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In most of the AA videos of ACCA that i watched, it is asked to write a substantive procedure which is sufficiently detailed and comprises of the action, the source and the reason. However, in a lot of the answers in the ACCA study hub, I found that it misses the reason.
For example, the following are just a sample of four substantive procedures that i found as the sample answer. (Also, the question is about collecting sufficient and appropriate evidence for sales-tax liability year-end balance)
1. Agree the year-end sales tax liability in the trial balance to the tax return/reconciliation submitted to the tax authority and cast the return/reconciliation.
2. Agree the quarterly sales tax charged equates to 15% of the last quarter’s sales as per the detailed sales listing.
3. Recalculate the sales tax incurred as per the reconciliation is equal to 15% of the final quarter’s purchases and expenses as per the detailed purchases listing.
4. Recalculate the amount payable to the tax authority as sales tax charged less sales tax incurred.My question, I dont see the reason here since the reason such as the assertion being tested is not mentioned. Maybe, i have misunderstood the requirement of a reason. Please can you help me understand if these substantive procedures are enough from an exam perspective? If yes, then how since I fail to see the reason and it would be great if you could help me identify the reason.
Thank you for time and efforts.
Welcome to my AA forum! Especially as “substantive procedures” is a very popular post to this forum, can you please give a Q name/reference and/or topic in the subject line.
If this is the Q Hyacinth then it is a past exam Q and A and it illustrates how full marks can be obtained for well described answer points without specifying an assertion. The Q specifically asked for procedures regarding the y/e liability – so that was one point of focus for good answer points. Sometimes the Q itself will specifically the assertion – e.g. “VALUATION” – where clearly the answer point is not required to give assertions.
I would say for this Q that as sales tax is examiner relatively infrequently, the model answer was focusing on describing the procedures in such a way that the students could grasp what a sales tax liability would be made up of – the focus being on accuracy of the y/e liability since its make-up is derived from other amounts.
Hello Sir, I will keep in mind to name the topic based on the question next time onwards. I am truly sorry for that.
I still have another question. If i rewrite the same procedures in the exam “Agree the year-end sales tax liability in the trial balance to the tax return/reconciliation submitted to the tax authority and cast the return/reconciliation”. Would that be enough?
Similarly, in Gooseberry question when sufficient and appropriate evidence is asked for research and development expenditure then “agree research expenditure to supporting documentation such as purchase invoices and then to statement of profit or loss” is another audit procedure mentioned. would these audit procedures be considered sufficient to gain the one mark?
You have two actions – agreeing something to something and casting i.e. adding something up – so is enough for 1 mark.
This is a good resource for debriefing gooseberry https://www.accaglobal.com/content/dam/ACCA_Global/Students/fun/f8/Read_the_mind_of_AA_marker_WEB_v3.pdf
I would say “to supporting documentation” gets nothing – it is the purchase invoice as the example of what you’re agreeing that get’s the 1/2 mark. I personally wouldn’t credit “then to profit or loss” because there’s rather a leap of faith how you would get from one to the other – and certainly an audit junior/trainee would need more guidance(!)
But as I’ve said to many students – don’t get “hung up” on whether every point is 1/2 or 1 – whilst aiming for full marks – it’s only 1/2 marks you need to pass.
Oh, I got that audit procedure from ACCA Study hub where they agreed it later to SPL for Gooseberry. I am a little torn at this point, are the audit procedures mentioned in the Study Hub Practice area a good tool to follow?
Also, had a look at the document. Thank you for the rest for information.
Truly appreciate your help.The vast majority, if not all (!) of the revision study hub Qs are REAL exam Qs & As that you won’t find in the CBE practice platform – only, unlike the CBE Qs & As, which don’t get technically updated (except for the Specimen and Practice Exams), they are technically updated every year. For example, the Study Hub Qs & As are all updated to take account of the fact that IFRS 18 is the relevant standard for presentation of financial statements (not IAS 1) and IAS 8 is the relevant standard for going concern (not IAS 1).
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