7/27/2019 ACCA F8 Audit Test - Answers

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F8 – Answers to Revision Test  Answer 1

Which of the following is a test of control and which a substantive test? 

A ToC has to test a control. The auditor tracing amounts, comparing amounts, inspectingassets are not internal controls 

 Answer 2

Total assets = $10m. What is the preliminary estimation of materiality? 

1 – 2% ie $100,000 to $200,000 

 Answer 3

If a preliminary estimation of materiality is $2m, is performance materiality more likely to be$1m or $3m? 

$1m – performance materiality is a more rigorous test 

ToC ST

20 purchase invoices for expenses amounts are traced to debit entries in theappropriate nominal ledger accounts.

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Expenses are compared to similar expenses in the previous year.   !

20 purchase invoices are inspected to see if they had been stamped‘Approved for payment’ by the chief accountant

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20 cars are inspected to see if they exist   !

15 Capital expenditure authorisations for purchases over $1,000 areinspected to see if they have been signed-off by the finance director 

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15 capital expenditure invoices are traced to the appropriate non-currentasset and VAT accounts

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Depreciation calculations are re-performed by the auditor    !

10 records in the fixed asset register are inspected to verify that the assetswere physically inspected within the last 12 months.

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The receipt of goods into the factory is observed to ensure that deliveriesare counted by staff upon receipt

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The auditor inspects inventory to see if any appears damaged.   !

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 Answer 4

An internal control system is found not to be operating effectively. Which of the following isthe appropriate audit response? 

(a) 

Carry out more tests of control 

(b)  Carry out more substantive tests  "

 Answer 5 

Which three of the following terms are the odd ones out? 

Honesty, objectivity, confidentiality, independence, secrecy, professional competence anddue care, professional behaviour, integrity 

[Note: see the ACCA’s fundamental ethical principles] 

 Answer 6 

The question “Can non-current assets be bought without proper authorisation?” is anexample of: 

(a)  A control objective  "(b) A control procedure

and would the question be found on an 

(a) ICQ 

(b) ICEQ?  "

 Answer 7

What are the preconditions of an audit? 

(a) An acceptable financial reporting framework (b) Management accepts the premise of an audit 

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 Answer 8

Are the following methods of sampling statistical or non-statistical? 

 Answer 9

Fill in the blanks: 

 Answer 10

What are the 5 elements of an assurance engagement? (a) A three party arrangement (responsible party, person to whom to report, practitioner) (b) Suitable criteria (c) Sufficient appropriate evidence (d) Appropriate subject matter (e) A written report in the prescribed form 

Statistical Non-statistical

Block sampling   !

Monetary unit sampling   !

Random sampling   !

Haphazard sampling   !

Internal auditors External auditors

Report to? Management/auditcommittee

Members

Employed by? Company, management/audit committee

 An independent audit firm

Work determined by? Management/auditcommittee

Statute, ISAs, IFAC

Purpose of work? Test internal control, value

for money audits,investigate fraud – almostanything managementsrequires.

To collect sufficient

appropriate audit evidenceto be able to givereasonable assurance (orotherwise) that the FS arefree of materialmisstatement

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 Answer 11

Indicate the relevance of the following list of assertions to the audit of

account balances, transactions and events, and presentation and disclosure: 

 Answer 12

Is the following statement true or false?

“A contingent liability is caused by a future event.”

False. It relates to a past event whose outcome will only be known upon some futureevent 

 Answer 13

What is wrong with the following description of an audit procedure?

“Inspect the cash book for amounts received after year end in respect of amounts

owing at year end.”

Audit procedures should state what assertion they are designed to verify. 

 Answer 14

Could a sharp fall in sales after year end be an adjusting event? 

Yes, it could be. It might indicate that inventory at year end is not saleable and so itshould be written down.

Period end

balances

Transactions and

events

Presentation and

disclosure

 Accuracy   ! !

Completeness   ! ! !

Cut-off    !

 Allocation   !

Existence   !

Classification   ! !

Occurrence   ! !

Valuation   ! !

Rights andobligations

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