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P R A C T I C PAPER F8 E AUDIT AND ASSURANCE & (INTERNATIONAL) R E V In this January 2010 new edition I x We discuss the best strategies for revising and taking your ACCA exams S x We show you how to be wwell prepared for your exam x We give you lots of great guidance on tackling questions I x We show you how you can build your own exams O x We provide you with three mock exams including the DDecember 2009 exam N xThiNganHang.comWe provide the AACCA examiner's answers as well as our own to the June and December 2009 exams as an additional revision aid Our i-Pass product also supports this paper. K I T FOR EXAMS IN 2010 ThiNganHang.com
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First edition 2007 Fourth edition January 2010 ISBN 9780 7517 8056 7 (previous ISBN 9780 7517 6663 9) British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library All our rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted, in Published by any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior BPP Learning Media Ltd written permission of BPP Learning Media Ltd. BPP House, Aldine Place London W12 8AA We are grateful to the Association of Chartered Certified www.bpp.com/learningmedia Accountants for permission to reproduce past examination questions. The suggested solutions in the exam answer bank have been prepared by BPP Learning Printed in the United Kingdom Media Ltd, except where otherwise stated. Your learning materials, published by BPP LearningMedia Ltd, are printed on paper sourced fromsustainable, managed forests.ThiNganHang.com© BPP Learning Media Ltd 2010 ii ThiNganHang.com
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Contents Page Finding questions Question index ................................................................................................................................................................. iv Using your BPP Learning Media products ..................................................................................................................... vii Topic index .................................................................................................................................................................... viii Using your BPP Learning Media Practice and Revision Kit........................................................... x Revising F8 General exam support from BPP Learning Media............................................................................................................. xi Topics to revise................................................................................................................................................................ xi Question practice ............................................................................................................................................................. xi Passing the F8 exam ....................................................................................................................................................... xii Exam information ............................................................................................................................................................ xv Useful websites .............................................................................................................................................................xxv Planning your question practice BPP Learning Media’s question plan.............................................................................................................................xxvi Build your own exams.................................................................................................................................................xxxiii Questions and answers Questions..........................................................................................................................................................................3 Answers ..........................................................................................................................................................................61 Exam practice Mock exam 1 x Questions ............................................................................................................................................................263 x Plan of attack .......................................................................................................................................................269 x Answers...............................................................................................................................................................270 Mock exam 2 x Questions ............................................................................................................................................................285 x Plan of attack .......................................................................................................................................................291 x Answers...............................................................................................................................................................292 Mock exam 3 (December 2009) x Questions ............................................................................................................................................................307 x Plan of attack .......................................................................................................................................................313 xACCA examiner's answersxx Answers...............................................................................................................................................................314June 2009............................................................................................................................................................331December 2009 ...................................................................................................................................................339ThiNganHang.com Review form & free prize draw iii ThiNganHang.com
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Question index The headings in this checklist/index indicate the main topics of questions, but questions are expected to cover several different topics. Questions set under the old syllabus Audit and Internal Review (AIR) paper are included because their style and content are similar to those which appear in the F8 exam. The questions have been amended to reflect the current exam format. Time Page number allocation Marks Mins Question Answer Part A: Audit framework and regulation 1 Audit regulation 10 18 3 61 2 Corporate governance 10 18 3 62 3 Ethical issues 10 18 3 62 4 External audit (AIR 12/04) 20 36 3 63 5 International Standards on Auditing (AIR 6/06) 20 36 4 66 6 Jumper (AIR 6/06) 20 36 4 68 7 ZX (AIR 6/05) 20 36 4 70 8 Conoy (6/09) 20 36 5 73 9 Ethical dilemma (AIR 6/02) 20 36 5 76 10 Confidentiality and independence (AIR 6/06) 20 36 6 77 11 NorthCee (Pilot Paper) 20 36 6 80 12 Stark (12/08) 20 36 7 82 Part B: Internal audit 13 Internal audit function 10 18 8 84 14 Internal audit (AIR 6/03) 20 36 8 85 15 Value for money audit (AIR 12/06) (amended) 20 36 8 88 16 MonteHodge (6/08) 20 36 9 90 Part C: Planning and risk assessment 17 Audit risk and planning 10 18 10 92 18 Twinkletoes (AIR 6/04) 20 36 10 93 19 Specs4You (AIR 6/07)ThiNganHang.com20 36 11 95 20 Tempest (AIR 12/05) 20 36 12 98 21 Bridgford Products 20 36 13 101 22 Parker (AIR 6/05) (amended) 20 36 13 103 23 EuKaRe (12/08) 20 36 14 107 24 BearsWorld (AIR 6/05) 20 36 14 109 25 Porthos (AIR 12/05) 20 36 15 111 26 Tirrol (6/09) 20 36 16 114 27 Serenity (AIR 12/06) (amended) 20 36 16 117 28 Tam (AIR 12/06) (amended) 20 36 17 119 29 Ajio (AIR 12/03) 20 36 18 121 iv Finding questions ThiNganHang.com
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123 Time Page number allocation Marks Mins Question Answer 30 B-Star (6/09) 30 54 18 123 Part D: Internal control 31 Rhapsody (AIR 6/07) (amended) 20 36 20 127 32 Risk assessment and internal control (AIR 12/02) 20 36 20 129 33 Atlantis Standard Goods (AIR 6/06) 20 36 21 132 34 Cosmo (AIR 12/01) (amended) 20 36 22 134 35 SouthLea (Pilot Paper) (amended) 20 36 22 136 36 Burton Housing 20 36 23 138 37 Delphic (12/07) 20 36 24 141 38 Matalas (12/07) (amended) 20 36 24 144 39 Cliff (AIR 12/04) (amended) 30 54 25 147 40 Blake (12/08) (amended) 30 54 26 150 Part E: Audit evidence 41 Using the work of others 10 18 28 153 42 Expert (12/08) (amended) 10 18 28 154 43 Audit techniques and sampling 10 18 28 156 44 Sampling methods (6/09) (amended) 10 18 29 156 45 External confirmations 10 18 29 158 46 Analytical procedures, sampling and CAATs 10 18 29 159 47 Wear Wraith (AIR 6/06) 20 36 30 160 48 Tracey Transporters (AIR 6/05) 20 36 31 162 49 MistiRead (AIR 6/07) 20 36 31 164 50 Coogee 20 36 32 167 51 Duckworth Computers 20 36 32 168 52 Cash audit (AIR 6/02) 20 36 33 170 53 Metcalf (AIR 6/07) (amended) 20 36 34 172 54 Liabilities (AIR 12/02) 20 36 34 175 55 Boulder (AIR 12/04) (amended)ThiNganHang.com20 36 35 178 56 Newthorpe 20 36 35 180 57 Crighton-Ward (AIR 6/05) (amended) 20 36 37 182 58 Jayne (AIR 12/06) (amended) 20 36 37 184 59 FireFly Tennis Club (AIR 12/06) 20 36 38 187 60 Walsh (AIR 12/06) 20 36 39 189 61 ZPM (AIR 6/06) (amended) 20 36 39 190 62 Zak (6/08) (amended) 20 36 40 193 63 Springfield Nurseries (AIR Pilot Paper) (amended) 30 54 40 195 64 Snu (AIR 6/03) (amended) 30 54 41 198 65 Textile Wholesalers 30 54 42 201 Finding questions v ThiNganHang.com
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Time Page number allocation Marks Mins Question Answer 66 Rocks Forever (AIR 12/05) (amended) 30 54 43 203 67 Westra (Pilot Paper) 30 54 43 206 68 Strathfield 30 54 44 210 69 Seeley (6/08) 30 54 45 212 70 DinZee (12/07) (amended) 30 54 46 215 Part F: Review 71 Evidence and written representations (6/08) (amended) 10 18 48 220 72 Ethics and going concern (12/07) 10 18 48 222 73 LALD (AIR 12/05) 20 36 48 224 74 Tye (6/09) 20 36 49 226 75 Eastvale (Pilot Paper) 20 36 50 229 76 OilRakers (AIR 12/05) 20 36 50 231 77 ZeeDiem (12/08) 20 36 51 234 78 Green (AIR 6/07) 20 36 52 237 79 Smithson (6/08) 20 36 53 239 Part G: Reporting 80 Terms, evidence and modified reports (Pilot Paper) (amended) 10 18 54 242 81 Reporting 10 18 54 244 82 Corsco (AIR 12/03) (amended) 20 36 54 245 83 Hood Enterprises (AIR 6/05) (amended) 20 36 55 248 84 MSV (AIR 6/07) (amended) 20 36 56 251 85 Galartha (12/07) 20 36 57 254 Mock exam 1 Questions 86 to 90 Mock exam 2 Mock exam 3 (December 2009)Questions 91 to 95ThiNganHang.com Questions 96 to 100 vi Finding questions ThiNganHang.com
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Planning your question practice Our guidance from page xxvi shows you how to organise your question practice, either by attempting questions from each syllabus areas or by building your own exams – tackling questions as a series of practice exams. ACCA's examiner's answers The ACCA examiner's answers to questions marked 'Pilot paper', ‘12/07’, ‘6/08’, or ‘12/08’ can be found on the BPP website at the following link: www.bpp.com/acca/examiner-solutions Additional question guidance Additional guidance to certain questions can be found on the BPP website at the following link: www.bpp.com/acca/extra-question-guidance Using your BPP Learning Media products This Kit gives you the question practice and guidance you need in the exam. Our other products can also help you pass: x Learning to Learn Accountancy gives further valuable advice on revision x Passcards provide you with clear topic summaries and exam tips x Success CDs help you revise on the move x i-Pass CDs offer tests of knowledge against the clock You can purchase these products by visiting www.bpp.com/mybpp. You can view demonstrations of i-Learn and i-Pass products by visiting www.bpp.com/acca/study- materials/#ilearn. Scroll down the page until you find the sections for i-Learn and i-Pass and click on the appropriate 'View demo' button. ThiNganHang.com Finding questions vii ThiNganHang.com
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Topic index Listed below are the key Paper F8 syllabus topics and the numbers of the questions in this Kit covering those topics. If you need to concentrate your practice and revision on certain topics or if you want to attempt all available questions that refer to a particular subject, you will find this index useful. Syllabus topic Question numbers Accounting estimates 43, 50 Analytical procedures 24, 30, 40, 43, 46, 47, 62, ME2 Q3 Audit appointment ME1 Q1 Audit evidence 24, 27, 40, 44, 53, 55, 71, 80, ME3 Q2 Audit planning 17, 20, 21, 22, 26, 30, ME3 Q1 Audit regulation 1 Audit reporting 44, 80, 81, 82, 83, 84, 85, ME1 Q5 Audit risk 17, 18, 22, 23, 27, 29, 30, 62, ME1 Q1, ME2 Q3 Audit sampling 28, 43, 44, 46, 68 Auditing standards 5 CAATs 25, 26, 37, 46, 60, 67, 68 Cash and bank 38, 45, 51, 52, 58, 62 Confidentiality 3, 10 Corporate governance 2, 6, 7, 8, 11, 31, ME3 Q2 Engagement letters 49, 80, ME1 Q1 Ethics 3, 9, 10, 11, 12, 49, 72, 74, 78, ME1 Q3, ME1 Q5 Expert 41, 42, 66 External audit 4 External confirmations 45, 52, 58 Fraud 35, 74, ME2 Q2 Going concern 22, 72, 78, 79, 82 Independence 3, 10, 11, ME1 Q3 Internal audit 7, 8, 12, 13, 14, 15, 16, 26, 38, 41, 61, ME1 Q3, ME2 Q1, ME2 Q2 Internal controls 18, 23, 32, 39, 69, 84, ME1 Q4, ME3 Q3 Inventory 49, 56, 61, 64, 65, 66, 70, 74, ME2 Q1, ME3 Q1 Materiality 28 Negative assurance 27, 79, 83, ME3 Q4 Non-current assetsThiNganHang.com42, 46, 48, 56, 63, ME3 Q3 Not-for-profit organisations 23, 36, 59 Payables 53, 54, 67, ME3 Q5 Provisions 53, 54, 56, ME1 Q5 Purchases systems 34, 67, 70 Receivables 30, 45, 50, 68, 69 Removal from office 73, 75 Report to management 39 Review reports 81 Sales systems 31, 32, 33 Subsequent events 75, 76, 77, 78, 85, ME2 Q4, ME2 Q5 viii Finding questions ThiNganHang.com
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Syllabus topic Question numbers Wages systems 35, 40, 55, 60, ME1 Q4 Working papers 17, 19 Written representations 57, 71, ME1 Q2 ThiNganHang.com Finding questions ix ThiNganHang.com
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Using your BPP Learning Media Practice and Revision Kit Tackling revision and the exam You can significantly improve your chances of passing by tackling revision and the exam in the right ways. Our advice is based on feedback from ACCA examiners. x We look at the dos and don’ts of revising for, and taking, ACCA exams x We focus on Paper F8; we discuss revising the syllabus, what to do (and what not to do) in the exam, how to approach different types of question and ways of obtaining easy marks Selecting questions We provide signposts to help you plan your revision. x A full question index x A topic index listing all the questions that cover key topics, so that you can locate the questions that provide practice on these topics, and see the different ways in which they might be examined x BPP's question plan highlighting the most important questions and explaining why you should attempt them x Build your own exams, showing how you can practise questions in a series of exams Making the most of question practice At BPP Learning Media we realise that you need more than just questions and model answers to get the most from your question practice. x Our Top tips included for certain questions provide essential advice on tackling questions, presenting answers and the key points that answers need to include x We show you how you can pick up Easy marks on some questions, as we know that picking up all readily available marks often can make the difference between passing and failing x We include marking guides to show you what the examiner rewards x We include examiners’ comments to show you where students struggled or performed well in the actual exam x We refer to the BPP Study Text (for exams in 2010) for detailed coverage of the topics covered in questions x In a bank at the end of this Kit we include the examiner's answers to the June and December 2009 papers. Used in conjunction with our answers they provide an indication of all possible points that could be made, ThiNganHang.comissues that could be covered and approaches to adopt. Attempting mock exams There are three mock exams that provide practice at coping with the pressures of the exam day. We strongly recommend that you attempt them under exam conditions. Mock exams 1 and 2 reflect the question styles and syllabus coverage of the exam; Mock exam 3 is the December 2009 paper. x Using your BPP Learning Media Practice and Revision Kit ThiNganHang.com
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Revising F8 General exam support from BPP Learning Media BPP Learning Media is committed to giving you the best possible support in your quest for exam success. With this in mind, we have produced guidance on how to revise and techniques you can apply to improve your chances of passing the exam. This guidance can be found on the BPP Learning Media web site at the following link: www.bpp.com/acca/examtips/Revising-for-ACCA-exams.doc A paper copy of this guidance is available by emailing learningmedia@bpp.com Topics to revise Any part of the syllabus could be tested in the F8 exam because all of the questions are compulsory, therefore it is essential that you learn the entire syllabus to maximise your chances of passing. The F8 paper assumes knowledge of Paper F3 Financial Accounting. It is important, therefore, that candidates can apply the knowledge they have gained in this paper to the audit and assurance context of Paper F8. All questions will require a written response but there may be questions requiring the calculation and interpretation of some basic ratios in the context of audit planning or review. The following table summarises the expected format of the F8 exam. Question Format/indicative subject area Marks available 1 This will always be a question on audit procedures and their application to a 30 specific scenario. 2 Short factual questions based on ISAs and other key areas of the Study Guide. 10 3 Risk and audit approach. 20 4 More specialised audit areas. 20 5 Collection of audit evidence, closedown, reporting. 20 In short, remember that all the questions in this paper are compulsory. Therefore, we strongly advise that you do not selectively revise certain topics – any topic from the syllabus could be examined. Selective revision will limit the number of questions you can answer and hence reduce your chances of passing this paper. Question practice You should use the Passcards and any brief notes you have to revise the syllabus, but you mustn't spend all yourThiNganHang.com revision time passively reading. Question practice is vital; doing as many questions as you can in full will help develop your ability to analyse scenarios and produce relevant discussion and recommendations. The question plan on page xxvi tells you what questions cover so that you can choose questions covering a variety of syllabus areas. Make sure you leave enough time in your revision schedule to practise 30 mark, 10 mark and 20 mark questions that will comprise the F8 exam. The F8 paper will have one 30 mark question, one 10 mark question and three 20 mark questions. They are all compulsory and different in style so you must be comfortable with approaching them. Also ensure that you attempt all three of the mock exams under exam conditions. Revising F8 xi ThiNganHang.com
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Passing the F8 exam Displaying the right qualities and avoiding weaknesses In order to pass this paper it is important that you get some of the basics right. These include the following: Reading time You have 15 minutes of reading time – make sure you use it wisely. Consider the following: x Speed read through the question paper, jotting down any ideas that come to you about any of the questions x Decide the order in which you would prefer to tackle questions x Spend the reminder of the reading time reading the question(s) you'll do first in detail, analysing scenarios, jotting down plans x When you can start writing, get straight on with the questions you've planned in detail Read the question Again this sounds obvious but is absolutely critical. When you are reading the question think about the following: x Which technical area is being tested? This should let you identify the relevant areas of technical knowledge to draw on. x What am I being asked to do? (We will take a more detailed look at the wording of requirements later.) x Are there any key dates? This is important in questions on inventory. If the inventory count takes place at a time other than the year- end you need to be aware of this. x What is the status of your client? For example is it large or small, is it a new or existing client? This might affect issues such as risk. x What is the nature of the business? This is particularly relevant in planning questions as it will have an impact on risk areas. x How many marks are allocated to each part of the question so approximately how many points do I need to make? When you think about the number of points you need to achieve you need to consider this in relation to the requirement. If you are asked for explanation it is likely that you will score more marks per point than if you ThiNganHang.comare simply asked for a list of points. You also need to think about the order in which you read information in the question. If the question is scenario based it is important that you read the requirement first so that as you read through the rest of the information you are aware of the key matters/issues which you are looking out for. For example if you are asked for risks in a scenario you can try to identify as many risk factors as possible as you read the detailed information. You should also try to read the question as ‘actively’ as possible. Underline key words, annotate the question and link related points together. These points can often serve as the basis for an outline plan. xii Revising F8 ThiNganHang.com
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Understand the requirements It is important that you can understand and differentiate between the requirements that the examiner typically uses. Here are some examples: Requirement Meaning Explain Make a point clear, develop basic point, justify a point of view Discuss Critically examine an issue List Normally punchier points than ‘explain’ or ‘discuss’ Illustrate Explain by using examples Audit procedures/audit tests Actions Enquiries Questions Evidence Source (eg document) and what it proves Think and plan No matter how well prepared you are you are going to have to do some thinking in the exam. Obviously you will be under time pressure, but if used effectively thinking and planning time should not be seen as a waste of time. Generating ideas can often be a problem at this stage. Remember that your knowledge of key ISAs can serve as a good starting point. In audit evidence questions you may think about the financial statement assertions (completeness, accuracy, valuation etc). You could also think about the different types of procedures listed in ISA 500 (inspection, observation, inquiry, confirmation, recalculation/reperformance and analytical procedures). In risk questions it might be helpful to think about the different elements of risk (inherent risk, control risk, detection risk). Repeating this knowledge will not be sufficient in most cases to pass the question but these ideas can form a very sound basis for developing a good answer. One particular issue you need to consider at this stage is the problem of repetition. In many auditing questions it is possible that the same point may be relevant in more than one part of the answer. Candidates will only get credit once so repeating the same point several times is a waste of time. Decide where you want to make the point, make it once and move on. Keep going back to the requirement and make sure that you really are answering the question. One of the most common errors in auditing papers is identifying the correct point but using it in the wrong way. Make sure that your answer is focused on the requirements. It may be tempting to write everything you know about a particular point but this will not help you to pass the exam. This 'scattergun' approach will attract few, if any, marks. Producing your answer Although much of the hard work has been done by the time you get to this stage you need to think carefully aboutThiNganHang.com how you put down each point on paper. The way you make the point can make a difference to the number of marks scored. The main criticism from the examiner in the previous syllabus was the lack of clarity and precision. This is particularly the case regarding questions on audit evidence. For example lists of tests stating ‘check this’ and ‘check that’ without explaining what is being checked and why is likely to score few marks. If you find it difficult to gauge the right level of detail try to imagine that you are explaining the procedure to a junior member of staff. Would they be able to perform the procedure based on your description? Think about your style. A well structured answer with clearly identifiable points is generally preferable to long paragraphs of text. However, do not fall into the trap of producing note-form answers. This is rarely sufficiently detailed to score marks. Revising F8 xiii ThiNganHang.com
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Tackling questions In summary, you’ll improve your chances by following a step-by-step approach along the following lines. Step 1 Read the requirement Identify the knowledge areas being tested and see precisely what the examiner wants you to do. This will help you focus on what’s important in the scenario. Step 2 Check the mark allocation This shows the depth of answer anticipated and helps you allocate time. Step 3 Read the scenario/preamble Identify which information is relevant to which part. There are lots of clues in the scenario so make sure you identify those that you should use in your answer. Step 4 Plan your answer Consider the formats you’ll use and discussion points you’ll make. Step 5 Write your answer Gaining the easy marks Stick carefully to the time allocation for each question, and for each part of each question. All questions in this paper are compulsory so you need to attempt them all in order to improve your chances of passing. Easier marks are available in Question 2, a 10 mark question based on factual elements of the syllabus. Such knowledge-based requirements could also feature in parts of the scenario questions in this paper. However, do not be tempted to write down everything you know about a particular topic – stick to the time allocation and answer the question set. ThiNganHang.com xiv Revising F8 ThiNganHang.com
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Exam information Important information regarding the F8 examiner From the June 2010 exam sitting onwards, the F8 examiner will be Pami Bahl. The current syllabus exams in this kit have been written by Alan Lewin, but you should be aware of the change in examiner and look out for any articles that may be written by Pami Bahl in Student Accountant. The exam paper The F8 exam is a three-hour paper with 15 minutes of reading time and consists of five compulsory questions. Question 1 will comprise a 30 mark case study style question, split into several parts, perhaps including one knowledge-based part. Question 2 will be a 10 mark knowledge-based question from across the syllabus. The remaining three questions will be worth 20 marks each and scenario-based. The pass mark is 50%. December 2009 1 Audit planning; audit procedures; risk assessment; auditing inventory 2 Audit evidence (reliability); communication with those charged with governance 3 Understanding the entity and its environment; non-current assets (control environment and completeness) 4 Interim and final audit; reliance on internal audit work; other assurance engagements 5 Assertions relevant to accounts payable; internal controls (purchases); contingent liabilities and reporting The December 2009 exam is Mock Exam 3 in this Kit. June 2009 Question in this kit 1 Audit planning; audit risk; analytical procedures; audit procedures (receivables) 30 2 Audit sampling; audit evidence (assertions); audit report term 44 3 CAATs; evaluating internal audit work 26 4 Internal audit; corporate governance 8 5 Inventory; fraud; professional ethics 74 Examiner's comments. Many candidates presented a high standard of answer for all five questions. Question 1 (a) and (c) appeared to be the most challenging as the subject matter appeared to be less well understood.The inadequate performance of many candidates was once again exacerbated by a clear failure to carefully read therequirements of questions and note the time allocation indicated by the marks to be awarded. Of significant concernThiNganHang.com was the lack of clear time allocation in question 2. Many candidates answered this question first and wrote a significant amount of detail on each section (in many cases more than question 1). Given that question 2 had only 10 marks available and question 1, 30 marks, there was a clear lack of examination technique in using the time available to maximise mark earning potential. Many candidates continue to display their answers inadequately, with a lack of clear labelling to indicate which questions are being attempted. Each question should be started on a new page and candidates must give more thought to the layout and organisation of their answers. Many scripts were also presented quite inadequately, with lengthy paragraphs of writing “hiding” many individual relevant points. Revising F8 xv ThiNganHang.com
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December 2008 Question in this kit 1 Wages system; analytical procedures; audit evidence 40 2 Expert; rights of auditors; assertions relating to tangible non-current assets 42 3 Professional ethics; internal audit 12 4 Audit risk; inherent risk; control environment 23 5 Events after the reporting period 77 Examiner's comments. Many candidates presented a high standard of answer for all five questions. Question 4 appeared to be the most challenging as this was based on a charity. However, not for profit entities are within the syllabus and candidates who applied their auditing knowledge to this question did obtain a pass standard. The inadequate performance of many candidates was once again exacerbated by a clear failure to carefully read the content and requirements of questions. Of significant concern was the lack of understanding of the meaning of requirement verbs such as “list” particularly in relation to question 2. Rather than “list”, many candidates provided a detailed discussion in their answers. As in previous diets, many candidates continue to display their answers inadequately, with a lack of clear labelling to indicate which questions are being attempted. June 2008 Question in this kit 1 Internal control questionnaires; tests of controls on sales system; 69 receivables' confirmation 2 Audit evidence; representations; tests of controls 71 3 Analytical procedures; bank confirmation letter 62 4 Internal audit and outsourcing 16 5 Going concern; negative assurance 79 Examiner's comments. Performance on this paper highlighted the following key issues: x Failure to read the content and requirement of questions x Poor presentation of answers x Lack of technical knowledge x Lack of breadth of answers x Lack of sufficient explanation where required x Repetition of points already made ThiNganHang.com xvi Revising F8 ThiNganHang.com
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December 2007 Question in this kit 1 Purchases system; inventory system and count 70 2 ACCA's Code of Ethics and Conduct; going concern 72 3 Internal audit; petty cash 38 4 CAATs; auditing around the computer 37 5 Non-compliance with accounting standards; audit reports 85 Examiner's comments. Performance on this paper highlighted the following key issues: x Failure to read the content and requirement of questions x Poor presentation of answers x Lack of technical knowledge x Lack of breadth of answers x Lack of sufficient explanation where required x Repetition of points already made Pilot paper Question in this kit 1 Substantive procedures on trade payables and purchases; use of CAATs 67 2 Engagement letter, audit evidence; audit reports 80 3 Threats to independance; corporate governance and audit committees 11 4 Weaknesses in wages system; fraud; use of an external consultant 35 5 Events after the year-end and impact on audit report 75 ThiNganHang.com Revising F8 xvii ThiNganHang.com
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Analysis of past papers – F8 Audit and Assurance The table below provides details of when each element of the syllabus has been examined and the question number and section in which each element appeared. Covered in Text Dec June Dec June Dec Pilot chapter 2009 2009 2008 2008 2007 Paper AUDIT FRAMEWORK AND REGULATION 1 Audit and other assurance 4d 5d engagements 2 Statutory audit and regulation 2b 3 Corporate governance 2b 4b 3b, c 4 Professional ethics 5b 3a 2a 2a, 3a INTERNAL AUDIT 5 Internal audit 4a 3b 4 3a 4b, c PLANNING AND RISK ASSESSMENT 6 Risk assessment 3a 3, 5b 4 4c 7 Audit planning and documentation 1a, 4a 1a 8 Introduction to audit evidence 1b, c, 2b 1d 2a, c 2a INTERNAL CONTROL 9 Internal control 3b 1a 1c, d 1c, 4a 10 Tests of controls 3b, 5b 1b 1a, b 1b 1c 1c, 4a AUDIT EVIDENCE 11 Audit procedures and sampling 4b, c 1c, 2a, 1c, 2a 3a, b 1d, 4 1d, 2b 3 12 Non-current assets 3c 2c 13 Inventory 1d, e 1b 14 Receivables 1d 1c, d 4a 15 Cash and bank 3c 3b 16 Liabilities and capital 5a, c 1a 1a, b 1718ThiNganHang.comAudit review and finalisationNot-for-profit organisationsREVIEW 5c 5a 4b, c5 2b, 5 2b, 5a 5 REPORTING 19 Reports 5d 2c 5 2c, 5 xviii Revising F8 ThiNganHang.com
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Study guide for exams in 2010 The F8 study text for exams in 2010 contains the study guide relating to the December 2009 exam because the study guide for the 2010 exams was unavailable at the date the study text was published. The 2010 study guide is now available and is included below. A AUDIT FRAMEWORK AND REGULATION 1. The concept of audit and other assurance engagements (a) Identify and describe the objective and general principles of external audit engagements.[2] (b) Explain the nature and development of audit and other assurance engagements.[1] (c) Discuss the concepts of accountability, stewardship and agency.[2] (d) Discuss the concepts of materiality, true and fair presentation and reasonable assurance.[2] (e) Explain reporting as a means of communication to different stakeholders.[1] (f) Explain the level of assurance provided by audit and other review assignments.[1] 2. Statutory audits (a) Describe the regulatory environment within which statutory audits take place.[1] (b) Discuss the reasons and mechanisms for the regulation of auditors.[2] (c) Explain the statutory regulations governing the appointment, rights, removal and resignation of auditors.[1] (d) Discuss the types of opinion provided in statutory audits.[2] (e) State the objectives and principle activities of statutory audit and assess its value (e.g. in assisting management to reduce risk and improve performance).[1] (f) Describe the limitations of statutory audits.[1] 3. The regulatory environment and corporate governance (a) Explain the development and status of International Standards on Auditing.[1] (b) Explain the relationship between International Standards on Auditing and national standards.[1] (c) Discuss the objective, relevance and importance of corporate governance.[2] (d) Discuss the need for auditors to communicate with those charged with governance.[2] (e) Discuss the provisions of international codes of corporate governance (such as OECD) that are most relevant to auditors.[2] (f) Describe good corporate governance requirements relating to directors’ responsibilities (e.g. for risk management and internal control) and the reporting responsibilities of auditors.[1] (g) Analyse the structure and roles of audit committees and discuss their benefits and limitations.[2] ThiNganHang.com(h)(i) Explain the importance of internal control and risk management.and controls.Compare the responsibilities of management and auditors for the design and operation of systems[2] [1] 4. Professional ethics and ACCA’s Code of Ethics and Conduct (a) Define and apply the fundamental principles of professional ethics of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.[2] (b) Define and apply the conceptual framework.[2] (c) Discuss the sources of, and enforcement mechanisms associated with, ACCA’s Code of Ethics and Conduct.[2] Revising F8 xix ThiNganHang.com
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