ACCA F8 (INT) Audit & Assurance - 2010 - Study text - Emile Woolf Publishing
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Answers
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Recommendations
All inventory despatches should be recorded on sequentially numbered
despatch notes and be subsequently matched with a sales invoice.
All inventory returns should be recorded on sequentially numbered
returns notes and be subsequently matched with a credit note.
A responsible official (e.g. warehouse manager) should authorise any
movement out of inventory other than for sales. These items should either
be removed from the inventory records and transferred to the non-current
assets register (e.g. PCs used by directors) or retained within the inventory
records with a note as to their location.
Physical security over inventory should be improved.
Until the accuracy of the inventory records is established, monthly counts
should be performed.
(2) Customer credit limits
Weaknesses
The system in operation over credit limits has been broken down as:
credit limits are being exceeded
credit limits are not being allocated to new customers.
Implications
Customers may make purchases for which they are then unable to pay,
resulting in bad debts.
Customers may take advantage of the deterioration in credit control and
delay payment.
Recommendations
A credit limit must be set by a responsible official (e.g. sales director)
before a new customer can be accepted.
Before an order is accepted from a customer, a check should be made to
see if that order, together with the outstanding balance on that customer’s
account, exceeds that customer’s credit limit. If that is the case then either
the order should not be accepted at that time, or an increased limit should
be authorised.
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Paper F8 (INT)
Audit and assurance
i
Index
3Es 95
A
ACCA’sdisciplinaryregime 47
Acceptinganauditappointment:ethical
matters 73
Accountability 14
Accountabilityandaudit 29
Accountingcontrols 170
Accountingestimates 245
Accountingforpurchases 204
Accruals 301
AccuracyandValuation 228
Accuracycontrols 171
Actuallitigation 67
Adjustingevents 321
Advertisingandpublicity 72
Advocacythreat 49
Advocacy
threats 51
Agency 15
Analyticalprocedures 132
Analyticalprocedures 238
Analyticalproceduresinsubstantive
testing 241
Annualreviewoftheengagementletter 76
Applicationcontrols 170
Appointmentofauditors 35
Appropriateauditevidence 131
Arithmeticcontrols 170
Assertionlevel 112
Assessmentofrisk 160
Assurance 18,26
Assuranceprovidedbyaudit
18
Assuranceprovidedbyreview 19
Audit 14
Auditapproach 161
Auditcommittee‐functions 31
Auditcommittees 30
Auditdocumentation 138
Auditdocumentation:ISA230 138
Auditevidence 130,233;
Auditevidence‐ISA500 130
Auditevidence:reliability 132
Auditfile 138
Auditofaccountingestimates‐ISA540 245
Audit
ofequity 309
Auditofliabilities 298
Auditofprepayments 291
Auditofsmallerentities 374
Auditplan 106,109
Auditprocedures‐reserves 309
Auditprogrammes 109
Auditreport 15,336
Auditrisk 117,118
Auditriskapproach 113
Auditriskassessment 185
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Auditriskmodel 118
Auditsampling‐ISA530 143
Auditsoftware 230
Auditstrategy 108
Audittrail 188
Auditworkafterthecount:followup 277
Auditworkbeforethecount 275
Auditworkduringthecount 276
Auditworkingpapers 138
Auditingstandards 39;
issuing 39
Auditor’sopinion 341
Authorisationcontrols 170
B
Baddebts 289
Bankandcashbalances 292
Bankandcashsystem 212
Bankbalances‐confirmationofbalances 293
Bankconfirmationletter 293
Batchtotals 176
Bestvalueaudits 97
Businessandmateriality 110
Businessrisks 22,111
C
CAATs 192
Checkdigits 175
Chinesewalls 71
Circularisation 282
ClassificationandUnderstandability 229
clientscreening 74
Closebusinessrelationships 58
Closinginventory 264
CodeofEthicsandConduct 46
CombinedCodeonCorporateGovernance 27
Commonratios 243
Comparatives 250
Completeness 227
Completenesscontrols 171
Compliancerisk 84
Comply
orexplain 27
Computer‐assistedaudittechniques
(CAATs) 192
Computer‐basedauditworkingpapers 141
Conceptualframework 49
Confidentiality 47,69
Confirmationexercise 284,286
Confirmationofreceivablesbalances 282
Conflictsofinterest 70
Constructiveobligation 303
Contentengagementletter 75
Contingencies 306
Contingentassets 304
Contingentfees 57
Contingentliabilities
304
Continuityofoperations 170
Controlactivities 167
Controlenvironment 117
Controlenvironment 164
Controlrisk 119
Controltotals 175
Corporategovernance 22,25;
generalprinciples 28;
mainissues 23
roleoftheauditor 25
systems 27
voluntarycode 27
Countingprocedures 271
Currentfile 140
Customerordering
196
Cut‐off 229,273,289
D
Debtratios 243
Despatchofgoodsandinvoicing 198
Detectionrisk 119
Directconfirmation 282
Directconfirmationofbalances 282
Directionaltesting 235,298
Directionaltesting
Directors 28
Documentaryevidence 234
Duecare 46
Index
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Dueskillandcare 47
Dutiesoftheauditor 317
Dutiesofthedirectors 316
Dutiesoftheexternalauditor 37
Dutyofconfidentiality 69
E
Economy 94
Effectiveness 95
Efficiency 95
Efficiencyaudits 86
Electroniccommerce‐IAPS1013 190
Electronicdatainterchange(EDI) 189
Embeddedauditfacilities 230,232
Employmentassuranceclients 60
Engagementletters(ISA210) 74
Enquiry 132
Enterpriserisks 22
Entity’sriskassessmentprocess 165
Error 124
EthicsandConduct 46
Evaluating
controls 185
Evaluationofcontrols 185
Evaluationprocess 185
Existence 228
Existencecheck 176
Expectationgap 336
Expectedmisstatementorrateofdeviation 147
Expert 153
Exposuredraft 40
Externalandinternalaudit 84
Externalaudit 19,85
Externalaudit:requirement 34
Externalauditor 25
Extrapolating 149
F
Fairpresentation 16
Familiaritythreat 49,52,61
Familyandpersonalrelationships 57
Fees 72
Feesandpricing 56
Financialaudits 97
Financialcontrols 23
Financialinterests 59
Financialrisk 84
Financialstatementassertions 135,227
Financialstatementlevel 112
Financialstatements 334
FourPs 89
Fraud 124
ISA240
124
Fraudriskfactors 125
Fraudulentfinancialreporting 125
Fundamentalprinciples 46
G
Gifts 67
Goingconcernassumption 357
Goingconcernbasis 316
Goingconcernreview‐ISA570 316
Goodwill 260
Governancerisks 22
Guarantees 60
H
Haphazardsampling 146
Hospitality 67
Humanresourcesmanagement 92
I
IAASB 40
IAPS1000Inter‐bankconfirmationprocedures 293
IAPS1013 190
IAPS1014 344
IAS2Inventories 266
IAS10Eventsafterthereportingperiod 321
Immediatefamilymember 58
Inconsistencies 359
Independence 15;
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Independence 55
Independence:auditor 15
Informationprocessing 167
Informationsystem 166
Informationtechnology(IT)audits 98
Inherentrisk 118
Initialauditengagements
–openingbalances 248
Inspection 132
Intangiblenon‐currentassets 260
Integratedauditmodule 232
Integrity 46,55
Internalaudit 19,80,85;
ethics 101
planning 127
reports 99
regulation 101
services 65
Internalauditandriskassessment 83
Internalauditor 26
Internalcontrol 23,160,164
elements 163
evaluation 185
Internalcontrolevaluation
questionnaire(ICEQ) 184
Internalcontrolquestionnaire(ICQ) 182
Internalcontrolsystem 163
limitations 179;
recording 181;
smallentities 179
Internal
controlsforinventory 264
InternationalAuditandAssurance
StandardsBoard(IAASB) 39
InternationalFederationof
Accountants(IFAC) 39
InternationalFrameworkforAssurance
Engagements 362
InternationalStandardonAssurance
Engagements(ISAE)3000 363
InternationalStandardonReview
Engagements(ISRE)2400 364
InternationalStandardsonAuditing(ISAs) 39
InternationalStandardsonQuality
Control
(ISQCs) 41
Intimidationthreat 49,52
Inventory 264
Inventorycount 274
Inventoryquantity‐thephysical
inventorycount 269
Inventorysystem 217
Investorratios 244
ISA 40
ISA210Agreeingthetermsofaudit
engagements 75
ISA230 138
ISA240Theauditor’sresponsibilities
relatingtofraudinanauditof
financialstatements 124
ISA250Considerationoflawsand
regulationsinanauditoffinancial
statements 115
ISA260Communicationofauditmatters
tothosechargedwithgovernance 25
ISA300Planninganauditoffinancial
statements 107
ISA315Identifyingandassessingtherisks
ofmaterialmisstatementthrough
understanding
theentityandits
environment 110,164
ISA320Materialityinplanningand
performinganaudit 113
ISA330Theauditor’sresponsestoassessed
risks 117
ISA402Auditconsiderationsrelatingto
anentityusingaserviceorganisation 155
ISA500Auditevidence 130
ISA501Auditevidence–Additional
considerations
forspecificitems 269,270
ISA505Externalconfirmations 283
ISA510Initialauditengagements
–openingbalances 248
ISA530Auditsampling 144
ISA540Auditofaccountingestimates 245
ISA560Subsequentevents 322
ISA570Goingconcern 317,357
ISA580 327
ISA610Consideringthework
ofinternal
auditing 80
ISA610Usingtheworkofinternalauditors 151
ISA620Usingtheworkofanauditor’sexpert 153
ISA700 338
ISA705 348
ISA710Comparatives 250
Index
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ISA720 359
ISAE3000Assuranceengagementsother
thanauditsandreviewsofhistorical
financialinformation 363
ISAs 39
ISRE2400 364
ITcontrols 167
ITsystems 187
ITsystemsservices 65
J
Judgementalsampling 144
L
Legalobligation 303
Legalservices 66
Letterofrepresentation 328
Levelofassurance 18,362
Levelsofmateriality 114
Liability 302
Liquidityratios 243
Litigationsupportservices 66
Loans 60
Low‐balling 73
M
Managementaudits 86
managementcontrols 167
Managementrepresentations‐ISA580 327
Marketingoperations 88
Masterfiles 172
Materialinconsistencies 359
Materialmisstatementoffact 360
Materialriskofmisstatement 112
Materiality 15
Materialityconcept 16
Materialitylevel 114
Measuringaprovision 304
Microcomputersystems 187
Misappropriationofassets 125
Misstatement
offact 360
Modifiedauditreport 348
Modifiedauditreport‐ISA705 348
Modifiedopinions 348
Monitoring 26
Monitoringofcontrols 174
N
Narrativenotes 181
Negativeassurance 19
Negativeconfirmation 285
Netrealisablevalue(NRV) 266
Non‐adjustingevents 321
Non‐assuranceservices 62
Non‐currentassets 218,254
Non‐currentliabilities 307
Non‐samplingrisk 123
Non‐statisticalsampling 144
Not‐for‐profitorganisations(NFPOs) 366
O
Objectiveengagementletter 75
Objectivity 46,55
Obligatorydisclosure 69
Observation 132
Obtainingauditwork 72
Occurrence 228
OECDPrinciples 28
Onlinesystems 188
On‐screenprompts 177
Operationalinternalauditassignments 86
Operationalrisk 83
OrganisationforEconomicCo‐operation
andDevelopment(OECD) 28
Outputcontrols 172
Outsourcing
155
Outsourcinginternalaudit 103
Overduefees 56
Ownership,custodyandconfidentiality 142
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P
Paperaudittrail 189
Payrollsystem 206
Performancereviews 167
Permanentfile 139
Physicalcontrols 167
Physicalcount 294
Place 89
Placingorders 202
Planninganaudit‐ISA300 106
Positiveassurance 19
Positiveconfirmation 285
PrefacetoInternationalStandards 40
Prepaidexpenses 291
Price 89
Pricing 57
Principalcontrols
197
Principalrisksofmisstatement 255
Priorperiodcomparatives 248
privatereports 99
Proceduresafteracceptinganappointment 74
Proceduresbeforeacceptinganappointment 73
Processingcontrols 172
Procurementoperations 87
Product 89
Professionalbehaviour 47,72
Professionalcompetence 46
Professionalethics 46
Professionalscepticism 107,124
Profitabilityratios 243
Program
changes 169
Promotion 89
Provisions 302
Provisionsandcontingencies:IAS37 302
Purchasedgoodwill 260
Purchasesandexpensessystem 202
Purchasescut‐off 274
Purchasescut‐off 300
PurposeofISA720 359
Q
Questionnaires 182
R
Randomsampling 146
Randomselection 144
Rangecheck 176
Reasonableassurance 18
Receivinggoodsandinvoices 203
Recognisingaprovision 303
Recordingandaccountingforpurchases
andexpenses 204
Recordingmethods 181
Recordingsalesandaccounting 200
Regulationbygovernment 35
Regulatoryframework 34
Relianceontheworkofothers
150
Removalofauditors 36
Remuneration 29
Remunerationoftheauditor 36
residentauditsoftware 232
Resignationofauditors 36
Responsestoassessedrisks 117
Review 19
Reviewplanning 127
Rightsanddutiesofauditors 37
Rightsandobligations 228
Rightsoftheexternalauditor 38
Riskandmateriality 112
Risk
assessment 83,106
RiskManagement 84
Riskofmisstatement 109
Riskreduction 84
Risk‐basedapproachtoauditing 117
Rotation 62
S
Safeguards 53
Salescut‐off 274
Salessystem 196,200
Sampledesign 144
Sampleselection 286
Sampleselectionmethod 146
Sampling 122,143
Samplingrisk 123,144
Index
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Samplingunit 146
Sarbanes‐OxleyAct(2002) 27
Segregationofduties 167,172
Self‐interestthreat 49,50
Self‐regulation 34
Self‐regulationbytheauditprofession 34
Self‐reviewthreat 49,51
Serviceorganisations 155
Sharecapital 309
Smallcompanyauditexemption 34
Smallentities–internalcontrols 179
Smaller
entities 375
SpecialisedITsystems 187
SpecificITcontrols 175
Statisticalsampling 144
Statutoryapproach 27
Statutoryaudits 43
Statutorybooks 310
Statutoryrequirementforaudit 17
Stewardship 14
Stratifiedsampling 146
Subsequentevents‐ISA560 321
Substantiveprocedures–additionsand
disposals 257
Substantiveprocedures:‐trade
receivablesandprepayments
282
Substantiveapproach 113
Substantiveprocedures 162,226
Substantivetestingforinventory 264
Sufficient 131
Systematicsampling 146
Systemsapproach 113
Systemsflowcharts 181
Systems‐basedapproach 162
T
Tangiblenon‐currentassets 254;
substantiveprocedures 256
Taxandotherdeductions 208
Taxationservices 64
Temporarystaffassignments 65
Tendering 73
Testdata 193
Testingthe‘reciprocalpopulation’ 236
Testsofcontrol 192,197,220
Testsofdetail 117
Threatenedlitigation 67
Threats 50
Threatstothefundamentalprinciples
49
Tolerablemisstatementordeviation 147
Tradepayables 298
Tradereceivables 282
Transactioncycles 194
Transactions‐basedapproach 162
Treasuryoperations 90
Trueandfair 15
Trueandfairview 16
TurnbullReport 161,163
U
Unmodifiedauditreport 338
Unmodifiedauditreport‐ISA700 338
V
Valuationofinventory
‐Substantivetestingprocedures 266
Valuationservices 64
Valueformoneyaudits 94
VFMaudits:problems 96
Voluntaryapproach 27
Voluntarydisclosure 70
W
Wagesandsalaries 206
Walk‐throughtesting 164,175
Workingcapitalefficiencyratios 243
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