ACCA paper f8 auditiing and assurance F8AA(Int)RQB conts d08

ATC INTERNATIONAL ACCA PAPER F8 AUDIT AND ASSURANCE (INTERNATIONAL) REVISION 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 (International Holdings) 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 (International Holdings) Limited Acknowledgement Past ACCA examination questions are the copyright of the Association of Chartered Certified Accountants and have been reproduced by kind permission (ii) REVISION QUESTION BANK – AUDIT AND ASSURANCE (Int) (F8) CONTENTS Question Page Answer Marks Date worked 1001 20 1004 1007 20 20 1009 1011 20 20 1013 1016 1018 20 20 20 6 1019 1022 20 20 1023 1026 1031 20 20 20 11 12 12 1033 1037 1041 1042 20 20 20 20 13 14 15 1045 1048 1050 20 20 20 REGULATORY FRAMEWORK Auditors and Auditing Standards (ACCA D01) CORPORATE GOVERNANCE Jumper (ACCA J06) Corporate governance (ACCA J05) FRAUD, LAWS & REGULATIONS Fraud and compliance seminar (ACCA J01) Stone Holidays (ACCA D04) PROFESSIONAL ETHICS AND CODES OF CONDUCT Manly (ACCA D99) Internal auditor (ACCA J02) Client confidentiality (ACCA D03) AUDIT APPOINTMENT 10 Melton Manufacturing (ACCA J95*) Bondi (ACCA J99) DOCUMENTATION 11 12 13 Planning documentation Bestwood Trading (ACCA J98) Working papers (ACCA J00) AUDIT PLANNING & RISK ASSESSMENT 14 15 16 17 Phones Anywhere (ACCA J97*) Bridgford Products (ACCA D98) Five Dock (ACCA J01) Parker (ACCA J05) RISK MANAGEMENT 18 19 20 Cleanco (ACCA D03) Business Risk (ACCA J04) Grindstock Clothing Company (ACCA J02) * Denotes Adapted Qs & As (eg to take account of Internationalisation in 1997 and amendments to Syllabus detail) (iii) AUDIT AND ASSURANCE (Int) (F8) – REVISION QUESTION BANK CONTENTS Question Page Answer 16 17 1051 1053 Marks Date worked MATERIALITY 21 22 Analytical procedures and materiality (ACCA J02) Concept of materiality (ACCA D00*) 20 12 INTERNAL CONTROL AND ASSESSING CONTROL EFFECTIVENESS 23 24 25 26 27 28 Lenton Textiles (ACCA J95*) Bestwood Engineering (ACCA D98) Small firm internal controls (ACCA J03) Cotsgrove Distributors (ACCA Pilot 1997) Dinko (ACCA D03) ASG (ACCA J06) 17 18 19 19 20 20 1055 1059 1062 1062 1065 1067 20 20 10 20 20 20 21 1068 20 22 23 1072 1075 20 20 24 25 26 1076 1079 1081 20 20 20 26 26 1084 1087 20 20 27 28 1091 1092 10 20 29 1095 20 30 31 1099 1101 20 20 32 1103 20 COMPUTER INFORMATION SYSTEMS 29 Mildrain (ACCA D96*) COMMUNICATIONS WITH MANAGEMENT 30 31 Wicket Cosmo (ACCA D01) AUDIT EVIDENCE 32 33 34 BearsWorld (ACCA J05) Gordon (ACCA J01) Confirmations (ACCA D02) ANALYTICAL PROCEDURES 35 36 Just Crust Villawood (ACCA J00) AUDIT SAMPLING 37 38 Audit sampling (ACCA J03) Strathfield (ACCA D99) ACCOUNTING ESTIMATES 39 Newthorpe Engineering (ACCA J97*) MANAGEMENT REPRESENTATIONS 40 41 Two communications (ACCA J01) Crighton-Ward (ACCA J05) USING THE WORK OF AN EXPERT 42 (iv) Ravenshead Construction (ACCA J86*) REVISION QUESTION BANK – AUDIT AND ASSURANCE (Int) (F8) CONTENTS Question Page Answer Marks Date worked 32 34 1104 1107 20 20 35 37 1110 1113 20 20 38 39 39 40 1115 1117 1120 1122 20 20 20 20 41 42 1124 1126 20 20 44 45 1129 1131 20 20 46 46 1132 1135 20 20 Tourex ands Pudco (ACCA J03) 48 1138 20 Boulder (ACCA D04) 48 1140 20 49 50 51 1142 1146 1147 20 20 20 51 52 1150 1152 20 20 COMPUTER-ASSISTED AUDIT TECHNIQUES 43 44 Southwell Engineering (ACCA J94*) Petersham (ACCA J00) NON-CURRENT ASSETS 45 46 Hyson Computers (ACCA J96*) WW (ACCA J06) INVENTORY 47 48 49 50 Silverhill Potteries (ACCA J94*) Trent Textiles (ACCA Pilot 1997) Perpetual and year-end inventory counts (ACCA J03) Rocks Forever (ACCA D05) TRADE RECEIVABLES 51 52 Gootfoot (ACCA D01) Lidcombe (ACCA D00) LOANS, BANK & CASH 53 54 Bardwell (ACCA J01) Bank & Cash (ACCA J02) TRADE PAYABLES AND ACCRUED EXPENSES 55 56 Ravenshead Engineering (ACCA D94*) Tollerton (ACCA J96*) PROVISIONS AND CONTINGENT LIABILITIES 57 WAGES 58 SMALL BUSINESSES 59 60 61 Newton Electronics (ACCA J98) Ajio Charity (ACCA D03) ISAs (ACCA D04) AUDIT FINALISATION 62 63 Dylan Reddy (ACCA D00) (v) AUDIT AND ASSURANCE (Int) (F8) – REVISION QUESTION BANK CONTENTS Question Page Answer Marks Date worked 53 54 1154 1155 20 16 54 1157 20 56 56 1159 1161 20 20 57 1163 20 58 1165 20 THE AUDITOR’S REPORT ON FINANCIAL STATEMENTS 64 65 Cremorne (ACCA J99) Theta REVIEW REPORTS 66 ABC Company (ACCA D01) GOING CONCERN 67 68 ISA 570 Revised (ACCA J93*) Corsco (ACCA D03) INTERNAL AUDIT 69 Octball (ACCA D05) RELIANCE ON INTERNAL AUDITING 70 ZPM (ACCA J06) PILOT PAPER (December 07) Questions Answers Marking scheme (vi) REVISION QUESTION BANK – AUDIT AND ASSURANCE (Int) (F8) 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 (vii) AUDIT AND ASSURANCE (Int) (F8) – REVISION QUESTION BANK (viii) ... Auditors and Auditing Standards (ACCA D01) CORPORATE GOVERNANCE Jumper (ACCA J06) Corporate governance (ACCA J05) FRAUD, LAWS & REGULATIONS Fraud and compliance seminar (ACCA J01) Stone Holidays (ACCA. .. Bestwood Trading (ACCA J98) Working papers (ACCA J00) AUDIT PLANNING & RISK ASSESSMENT 14 15 16 17 Phones Anywhere (ACCA J97*) Bridgford Products (ACCA D98) Five Dock (ACCA J01) Parker (ACCA J05) RISK... counts (ACCA J03) Rocks Forever (ACCA D05) TRADE RECEIVABLES 51 52 Gootfoot (ACCA D01) Lidcombe (ACCA D00) LOANS, BANK & CASH 53 54 Bardwell (ACCA J01) Bank & Cash (ACCA J02) TRADE PAYABLES AND ACCRUED