ACCA F8 - Audit and Assurance Revision Kit 2016

AUDIT EVIDENCE
Questions 72 – 99 cover Audit evidence, the subject of Part D of the BPP Study Text for F8.
Expert (12/08) (amended)
20 mins
The following scenario relates to questions 72 – 76.
You are the audit manager in the firm of WSD & Co, an audit firm. You are planning the audit of Truse Co, which
operates as a high street retailer and has 15 shops.
All of the shops are owned by Truse Co and have always been included in the financial statements at cost less
depreciation. The shops are depreciated over 50 years. However, you know from discussions with management that
the company intends to include one of the shops, the flagship store, at a revalued amount rather than cost in the
current accounting period. The revalued amount is expected to be materially above the carrying value of the shop.
The valuation will be based on a management estimate.
Management has explained that the reason for the revaluation is because the flagship store is located in an area
where property prices have risen much more quickly compared to other shop locations. They consider the flagship
store to be significantly undervalued on the statement of financial position.
Management will not depreciate the revalued amount allocated to the flagship store's building because they
maintain the building to a high standard.
72 In his notes for the audit planning meeting, the audit junior made the following statements in relation to the
valuation of the shops:
(1) Truse Co is allowed under IAS 16 to revalue the flagship shop while continuing to measure its three
other shops at cost less depreciation.
(2) The revaluation constitutes a change in accounting policy, so we will need to consider the adequacy
of the disclosures made in respect of this.
(3) The flagship store should be depreciated on its revalued amount
(4) We must confirm that all repairs and maintenance costs have been capitalised
Which TWO of the above statements are correct?
A 1 and 3
B 2 and 4
C 2 and 3
D 1 and 4
73 Which of the following assertions are relevant to the audit of tangible non-current assets?
(1) Existence
(2) Occurrence
(3) Classification
(4) Presentation
A 1 only
B 1, 3 and 4
C 2, 3 and 4
D 1, 2, 3 and 4
38 Questions