The summary of ACCA F8 Audit and Assurance

Quick look at ACCA F8 Audit and Assurance.

Assurance

Audit is the process, assurance is the product.

Agency theory: secondary agent (auditor) delivers the aussurance to principal (shareholders) that the report (FSs) provided by primary agent (director) shows T&F view.

Objective of EA is assurance, purpose of EA is delivery confidence of FSs to shareholders.
Reasonable assurance is a high degree of confidence, but NO guarantees!

5 elements of assurance engagement:

(1) 3 parties relationships:

• practitioner (auditor)
• responsible party (director)
• intended users (shareholders)

(2) subject matter
(3) criteria (standards)
(4) audit procedures to form opinion
(5) audit report

Positive assurance - high level, but not absolute, a lot of testings to form opinion, FSs show T&F view
Negative assurance - medium level, a smaller amount of testings to form opinion, we have no evidences that CF forecast does not provide T&F view.

Statutory audit is an audit of annual FSs.

Auditor & AC - matters to discuss:

• scope & timing of audit
• significant findings during audit
• independence issues
• modification of audit report (opinion)
• man-t representation requested
• fraud cases

Corporate governance (CG) - systems by wich the company directed and controlled.
Rules of CG:

• global - OCDE Code
• national - The US - SOX, The UK - The UK CG Code
• other - Stock Echange Rules

Underlying concepts of CG:
HAIR DRIFT

Решение задач по аудиту ACCA F8 Pilot paper Q4 SouthLea

Четвертое задание по аудиту "стоит" 20 марок и должно быть выполнено за 1,8*20 = 36 минут. Традиционно четвертое задание - это сценарий, по которому необходимо применить теоретические знания к конкретным специфическим условиям сценария.

Question 4 part a)

(i) Identify, and explain weaknesses in SouthLea Co's system of internal control over the wages system that could lead to misstatements in the fiancial statements.
(ii) For each weakness, suggest an internal control to overcome the weakness.

(8 marks, 1,8*8 = 14 minutes, 1 mark for indentifying each weakness and explanation its consequence and 1 mark to suggestion of control. Maximum 2 marks for each area)

Weaknesses		Consequence		Recommended control
Workers clock in by entering their unique number on a key pad.		It’s not supervised, then workers may swap numbers and clock in employees who are absent. SouthLea will then pay employees who have not worked.		Clocking in and out should be supervised by the foreman.
The foreman can issue temporary numbers for new empoyees.		The foreman may be able to issue a number for a fictitious employee and have waged paid into his own account.		The foreman must obtain authorisation to issue a new number from HR director. The issue of a new number should be backed up with the new employee's contract.
Overtime is not authorised before adding to standard pay.		Employees may claim for overtime that they have not worked.		The foreman must uathorised the list of overtime payments before adding it to the net pay.
The staff in the wages department can set up employee records wthout authorisation		The records may be set up for fictious employees whose wages are paid by cash to the clerks.		Any amendments to employee records must be authorised by the HR director and backed up with the employee contract. The HR director should review a weekly print out of amendments to ensure they are all reasonable and authorised.
Employees are paid in cash.		Cash is easy to misappropriate. Employees may claim that they didn't receive their payments as they are not expected to sign for their wage envelopes.		It's better to make the payments by trasfer. If not, a list of cash payments should be kept and employees should sign to say they have received their envelope.