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

Useful Mnemonics for ACCA P1 Governance, ethics and risks

Preparing for exams, I have noticed that such enormous amount of new information is not able to be retained in my mind (!) How to improve the memory? The answer of this question is given by mnemonics. Many of teachers at Opentuition, BPP & LSBF use this technique in their lectures to improve the memorizing of their students.

I have collected some useful mnemonics for ACCA P1 Governance, ethics and risks. Hope it facilitates you to remember the relevant. :)

Ethical principles
PrOFIT

Probity
Openness
Fairness
Integrity
Transparency


Internal controls - categorisation
OPA SPAMS

Organisational Controls

• Control over the organisation structure including managers having specific responsibilities and delegations tasks.

Authorisation

• Controls to ensure that transactions do not proceed until an appropriate individual has given approval.

Physical

• Protection of assets against theft, unauthorised access or use.

Supervision

• Oversight of work of other individuals to ensure tasks are carried out correctly.

Personnel

• Controls in place to ensure the suitable people are employed.

Arithmetic Accounting

• Checking accounting transactions for accuracy, includes use of accounts and reconciliations (e.g. bank reconciliation).

Segregation/rotation

• Different people for each transaction to – Authorise, Record, Maintain physical custody of any assets (i.e. petty cash), pay for it.

Management Controls

• Control actions taken by management depending on the contents of reports received. Managers should be involved in the day to day supervision of staff.

Internal control - objectives

SCARE

Safegard Assets

Comply with Laws&Regulation

Accurate Financial Information

Reduce Fraud

Efficient Business

Corporate governance - concepts

HAIR DRIFT

Free past exam questions of ACCA F8 Audit and Assurance

Hello to everyone!

Preparing for an exam ACCA F8 Audit and Assurance (Int) I found the video with analysis and resolving past papers exam.

The lecturer Low Chin Ann - Kolej Bandar, Citypro (www.acca2u.com)  writes by hand the answers of questions in the answer sheets. This may be a very good example for students who are needed in time management in exam. This video helps to get the skill of fast navigation into the task and to present the answers clearly and precisely.

Low Chin Ann gives the recommendations about how many to write to gain more marks on exam.

Free video of ACCA F8 revision

ACCA F8 Audit and Assurance - free lecture of substantive procedures

Hello to everyone!

I am preparing for ACCA F8 Audit and Assurance (Int). Searching in Youtube I found an excellent lecture on Substantive procedures. As you know, Substantive procedures is one of the most popular themes of ACCA F8 exam.

The lecturer teaches ACCA F8 at CityPro Institute (Johor, Malaysia).
The theme of this video - Substantive procedures and Non-current assets.

The lecturer handwrites the answers in the worksheet in ACCA F8 exam style. It is a very good example of presentation to score high marks on exam.

After watching this video I am sure you can write easily substantive procedures for PPE (Property, Plant and Equipment). Just use COVE (Completness, Ownership, Valuation and Existence) plus Disclosure!

See free video Substantive procedures and Non-current assets