ACCA模拟试题答案(3)_F8

F8 Audit and Assurance

Homework assignment

Marking guide

The following represents one possible answer only; other answers are acceptable if they are factually accurate and answer the question.

Up to 1 mark should be awarded per point unless otherwise stated. This suggested solution shows an appropriate length for an answer. If points are not explained in adequate detail then ? mark may be awarded.

Question 1

Since the question says “illustrate”, illustrative examples are required to gain marks. It is not enough to merely list the reasons. ? mark for listing each reason, ? mark for illustration.

(1)Auditors generally test a sample of items rather than the entire

population. There is a risk that although the items in the sample may

be correct, other items in the population could be materially

misstated. For example, an auditor may test a sample of 50 sales and

find them to be correct, but there could be material calculation errors in some of the items which are not tested.

(2)Auditors may rely on the controls in a client’s accounting system if it is

thought to be a good system, but no system, however good, is

perfect. For example, a client may designate two people to open the post to reduce the chance of theft of cash/cheques received in the

mail, but there is a chance that those two people could collude to

commit theft. The control reduces the chance of fraud but does not

eliminate it entirely.

(3)Many of the items in the accounts are estimates and the auditor can

only be persuaded they are reasonable rather than be certain they

are correct. For example, a client may depreciate an asset over 5

years as he believes the asset has a life of 5 years. The auditor may be

persuaded the estimate is reasonable but will not be able to conclude for sure until the asset’s life has expired in the future.

Question 2

“Materiality” means “importance”. As well as being important due to their size, items may be important because of their nature.

Failure to disclose accounting policies would be considered a material matter. Disclosure is important as it enables the users of the financial statements to understand the policies that have been applied and their impact on the figures in the financial statements. Failure to disclose could affect economic decisions made by the users.

Items are said to be material if their omission or misstatement could influence economic decisions made by the users of the financial statements. The assessment of what is material is a matter for professional judgement. The auditing standards do not specify any particular materiality measures.

Audit firms therefore estimate how big a misstatement would normally have

to be in order for it to affect the users, and different firms have different ways of estimating it.

As a result, neither of the methods quoted is “right”, since neither is stated in the financial statements. Both could be considered as a reasonable approximation, however, but if the audit firm is sued for negligence it will have to justify its use.

Question 4

The emphasis of the answer should be on the fact that it depends if the financial statements are materially misstated.

The auditor must first consider whether $50,000 is material. If it is not material, then the financial statements are not materially misstated and the auditor

can give an unqualified report.

If it is material, the audit report depends on whether the inventory figure has been reduced to correct for the effect of the fraud. If so, the financial statements are again not materially misstated and so an unqualified report can be given.

If the inventory value has not been reduced then inventory is materially overstated and so the audit opinion should be qualified due to a material disagreement with the value of inventory.

The question does not ask for discussion of why shareholdings are a problem, so ensure the answer focusses on actions and ethical codes.

I must mention my brother’s shareholding to the relevant partner in my audit firm so that the significance of the threat this represents can be properly assessed.

If my brother is financially dependent upon me he will be classed as my immediate family member and, unless he is willing to dispose of his shareholding immediately, I will have to be removed from the audit team.

If my brother is not financially dependent upon me he will be considered my close family member and, although my firm may still chose to remove me from the audit team, they may, if my brother holds a junior position within the client company and his shareholding is not material, keep me as a member of the team but bring in another professional accountant to review the work I have carried out.

Question 6

“List and give reasons for” means that explanation must be given in order to get the mark. Other contents than those below are (obviously) acceptable. The engagement letter would normally mention:

(1)the fact that only reasonable assurance with respect to material

misstatement is given and that the audit should not be relied upon to

detect fraud. This is to warn the client that we don’t find fraud so that

they will not take legal action against us in the event of undiscovered

fraud.

(2)that a separate letter will be sent in respect of any other work that we

do. This is because the level of responsibility is different and so a

separate contract is required.

(3)that the client should sign the letter and return a copy if the terms are

agreed. This is so we have written evidence of the agreed terms.

The point of this question is to clearly differentiate between business and audit risk. Business risk is a risk facing the company, generally something that could cause the company to make less profit. Audit risk affects the auditor; it’s the risk that the financially statements could be materially misstated and the auditor not detect the misstatement. The same matter can lead to both types of risk, but the answer should clearly differentiate between the two. No marks are given for definitions.

Business risk: There could be price competition from the competitor in Malaysia. As its labour costs are lower it can charge a lower price and still make profits. If ABC Limited charges the same price it will make a reduced profit or perhaps even a loss.

Audit risk: If price competition causes the market price of micro-processors to fall, the net realisable value of inventory produced in Singapore may be less that its cost (which includes labour cost at Singapore rates).

Question 8

This should be as simple an explanation as possible of the link between business risk and audit risk. You do not gain marks for defining these terms. Risks facing the client’s business (business risk) can affect the financial statements and increase the risk of financial misstatement. For example, the company is facing increased competition (business risk) so it may need to close down part of its operations.

There is an impact on the accounts in that a provision for redundancy may

be required, if compensation is to be paid to workers who will lose their jobs.

If the provision is omitted or calculated incorrectly then the financial statements may be materially misstated. The auditor must have a reasonable chance of detecting material misstatements, so should be aware of risks facing the client’s business that could affect the financial statements.

Customers are likely to pay by cash/cheque/credit card, so answers should focus on controls to prevent misappropriation. Any sensible points will gain credit, but marks will not be given for controls which are not appropriate to the business e.g. mentioning goods despatch notes.

(1)Customers should complete a form detailing the courses for which they

wish to enrol. This should be input into the computer in the customer’s

presence, and the computer should check that there is space

available on a particular course before enrolling a student. If a course

is full, the customer can be offered and enrolled on an alternative

course.

(2)The computer should automatically calculate the fee payable given

the courses purchased and any applicable discounts e.g. early bird,

multiple papers. This is to prevent the possibility of human error in

performing the calculations.

(3)The student should be issued with a sequentially numbered receipt

showing how much has been paid. This is so that a check can be

made that cash from all receipts issued has been banked.

(4)The student should be required to check the details on the receipt as

correct and sign a copy of the receipt to confirm. This provides a

check that the correct course details have been recorded, the

students name has been entered correctly etc.

(5)The system should analyse the payment between cash, credit card

etc, and at the end of the day a supervisor should check that the total cash etc received agrees to the amount recorded by the system. This

to check that no cash/cheques etc have been misappropriated. (6)Cash should be put into a locked box/safe and then banked daily. This

minimizes losses in the event of theft and maximizes bank interest

gained on deposits.