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

Related and correlated risks - ACCA P1 June 2013

To be honest, I missed this theme when I prepared for P1 June 2013. Reading the opentuition forum I discovered that the same question was in past paper P1 June 2011. Unfortunately, I didn't pratice all past papers. My knowledge of statistics helped me to find the right answer.

Related and correlated risks 

Question 1, part a), 10 marks (18 minutes)

Briefly explain ‘related’ and ‘correlated’ risks. Explore the correlation between legal risk and reputation risk for Hoppo if it were to cancel its contract with Red Co.


Related risks are the risk which vary because of the presence of another risk. They do not exist independently.

Correlated risks is a particular example of related risks.
Risks are positively correlated, if the one rises, then the another also rises and vice versa. That means they vary in the same direction.
Risks are negatively correlated, if the one rises, then the another falls and vice versa. That means they vary in opposite direction.

Successful ACCA exams strategy

How to write the answers to score high marks?
How to allocate sufficient time for all questions in a paper?
Why apparently well-prepared students performed badly in the actual exam?
Whenever a student marginally failed, they would insist that they did not understand why.

There are some good advices to prepare for successful passing ACCA exams:

1. Cover the complete syllabus

ACCA provides some amendments in their syllabuses every year. If you use the materials of your friends or colleagues from previous years, you should search for update materials to complete the syllabus.
There are some free materials !

2. Practice your handwriting in three hours sessions

The summary of ACCA P1 Governance, risk and ethics

Governance

Agency theory - directors act as agents of shareholders
Potential problem - strategy to benefit directors, not shareholders, different attitude to risk (not their investment), short-termism
Goal congruence - incentives to align interests (profit related pay and share option schemes)

Rules or principles-based approaches
Rules - SOX, legally enforced, section 404 ICFR penalises SMEs
Principles - UK Combined Code of CG, comply or explain, SMEs more leeway, not legally compulsory, market benefits or penalties for non-complier

CG concepts - HAIR DRIFT
Honesty- truth, not misleading
Accountability - directors accountable to shareholders, stakeholders
Independence - NEDs free from conflict of interests
Responsibility - directors responsible to stakeholders
Decision taking - improve wealth of an entity
Reputation - ability to comply with CG concepts
Integrity - honesty and balance, trustworthy
Fairness - take into account legitimate interests
Transparency - full disclosure of material matters

CG purposes -PIGCREW

Practice methods - governance provides practice methods to aid those who are managing a company
Investment - governance creates assurance and trust thereby attracting investment
Growth - governance creates conditions for growth of the economy
Control - it is set in place to control excessive behaviour in the organisation
Rules - it creates rules within which the organisation is operated
Employment - it creates employment as well as deals with several employment issues
Wealth - it supports a wealth-creating capitalist system

Chairman - role (Higgs report) - RAISE DIP
Run the board
Active engagement by board members
Induction programme
Sufficient time for complex decision
Effective communications with shareholders
Development needs for directors
Information provided accurately and timely
Performance evaluation

Решение задач по аудиту ACCA F8 Pilot paper Q5 EastVale

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

Question 5 
Fire in warehouse

(i) Describe the additional audit procedures you will carry out;
(4 marks, 4*1.8 minutes = 7 minutes, 1 mark for each procedure)

1. Discuss the matter with management whether EastVale has sufficient inventory to comply short-term orders of supermarkets.
2. Enquire the directors if EastVale can continue the trading in long-term period. Obtain the written representation to this effect.
3. Estimate the value of inventory destroyed in the fire.
4. Inspect insurance documents for likelihood of compensation being received to replace the damaged stock.
5. Inspect the rental agreement for warehouse for penalty that may be imposed in the case of damage to the warehouse. Consider the need for provision.

(ii) State, with reasons, whether or not the financial statements for the year-end require amendment;
(3 marks, 3*1.8=5 minutes, 1 mark for each reason)

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.

Решение задач по аудиту ACCA F8 Pilot paper Q3 NorthCee

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

Question 3 part a)

Identify, and explain the relevance of, any factors which may threaten the independence of Dark & Co's audit of NorthCee Co's financial statements for the year ending 31 December 2007. Briefly explain how each threat should be managed.
(10 marks, 1,8*10 = 18 minutes, 0.5 mark for identifying the risk, 1 mark for explanation risk and 1 mark to suggestion how to resolve. Maximum 2.5 marks for each area)

Threats for independence

- rotate of audit partner

Решение задач по аудиту ACCA F8 Pilot Paper Q2

Второе задание по аудиту "стоит" 10 марок и должно быть выполнено за 1,8*10 = 18 минут. Традиционно во втором задании необходимо показать теоретические знания.

Question 2 part a)

State SIX items that could be included in engagement letter. (3 marks, 1,8*3 = 5minutes, 0.5 mark per point)

- objective of an audit of financial statements
- management's responsibilities for the financial statements
- the scope of an audit with reference to appropriate legislation
- the auditor may not discover all material errors
- the form of a report of the results of engagement
- basic fee and billing arrangement

Question 2 part b)

State and briefly explain four types of audit evidence that can be obtained by auditor (4 marks, 1,8*4= 7 minutes, 0.5 mark for stating the type and 0.5 mark for explanation).

AEIOU

О пользе электронных библиотек (digital library)

Я уже давно учусь по программе АССА (The Association of Chartered Certified Accountants). Время от времени мне нужно решать вопрос с учебной литературой по выбранным предметам (paper).
В начале своего обучения я покупала учебники Kaplan Publishing. Каждый предмет (paper) представлен здесь 3 категориями учебных материалов:
1. основной учебник - Complete Text - теория и вопросы с решениями по ACCA syllabus;
2. "решебник" - Exam Kit - задания и их решения по прошлым экзаменам;
3. резюме курса - Poket Notes - краткое изложение теории (графики, диаграммы, таблицы и пр.), облегчающее повторение при подготовке к сдаче.
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