X9 and your audit manager has asked you to
produce both the audit strategy document and the detailed audit plan. He has requested that you cover the
following areas:
(1) The availability of the client’s data and staff (including internal audit)
(2) The allocation of responsibility for specific audit procedures to audit team members
(3) The audit procedures to be undertaken for each area of the financial statements
(4) The potential for using computer assisted audit techniques (CAATs) to gather evidence
Which of the following options correctly identifies the information that relates to the audit strategy and
the detailed audit plan?
Audit strategy
Detailed audit plan
(1) and (2) (3) and (4)
(1) and (4) (2) and (3)
(2) and (4) (1) and (3)
(1) only (2), (3) and (4)
20 Having set the level of materiality for the financial statements as a whole, you now turn your attention to
determining performance materiality.
Which of the following statements about performance materiality is NOT true?
Performance materiality is used to reduce the risk that the aggregate of uncorrected and undetected
misstatements exceeds materiality for the financial statements as a whole to an acceptable level
Performance materiality refers to the amounts set by the auditor at higher than the materiality level
for particular classes of transactions, account balances or disclosures where the materiality level
might otherwise mean that such items are not tested.
Once the materiality for the financial statements as whole has been set, a lower level of performance
materiality is determined by the auditor using his or her professional judgement.
The performance materiality level is affected by the auditor's understanding of the entity and the
nature and extent of misstatements identified in prior audits.
You visited Bridgford, where you obtained the following information.
Sales have increased during the year ended 31 January 20X9 following a move to attract new customers by offering
extended credit. The new credit arrangements allow customers three months’ credit, rather than the one month
credit period allowed previously. As a result of this change, you have calculated that trade receivables days have
increased from 49 days to 127 days.
Bridgford installed a new computerised inventory control system, which began operating on 1 June 20X8. Since the
inventory control system records both inventory movements and current inventory quantities, Bridgford is
proposing to use the inventory quantities on the computer to value the inventory at the year-end. It is not proposing
to carry out an inventory count at the year-end.
Questions 11