ACCA 英国特许会计师协会 Points/F8_Key_Points... · 2016-06-13 · ISA 315 (UK and Ireland) Identifying and Assessing the Risks of Material Misstatements Though Understanding

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ACCA 英国特许会计师协会 F8 Audit and Assurance

审计与鉴证 – 高频考点点睛

1. ISA 520 Analytical Procedures (UK and Ireland)

Lecturer: James Zhou

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Whole Course Outline

1. Analytical

Procedures √

2. Audit Procedures 3. Audit Risk

4. Audit Sampling 5. Audit Working

Papers

6. CAATs

7. Clarity Audit

Standards

8. Examining

Evidence

9. Going Concern

10. ISA 240 Auditors

and Fraud

11. ISA 315 12. ISA 330

13. Law and

Regulations

14. Matters of

Opinion

15. Subsequent

Events

16. The Audit of

Wages

17. Control

Environment

18. ISA 620 Using

the Work of An

Expert


What to expect when auditors need evidence?

Applicable for: F8 AA, P7 AAA, and FAU Difficulty Level: Advanced

Analytical procedures The comparison of financial, non-

financial information/trend

analysis/ratio analysis.

External confirmation E.g. Audit circularisation.

Inquiry E.g. Ask for explanation from the

management.

Observation and inspection E.g. Physical inventory

count/confirmation of the existence of

the PPE.

Recalculation and reporformance E.g. Calculation of depreciation

charge based on the accounting

policies adopted by the reporting

entity.


Before the lecture Quiz – Analytical Procedure

You have conducted analytical procedures on the draft accounts of Blunt

for the year ended 31 December 20X1. Two of your findings are as

follows:

(1) The gross profit margin has decreased from 29% for the previous year

to 23% for this year.

(2) The current ratio has decreased from 1.6 at the previous year end to

1.2 at this year end.

The directors has expected a decrease in both these measures but not by

as much as shown above.

Indicate what errors might be incorporated within the draft accounts to

produce these unexpected variations, and in which areas you would carry

out extra audit work in order to reach a conclusion.

ICAEW Professional Level Audit and Assurance - Question Bank


Flow Chart of Audit Procedure

Risk Assessment

Substantive procedure Tests of control

ISA 315 (UK and Ireland) requires auditors

perform the risk assessment including

analytical (preliminary) to identify and

assess the risk of material misstatement.

MUST always perform!

Full Substantive Procedure

Control

deficiency

Restricted Substantive Procedure

Strong

internal

control


Analytical Review Procedures

When to perform analytical

procedures? Why?

The planning stage (Risk Assessment);

ISA 315 (UK and Ireland)

Identifying and Assessing the

Risks of Material Misstatements

Though Understanding the

Entity and Its Environment

As a substantive procedure during the

course of audit; and

Substantive Analytical (not

confused with the analytical

procedure at the planning stage)

Procedure for cost-benefit

purpose compared with test of

detail (more effective and

efficient).

At the final overall review stage of the

audit.

If circumstances change

between the interim and final

audit, such materiality level may

subject to change for analysis.


1

2

3

Develop an independent expectation/threshold

Find the SIGNIFICANT difference/can it be justified?

Draw raw conclusion

Application of Analytical Procedures

If the auditors test 20% of a population of balances and aggregate

errors of £10,000 the error in the population can be projected to

be at least £10,000/20%=£50,000. The auditors will have to

decide if this is likely to be material and refer to their performance

materiality and tolerable misstatement set at planning stage.


Evidence Gathered by AP (Quality aspect)

Disaggregation (Materiality)

Data reliability (General)

Predictability


Problem Areas

1. All the information used must be reliable.

e.g. If the financial data of Year 4 is dubious, auditors

may compare the data with the Year 1-3; however, if

the data of Year 1-3 is manipulated by the

management, the comparison is meaningless.

2. Analytical procedure raises questions but does not

provide an answer.

3. Disaggregating the numbers into divisions,

subsidiaries or regions may be much more successful

than looking at the entities as a whole


Extent of use of analytical procedures

1. Significant fluctuations;

2. Unusual items; or

3. Relationships that. are unexpected or inconsistent

Auditors should consider such implications before conducting analytical

procedures.

At the planning stage, the auditor will plan suitable tests;

At the testing stage of the audit, further tests and other techniques will

be indicated;

At the final stage of the unexpected should not happen!


Key ratios

Profit ratios: Gross profit margin, net profit margin.

Asset and liability ratios: Current ratios, quick ratios, inv

entory turnover, inventory days, receivables days etc.

Financing ratios: Debt/equity ratio, ROCE.


Before the lecture Quiz – Analytical Procedure

You have conducted analytical procedures on the draft accounts of Blunt for the year ended 31

December 20X1. Two of your findings are as follows:

(1) The gross profit margin has decreased from 29% for the previous year to 23% for this year.

(2) The current ratio has decreased from 1.6 at the previous year end to 1.2 at this year end.

The directors has expected a decrease in both these measures but not by as much as shown

above.

Indicate what errors might be incorporated within the draft accounts to produce these

unexpected variations, and in which areas you would carry out extra audit work in order to

reach a conclusion.

ICAEW Professional Level Audit and Assurance - Question Bank

Suggested Answer:

Error indicated:

Inventories, receivables, or cash/equivalents may be understated

Payables or bank overdrafts may be overstated.

Revenue could be understated.

Purchases could be overstated.

Extra work: Inventories, receivables and payables; practically cut-

off/provisions

Provided by Academy of Professional Accounting (APA)

Professional Accounting Education

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ACCA 英国特许会计师协会 Points/F8_Key_Points... · 2016-06-13 · ISA 315 (UK and Ireland) Identifying and Assessing the Risks of Material Misstatements Though Understanding