ACCA F8 - Audit and Assurance Revision Kit 2016

108 A key supplier of Humphries Co is suing them for breach of contract. The lawsuit was filed prior to the year
end, and the sum claimed by them is $1 million. This has been disclosed as a contingent liability in the notes
to the financial statements.
Correspondence has just arrived from the supplier indicating that they are willing to settle the case for a
payment by Humphries Co of $0.6 million. It is likely that the company will agree to this.
Which of the following options correctly summarises the impact on the auditor’s report if the financial
statements are not revised in the light of this new information?
A
B
C
D
Unmodified
Unmodified with emphasis of matter
Qualified ‘except for’
Adverse opinion
109 It is now 13 December 20X1. The auditor’s report has been signed. The financial statements are due to be
issued on 25 December 20X1.
Which of the following statements correctly describes the auditor’s responsibility in relation to
subsequent events occurring between now and 25 December?
A
B
C
D
The auditor must design procedures to obtain sufficient appropriate audit evidence that all events up
to that date that may require adjustment or disclosure have been identified
The auditor must perform procedures on matters examined during the audit, which may be
susceptible to change after the year-end.
The auditor has no obligation to perform procedures, or make enquiries regarding the financial
statements. Any subsequent events should be noted and considered in the next period’s audit.
If the auditor becomes aware of a fact that, had it been known to the auditor at the date of the
auditor's report, may have caused the auditor to amend the auditor's report, the auditor shall discuss
the need for any adjustments with management.
Minnie (6/11) (amended) (CBE)
20 mins
The following scenario relates to questions 110 – 114.
You are the audit manager of Daffy & Co and you are briefing your team on the approach to adopt in undertaking
the review and finalisation stage of the audit of the financial statements for the year ended 31 December 20X7.
During the audit of Minnie Co, an uncorrected misstatement was identified with regards to a property balance which
was revalued during the year. The revaluation was carried out by an independent expert valuer and incorrect
assumptions were provided to the valuer. The audit team’s audit procedures have determined that the property is
overvalued by $600,000.
Profit before tax for the year ended 31 December 20X7 is $10m.
110 Which TWO of the following statements correctly describe the auditor’s responsibility in relation to
misstatements?
The auditor must accumulate misstatements over the course of the audit unless they are immaterial.
As part of their completion procedures, auditors shall consider whether the aggregate of uncorrected
misstatements in the financial statements is material
In deciding whether the uncorrected misstatements are material, the auditor shall consider the size
and nature of the misstatements
The auditor is required to consider misstatements relating to transactions and account balances, but
not misstatements related to qualitative disclosures
Questions 55