ACCA F8 - Audit and Assurance Revision Kit 2016

85 Tirrol Co's internal audit department is going to assist with the statutory audit. The chief internal auditor will
provide you with documentation on the computerised inventory systems at Tirrol Co. The documentation
provides details of the software and shows diagrammatically how transactions are processed through the
inventory system. This documentation can be used to significantly decrease the time needed to understand
the computer systems and enable audit software to be written for this year's audit.
Which of the following is NOT a matter the audit team should consider in determining whether or not the
internal auditor’s work is adequate for the purposes of the audit?
Whether the work was properly planned, performed, supervised, reviewed and documented
Whether there are any significant threats to the objectivity of the internal auditor
Whether sufficient appropriate evidence was obtained to allow the internal auditors to draw
reasonable conclusions
Whether the conclusions reached are appropriate in the circumstances and the reports prepared are
consistent with the results of the work done
86 The audit junior has obtained the following extract of the aged inventory report:
Inventory
code
Days in
inventory
Original cost
($)
Selling price
($)
Costs to sell
($)
Carrying
value ($)
X070003 98 12,000 20,200 2,000 12,000
X079001 127 14,500 16,000 2,500 14,500
X084000 109 18,000 26,000 3,000 23,000
Wright
What is the impact on the value of inventory if no adjustments are made to the carrying values above?
Inventory would be overstated by $5,000
Inventory and profit for the year would be overstated by $6,000
Inventory would be understated by $6,200
Inventory would be understated by $12,700
20 mins
The following scenario relates to questions 87 – 91.
You are the audit manager in the firm of Wright & Co, a large accountancy firm with 30 offices.
It is January 20X6, and a new intake of graduates and apprentices has recently started work at the Audit department
after completing their first ACCA exams. Julie, one of the new recruits, has been allocated to the audit of Wilbur Co,
your audit client, for the year ended 31 December 20X5. You are responsible for providing guidance to her on her
first audit.
87 After the audit planning meeting, Julie approached you with this query:
‘I know that as auditors, we have to collect audit evidence in order to support our audit opinion. But how can
we tell how much audit evidence we need to get?’
Which of the below factors influence the auditor's judgement regarding the sufficiency of the evidence
obtained?
(1) The materiality of the account
(2) The size of the account
(3) The source and quality of the evidence available
(4) The amount of time allocated to the audit
A 1 and 3
B 2 and 4
C 2 and 3
D 1 and 4
Questions 43