ATC INTERNATIONAL ACCA PAPER F8 AUDIT AND ASSURANCE (INTERNATIONAL) STUDY QUESTION BANK (i) No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author, editor or publisher This training material has been published and prepared by Accountancy Tuition Centre Limited 16 Elmtree Road Teddington TW11 8ST United Kingdom Editorial material Copyright Accountancy Tuition Centre (International Holdings) Limited, 2008 All rights reserved No part of this training material may be translated, reprinted or reproduced or utilised in any form either in whole or in part or by any electronic, mechanical or other means, now known or hereafter invented, including photocopying and recording, or in any information storage and retrieval system, without permission in writing from the Accountancy Tuition Centre Limited Acknowledgement Past ACCA examination questions are the copyright of the Association of Chartered Certified Accountants and have been reproduced by kind permission (ii) STUDY QUESTION BANK – AUDIT AND ASSURANCE (F8) CONTENTS Question Page Answer Marks Date worked 1 1001 1002 1005 1007 12 20 20 20 3 1009 1011 1015 20 20 20 5 1017 1019 20 6 1019 1023 20 20 REGULATORY FRAMEWORK International auditing Audit committee Fraud and error (ACCA D04) ISA 200 PROFESSIONAL ETHICS AND CODES OF CONDUCT Professional ethics (ACCA PP01) Eastfield Distributors Abel & Co (ACCA D00) AUDIT APPOINTMENT Viswa (ACCA J04) LALD (ACCA D05) DOCUMENTATION 10 11 Working papers Planning documantation AUDIT PLANNING (AUDIT RISK, ANALYTICAL REVIEW, MATERIALITY) 12 13 14 15 Norbert Audit risk Analytcal procedures and materiality Planning analytical review (ACCA J03) 7 1026 1028 1033 1034 14 20 20 20 INTERNAL CONTROL AND ASSESSING CONTROL EFFECTIVENESS 16 17 18 19 20 21 22 Knits Ibson Eastwood engineering (ACCA J98) Cliff (ACCA D04) Fairlight (ACCA D00) Internal controls from below (ACCA PP01) Betterhome 10 11 12 13 13 15 15 1037 1041 1043 1046 1047 1050 1052 20 20 20 20 20 20 20 16 16 17 18 1055 1057 1059 1061 20 20 20 20 INTERNAL AUDIT AND RISK MANAGEMENT 23 24 25 26 Internal and external auditors (ACCA D01) Risk managemnet (ACCA Dec02) Roxy Hotel (ACCA PP01) Sighthill Supermarkets (ACCA J98) (iii) AUDIT AND ASSURANCE (F8) – STUDY QUESTION BANK CONTENTS Question Page Answer Marks Date worked 19 19 20 1064 1066 1069 15 20 20 20 21 1073 1076 20 15 21 21 1078 1079 15 20 22 22 1083 1084 12 20 23 1085 20 Insurance Brokers (ACCA J95) 23 1087 20 Tracey Transporters (ACCA J05) 24 1089 20 25 26 27 1091 1093 1096 20 20 20 27 28 1097 1100 20 14 AUDIT EVIDENCE 27 28 29 Sources of audit evidence Basis of valuation Methods of evidence gathering (ACCA J04) ANALYTICAL PROCEDURES AND AUDIT SAMPLING 30 31 Delta Sampling and analytical techniques ACCOUNTING ESTIMATES 32 33 Accounting estimates Estimates MANAGEMENT REPRESENTATIONS 34 35 Flashy Letter of representation (ACCA J02) COMPUTER-ASSISTED AUDIT TECHNIQUES 36 Porthos (ACCA D05) NON-CURRENT ASSETS 37 SALES 38 INVENTORY 39 40 41 Fenton Electronics (ACCA D94) Charlton Computers Fizzipop (ACCA J04) TRADE REVEIVABLES 42 43 (iv) Spondon (ACCA D95) Cambridge STUDY QUESTION BANK – AUDIT AND ASSURANCE (F8) CONTENTS Question Page Answer Marks Date worked 28 29 1102 1104 20 15 30 30 32 1106 1108 1111 20 20 20 32 33 33 1114 1117 1119 20 20 20 34 34 1120 1122 20 20 36 36 37 1125 1127 1129 20 16 20 37 38 1131 1135 20 20 39 1137 20 40 40 43 1138 1141 1142 15 12 20 LOANS, BANK & CASH 44 45 Cromwell Bon Voyage TRADE PAYABLES AND ACCRUED EXPENSES 46 47 48 Cosmos Tollerton Company A (ACCA D02) SMALL BUSINESSES 49 50 51 Welfare Help for the Aged Trust (WHAT) Audit of small businesses ISAs (ACCA D04) FORMING AN AUDIT JUDGEMENT 52 53 Calva (ACCA D03) OilRakers (ACCA D05) THE AUDITOR’S REPORT ON FINANCIAL STATEMENTS 54 55 56 Audit scope Theta Hood Enterprises (ACCA J05) GOING CONCERN 57 58 Mowbray Computers (ACCA J94) EWHeels (ACCA PP01) INTERNAL AUDIT REPORTS 59 Internal audit reports (ACCA J03) POINT DEVELOPMENT EXERCISES 60 61 62 Quick questions Jasper, Ruby, Garnet & Emerald Burton Housing (v) AUDIT AND ASSURANCE (F8) – STUDY QUESTION BANK UPDATING NOTE The IASB reissued IAS ‘Presentation of Financial Statements’ in September 2007 Amendments to the old IAS are mainly to presentation and terminology and have been reflected throughout these questions Although IAS does not become effective until periods on or after January 2009, earlier adoption is permitted ACCA operates a six month rule in its examinations based on issue date, whereby accounting standards will not be examined until six months have passed from their date of issue Therefore the revised IAS falls to be examined from the June 2008 examinations Terminology has therefore been changed throughout the F8 materials The main changes can be summarised as follows: Balance sheet ⇒ Statement of financial position Balance sheet date ⇒ end of the reporting period (note that end of the reporting period may also be referred to as the “year end” within the study system and question bank) Income statement ⇒ Statement of comprehensive income (but see below) Cash flow statement ⇒ Statement of cash flows (IAS is renamed) Events after the balance sheet date ⇒ Events after the reporting period (IAS 10 is renamed) The Statement of Comprehensive Income basically consists of two elements – an income statement (the same as the old IAS format) plus other comprehensive income comprising, for example, gains on revaluations, cash-flow hedges, translation of foreign operations and actuarial gains (all of which are still analysed within a statement of changes in equity) Effectively, the only element that may be dealt within F8 will be the gains on revaluations Thus the Statements of comprehensive income used throughout F8 are the same as the old IAS Income statements (vi) ... from their date of issue Therefore the revised IAS falls to be examined from the June 2008 examinations Terminology has therefore been changed throughout the F8 materials The main changes can... statement (the same as the old IAS format) plus other comprehensive income comprising, for example, gains on revaluations, cash-flow hedges, translation of foreign operations and actuarial gains... (ACCA Dec02) Roxy Hotel (ACCA PP01) Sighthill Supermarkets (ACCA J98) (iii) AUDIT AND ASSURANCE (F8) – STUDY QUESTION BANK CONTENTS Question Page Answer Marks Date worked 19 19 20 1064 1066 1069 15