ACCA F8 - Audit and Assurance Revision Kit 2016

Consider the response from the existing auditor for any issues that could impact on the acceptance decision.
Tutorial note: Although five steps were needed to gain full marks, other steps you may have come up with
include:
Undertake client screening procedures such as considering management integrity and assessing whether
any conflict of interest with existing clients would arise.
Carry out further client screening procedures such as assessing the level of audit risk of the client and
whether the expected engagement fee would be sufficient for the level of anticipated risk.
17 Orange
Text references. Chapters 3, 4 and 6.
Top tips. This question tests your knowledge of responsibilities regarding fraud, ethics and the benefits of
establishing an audit committee.
Part (a) asks for an explanation of auditors' responsibilities in relation to the prevention and detection of fraud. Note
that the question is not asking about the responsibilities of management so there will be no marks for discussing
these.
Part (b) asks for an explanation of six ethical threats based on a scenario and for each threat, how it might be
reduced to an acceptable level. A two column approach would work well here. Read through the information
carefully identifying the problem. Make sure that you link the problem to a particular threat eg self-interest threat,
self-review threat. When thinking about how the threat can be reduced consider appropriate safeguards. Remember
in some cases safeguards will not be adequate to reduce the threat to an acceptable level.
Part (c) asks for an explanation of the benefits of an audit committee to the company. Make sure that you tailor
your answer to the company in question rather than producing a standard list of benefits.
Easy marks. There are few easy marks as such although part (c) is probably the most straightforward part of the
question.
Examination Team's comments. The focus of part (a) was what the auditors' responsibilities were; it did not
require an explanation of directors' responsibilities, however many candidates did provide this and there were no
marks available for this. Candidates also wanted to focus on what was not the auditors responsibility, namely to
prevent fraud and error. In addition some answers strayed onto providing procedures for detecting fraud and error
rather than just addressing responsibilities.
Parts (b) and (c) were well answered. In (c) where candidates did not score well this was usually because they only
identified rather than explained the ethical threat. .
Marking scheme
(a)
Marks
Up to 1 mark per well explained point
Per ISA 240 – obtain reasonable assurance that the financial statements are
free from material misstatement, whether caused by fraud or error
Identify and assess the risks of material misstatement due to fraud
Obtain sufficient appropriate audit evidence
Respond appropriately to fraud or suspected fraud identified during the
audit
Maintain professional scepticism throughout the audit
Discussion within the engagement team 4
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