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Thanks Mike for answering my earlier post. i cant post my thanks to you since that thread has now closed.
Anyhow i have some more questions. Please have a look at them below:
1) what is the difference between audit risk and financial statement risks? are they not exactly the same? when the question asks us about evaluating financial statement risks then should our approach should be the same as evaluating audit risk questions?
2) when we have high inherent and control risk then we do more testing to decrease detection risk. we also set the materiliaty at a lower level. Conversely when we have low inherent and control risk then we set the materaility at higher level. is this correct?
3) i have seen in some exam solutions on planning questions where the solutions have talked about previous auditors resigning to be a potential issue in planning documents. however how can this be an issue in planning? this is because current auditor needs to be professional clearance from past auditor during the appointment stage which comes before the planning stage. when we start planning in engagement, isn’t it right that we have already accepted the engagement work hence already gone through the reference procedure from past auditor?
4) is it compulsory to state headings in exams? or is it only required where professional marks are awarded.
5) appendix. suggested solutions have appendix at the end of the report. i understand that this is not possible in exams so i guess it would be perfectly fine if i start the answer with appendix and then the other aspects of the notes. right?
thanks
It would be better if you were to refrain from including multiple questions within a single post and were you to head those individual posts with an appropriate heading!
for example, the first question could have had a heading “Difference between audit risk and financial statement risk”
In that way, other students that face the same confusion can look at the thread and learn from it
The heading “Some issues for P7 – Please help” is helpful to no-one!
“1) what is the difference between audit risk and financial statement risks?”
Audit risk is the risk that the auditor will reach and express an audit opinion that is inappropriate. Financial statement risk is the risk that the accounting treatment of transactions and / or the internal controls within the client entity are inappropriate and will potentially lead to financial statements that do not show a true and fair view
Are they the same? No! Audit risk is managed by the auditor. Financial statement risk is managed by the client
2 – Yes
3 – Hmm. But we don’t know the quality of the work of the previous auditor. If the previous auditor was only locally qualified and not ACCA or equivalent, then would we be justified in placing reliance of that previous auditor’s work. Where there is a change in appointed auditors, the incoming auditor has additional procedures to carry out precisely because we were not the auditors last year
“4) is it compulsory to state headings in exams? or is it only required where professional marks are awarded”
It’s not even compulsory to write anything in your answer book! You can go in there and sit and dream! No-one is going to force you to do anything. Of course, over a period in excess of 100 years, the ACCA has decided that reports, letters, professional documents, emails, …. is considerably better presented where the subject matter is sub-divided into appropriate sections each of which is appropriately headed
No, there’s no need to put headings in your answer … it’s entirely up to you. But your answer will read better, will be more pleasing for a marker to mark, and will likely score any discretionary marks available simply because the marker was able more easily to follow the drift of your answer
But, hey, if you have something against the use of headings, that’s fine! Don’t use them if you don’t want
5 – correct. There’s no other practical way
In future, separate posts for separate topics, please
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