ACCA F8 - Audit and Assurance Revision Kit 2016

30 Having established a good understanding of South and its environment, the audit partner will need you to
produce the planning documentation for the audit.
Which of the following statements describe the objectives / benefits of planning an audit according to
ISA 300 Planning an Audit of Financial Statements ?
(1) To ensure appropriate attention is devoted to important areas of the audit
(2) To assist in the coordination of work done by experts
(3) To facilitate the assignment of work to audit team members
(4) To ensure the audit is completed within budget restraints
A 1, 2, 3 and 4
B 1, 3 and 4
C 1, 2 and 3
D 2 and 3
Following your preliminary visit to South’s head office you are now aware of the following information.
The company installed a new till system in all supermarkets four months before the year end. The new till system is
linked to the accounting system at head office and automatically posts transactions to the accounting system.
Previously journals were made manually based on totals on till rolls.
31 Having reviewed this information you have identified several audit risks which you feel your team will need
to address. The first risk relates to the cost of the new till system which South has capitalised as a noncurrent
asset. You are concerned that South may have included within the capitalised costs some items
which are revenue in nature, leading to the overstatement of non-current assets.
Which of the following statements is a valid response to this audit risk?
A Obtain a copy of the training manual relating to the new till system and discuss with directors the
extent of training staff have received on the new system
B Agree the capitalised costs from the trial balance back to invoices to confirm their value
C Inspect invoices capitalised within the cost of the new till system to determine whether they are
directly attributable to the cost of the new till system
D Recalculate the depreciation charged on the new till system
32 A second audit risk relates to how well the new till system is operating. You are concerned that the system
may not be reliable, and that consequently not all sales have been recorded, resulting in an understatement
of revenue. You are also concerned that staff may not yet be familiar with the system, leading to an
increased risk of errors relating to data entry.
Which of the following statements represent valid responses to this audit risk?
(1) Perform analytical procedures by comparing daily / weekly sales by store with both the prior year and
with expectations, in order to determine whether any unusual patterns have occurred following the
installation of the new system
(2) Vouch the sales revenue per the system to the till receipts to confirm the accuracy of the sales
(3) Obtain a copy of the training manual relating to the new till system and discuss with directors the
extent of training staff have received on the new system
(4) Test the internal controls relating to the till system and the transfer of data into the accounting
system
A 2 and 4
B 3 and 4
C 1, 2 and 4
D 1, 3 and 4
After a number of people living close to one of South's stores became seriously ill, the source of the illness was
traced back to meat the customers had purchased from South. Legal proceedings were commenced against South
by a number of customers during the financial year, demanding $1m in compensation.
Questions 15