ACCA F8 - Audit and Assurance Revision Kit 2016

Tirrol Co provides repair services to motor vehicles from 25 different locations. All inventory, sales and purchasing
systems are computerised, with each location maintaining its own computer system. The software in each location
is the same because the programs were written specifically for Tirrol Co by a reputable software house. Data from
each location is amalgamated on a monthly basis at Tirrol Co's head office to produce management and financial
statements.
You are currently planning your audit approach for Tirrol Co. One option being considered is to rewrite Cal & Co's
audit software to interrogate the computerised inventory systems in each location of Tirrol Co (except for head
office) as part of inventory valuation testing. The testing will need to take place while the system is live. You are
aware that July is a major holiday period for Tirrol Co.
82 The audit junior is concerned about various circumstances of the audit, which are likely to increase audit
risk. He has written to you with some suggestions.
Which TWO of the following suggestions are valid?
We should budget for the extra time required to document an understanding of the entity, its
environment and its systems, and to verify material opening balances.
Given the tight reporting deadline, a combined approach should be adopted on the audit, relying on
tests of controls wherever possible.
We must agree a clear timetable with the client for the testing of the computerized inventory systems,
setting out availability of access to the system, files and personnel required to complete testing.
As this is our first year of audit, we should agree separate fees with the client for any additional audit
procedures required. If the client refuses, we should consider withdrawing from the audit as Cal & Co
would be deemed to be lowballing.
83 Which of the following are benefits of using audit software in auditing the inventory of Tirrol Co? (Select
as many responses as you feel is appropriate.)
The ability to test all 25 of Tirrol Co’s locations using the same audit software, resulting in time and
cost savings
The ability to search all items for exceptions, thus giving greater assurance over the inventory figure
The ability to select and extract a sample of inventory data for testing, thus reducing sampling risk
The ability to test the actual computer files from the originating programme, rather than printouts
from a spook or preview files, thus eliminating exporting errors
84 It has been decided that systematic sampling would be applied to the audit of Tirrol Co’s inventory.
Which of the following sampling methods correctly describes systematic sampling?
A sampling method which is a type of value-weighted selection in which sample size, selection and
evaluation results in a conclusion in monetary amounts
A sampling method which involves having a constant sampling interval, the starting point for testing
is determined randomly
A sampling method in which the auditor selects a block(s) of contiguous items from within the
population
A sampling method in which the auditor selects a sample without following any particular structured
technique
42 Questions