ACCA F8 - Audit and Assurance Revision Kit 2016

Which of the following statements is NOT an explanation of why ISA 315 Identifying and assessing the
risks of material misstatement through understanding the entity and its environment requires a risk
assessment to be carried out at the planning stage?
The risk assessment will help the audit team gain an understanding of the entity for audit purposes
The risk assessment will enable the audit senior to produce an accurate budget for the audit
assignment
The risk assessment will form the basis of the audit strategy and the detailed audit plan
Once the risks have been assessed, TEY & Co can select audit team members with sufficient skill and
experience to maximise the chance of those risks being addressed
EuKaRe has a detailed constitution which explains how the charity's income can be spent. The constitution also
notes that expenditure relating to the administration of the charity cannot exceed 10% of the charity’s income in any
year. EuKaRe currently employs three permanent members of staff. At present, 100 volunteers work for EuKaRe:
some commit up to three days a week and others help out on an ad hoc basis. The organisation, including its
finance department, is primarily run by volunteers.
The charity's income is derived wholly from voluntary donations. Sources of donations include the public in the
form of cash collected in buckets by volunteers in shopping areas, and from generous individuals.
25 Having reviewed the above information you have identified several audit risks which you feel your team will
need to address. One such audit risk relates to the risk that income may be understated in the financial
statements. You are concerned that not all income may be recorded.
Which of the following statements is NOT a valid response to this audit risk?
Obtain a breakdown of the income recorded from the cash that was collected in buckets, and vouch a
sample of entries back to the volunteer in order to determine which volunteer collected the relevant
donations
Analytically review the level of donations in shopping areas per volunteer
Review the internal controls relating to cash collected in buckets to determine whether buckets are
sealed, sequentially numbered and signed in and out by EuKaRe’s volunteers
Observe the counting and recording of proceeds from collections, to determine whether appropriate
segregation of duties is in place
26 Another audit risk relates to the susceptibility of EuKaRe’s business to fraud.
Which of the following statements correctly describes the auditor’s responsibilities in accordance with
ISA 240 The auditor's responsibilities relating to fraud in an audit of financial statements?
The auditor is responsible for the prevention and detection of fraud and error
The auditor is not responsible for the prevention of fraud and error but is responsible for detection
The auditor is responsible for obtaining reasonable assurance that the financial statements are free
from material misstatement whether caused by fraud or error
The auditor is responsible for detecting all errors and should attempt to detect fraud where
information comes to light as a result of standard audit procedures
Questions 13