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- This topic has 87 replies, 47 voices, and was last updated 7 years ago by yakussy1965.
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- December 5, 2016 at 5:52 pm #354195
@riteshgrg82 said:
did no one find question number 2 difficult? i know the topic and question were simple, but i wasted 30 mins staring at question 2 trying to think what to write……that question tilted me and put me in time pressure. I found it puzzling not knowing how to start my answer.hated that question
Hi5! I was wondering how the break up of marks wud be. shd we write all the 3 aspects to each scenario? I was a bit stuck too with that n then decided to address all the 3 requirements for each case. Such a time killer!!
December 5, 2016 at 5:53 pm #354197On Material Mistatenent I got completely thrown off my the non disclosure note at bottom.
They took me away from looking at NCA’s and Intangibles and unmentioned opening balances and parts of the consolidation process.
Did mention borrowing costs and Derivitives so may have pulled 2 or 3 marks from the 10. Would have been better leaving Q 1 to the end.
December 5, 2016 at 7:26 pm #354270Hello all of.you
Anybofy write these audit risks
Listing issue directors manipulate the fs figures
Ifrs8
IAS 8 oprning balances
new audit client
30million understatment of liabilities and expensesDecember 5, 2016 at 7:29 pm #354271Business risk
One supplier
Regulations
Issue in buying new runways
Cargo services which effects reputation
Loss in revenueDecember 5, 2016 at 8:53 pm #354301The exam on a whole was as expected no surprise….but time pressure…. no matter how much you practice and find techniques this don’t stand to the exams….question one was messed up….only on doing the other questions could I think of the correct answers……For the amount of things that is required to be written there are too many things to analyse…..Just thinking of how to answer the questions 1 & 2 was enough to throw off the stamina for the exam. I didn’t even make use of the figures presented……i was just concentrating on trying to do some in each question before the time ran out………to read and analyse the question one alone is already half of the time allocated for the entire questions. During the mock exams did well in question 1’s but for this exams the Accounting standards used were….not my favorite, Question 2 I can barely remember what it was……Question 5 I think you did have to mention about KAM or EOM but I just mentioned whether or not it was correct and the impact on the audit……….
December 5, 2016 at 9:04 pm #354318I agree would have been better off leaving question 1 for last….that was my intention but then didn’t want to leave it for last and then ran out of time lol… Missed out completely on the borrowing costs…..and struggled so much for a 4th point for MM…….settled for the inventory theft….but I dont think it was Significant!!!
December 5, 2016 at 9:19 pm #354330Way too time pressured, should be another 15 minutes added onto the exam.
Failed to attempt the 4th question, partially my own fault, partially the lack of time in the exam.
December 5, 2016 at 9:33 pm #354336Agree with you 100% … hard to prepare for the real thing & the most annoying thing is you could have aced that paper with a liitle more time as there was nothing difficult in it. That line about not mentioning MM risks that were disclosure related completely threw me off as I started to doubt every risk I came up with. That and trying to use the figures ate into a lot of my time. I had to read that paragraph on the Landing rights about 3 times before I grasp what was happening and I still wasn’t sure. Messed up the ethical part too as I thought all non audit engagements are now prohibited for listed co’s. I was well over my time at that stage so that was an easy 7 marks left behind. The rest of the paper was fine but only had ten mins on Q4.
Will definitely leave Q1 until last if I have to re-sit as the rest of the paper definitely triggers off more info in your head for Q1.December 5, 2016 at 10:34 pm #354342extremely time pressured. I am not too sure what is the rationale behind asking the candidates to do a lot in so little time
December 6, 2016 at 1:01 am #354355There couldn’t have been borrowing cost as a qualifying asset is one that takes alot of time to get ready.
December 6, 2016 at 2:39 am #354360I wrote international version and i thought it was fair.
1.Group audit
A.Required an evaluation of business risks facing an Madness airline group
-new government regulation on landing times
-landing rights are very difficult to secure
Etc
B.Four significant risks of material mistatement
-Five new aircrafts purchased
-recognition of landing rights
-non cash transaction where the landing rights were exchanged with a competitor
-derivative which is recognised in current assets @$40m
-Fixed loan
-GoodwillC.further information which can be provided to the audit team about group wider controls
D.ethical issues involvedThis was 35 marks worth.
2.a.assets held for sale and discontinued operation
b.capital expenditure
c.payroll expenses
The question required to evaluate appropriateness and sufficiency of audit evidence,recommendation of further audit procedures and information to be communicated to those charged with governance about deficiencies in internal control.
3.Cashflow.did not attempt
4.several issues between the component auditor and group parter .The subsidiary was no longer a going concern.Yet a letter of support was not provided except for a verbal confirmation.The parent was facing legal woes.With a litigation pending .The partner refused to provide copies of legal representations.The management declined meetings and explanations.The partner was pushing the component auditor to issue an unmodified report regardless of lack of evidence which could trigger a potential disclaimer.
5.KAM
b.Audit report..I left 4 good marks here and was dissapointed..This was probably the easiest question in this examDecember 6, 2016 at 6:03 am #354371I was so regretted that I escaped Q3 to complete Q4. After I conducted half of Q4 I started to realize that Q3 might be more easier to get scores(once you get the calculation right, with another one or two sentences to explain, you are guaranteed to get some scores.), while Q4 is very hard to get the right answers since I do not quite understand the request of the question.
Anyone has same concern like me?
I woke up four times at Sunday night because I have diarrhoea that night, so I do not have a lot of energy to finish the test. And my head is not very clear at the test center, so I think that I might choose the wrong question to answer. Just hope for the best.
December 6, 2016 at 6:38 am #354378Revenue recognition is presumed to be a significant risk for sure.
December 6, 2016 at 6:44 am #354380AnonymousInactive- Topics: 0
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I found this Dec16 sitting was rather fair but slightly challenging in the aspect of having to read the first question’s case study numerous times. Here are my take on this paper :
Question 1 : This question most certainly burnt my stamina in trying to understand what the examiner was trying to say with regards to the license and the rights of landing. It took me some time to digest. The briefing note format was rather standard and i highlighted the points as below :
a) Business Risk – I managed to come up with 6 points that includes the competitors advantage, limited supply of license can cause a going concern issue, new regulations, fuel prices may vary….
b) Material Misstatement Risk – Recognition of license cost (IAS 38), Goodwill impairment (IAS 36), Derivatives Accounting (IFRS 9) – Complex in nature, Borrowing Cost (IAS 23)
c) Audit procedures relating to control – Reviewing the organisational structure, reviewing SOP’s and walkthrough process of the purchase to order system.
d) Ethical issues – A non assurance audit engagement will cause a threat to objectivity and imply a self review and self interest threat (along that lines). Safeguard is to have seperate engagement team to handle.
Question 2 was on the completion of audit and to comment on the audit evidences (ISA 500)
a) Assets held for sale – Verbal confirmation on the existance of the assets to be held for sale is not a strong evidence. Further evidences like S&P agreement, board of minutes meeting is necessary. Control issues on the incompetence of the human resources department needs to be vet through since the finance director and the staffs does not have the necessary competence to review the journal that needs to be posted.
b) Capitalisation process – Talked more on the control process where there was no proper authorisation. Cant really remember…
c) Payroll expenses – Using the work of an outsourced entity ISA 402. There is a need to communicate directly with the outsourced entity instead on relying on the report provided by the management as there might be some manipulation in the figures. The evidence is not suffcient and the payroll report provided directly from the payroll services will be more reliable.
Question 3 : PFI (Skipped)
Question 4 : I defined professional scepticism under ISA 200 and went on to describe the responsibility of a component auditor and the potential colloboration that can take place between the legal team and the group auditor. This question remained vague to me and was the weakest amongst the rest.
Question 5 : Why there is a KAM in the audit report? I went on to explain that KAM will bring a highlight to the users on the key issues. This gives more deeper explainations on the close call matters and should be seperate from the EOM and OM.
What are the difficulties in KAM disclosures? I went on to explain that the use of judgements and estimates is high and may not be accurate. Also the complexity and and relevance of the disclosure is also hard to determine. And if the KAM is understandable by the users.
b) Impact on the audit opinion – I started off by computing the materiality for each of the section below
i) Goodwill
I mentioned that since there is indeed no impairment on the goodwill and the amount is material to the financial statement and that it have been confirmed by the valuers and auditors, then an unmodified report should be issues but should contain a KAM paragraph under ISA 701.ii) Provisions
Since the component auditors did not modify their report nor perform an adjustement, then the report issued by the group should be modified under ISA 705 with the basis of opinion paragraph inserted as “except for” one item since the provision is material and not pervasive with having sufficient and appropriate audit evidences.iii) Disposal
As per the materiality computation, this items represented 0.8% of the total assets and hence its not material to the financial statement. Therefore, a unmodified opinion should be issued but with this item of disposal being highlighted in the Other Matters Paragraph under ISA 706.I found this paper rather challenging and tiring till the end. Lets all hope for the best in this sitting 🙂 All the best in the results guys!
December 6, 2016 at 6:56 am #354385AnonymousInactive- Topics: 0
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I am not sure if i understood the question correctly, but i tried to make sense out of the materiality as well since the question provided with some assets and profits figures. I guess although there were already work done, we need to base our opinion on that to derive at the type of report to be issued commenting on the materiality as well? I am really not sure 🙁
December 6, 2016 at 7:05 am #354387AnonymousInactive- Topics: 0
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well it was rough for having stayed away from exams for a year plus. alot of question practice would have done it for me.. am sure March i will be more than ready
December 6, 2016 at 7:08 am #354388i agree with most of what you said.Probably enough to secure a pass.I left the last part of the audit report – marks due to time .I thought service organisations applied to outsourced payroll service thus the Thornhill would require both report 1 and report 2 directly from the auditor and management of the service organisation.Also a direct confirmation from the auditor at service organisation about any significant matters which may suggest that the controls over payroll are not working effectively.With the permission of the client, deploying part the team to perform test of controls or substantive procedures on the payroll.Enquiries of management at client on the processes and procedures of hiring and authorisation of cash payments for casuals.
December 6, 2016 at 7:12 am #354390AnonymousInactive- Topics: 0
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I totally forgot to mention Type 1 & 2 report although i revised it. That would have gained me some marks as well! But i did mention about the hiring process and the controls in the human resource department. Lets hope for a pass! i dont need anymore marks above 50 🙂
December 6, 2016 at 7:42 am #354406I am also trying to get a grasp of how you guys used borrowing costs under IAS 23.I didnt see any evidence that the previously purchased 5 planes did not get landing rights.I thought maybe your assumption was that since they will take long before use then IAS 23 is relevant.5% $300 fixed and secured on assets right?Because IAS 23 is very popular on self constructed assets which are capitalised over a long time which wasnt the case.Unless if the assumption is that the landing rights will delay the use of the aircrafts thus for the mean time they have to be capitalised under IAS 23 then I cannot argue.The fair value of the derivative was recorded at $40 m in current assets.I wasnt so sure here.
December 6, 2016 at 7:43 am #354408you have every single chance to pass this paper
December 6, 2016 at 7:45 am #354410On Q1 what was everyone’s take on the note about not basing your answer on disclosure in part (b) about material missstatements?
Did most people base their answers on valuation?
Think I confused disclosure with treatment which put me off using the obvious ones like nca, gw and dep’n.
Would op bal’s and transposition for consolidation have scored anything here?
December 6, 2016 at 7:48 am #354411AnonymousInactive- Topics: 0
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I used the fact that the year end of the financial statement was on 31 March 2017 but the loan was secured on 1 July 2016. So the risk here was that, the borrowing cost might have been capitalised for 1 year instead of 9 months. I also mentioned that the finance cost might be overstated. Not sure if i am on the right note.
December 6, 2016 at 7:58 am #354415AnonymousInactive- Topics: 0
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To me, disclosures are more related to standards involving related parties, non adjusting events, contigent assets and liabilities. I guess it was the examiners hint on not commenting on accounting issues relating to those matters? But GW, NCA can be measured reliably and will have a direct impact on the financial statments itself?
December 6, 2016 at 8:44 am #354423AnonymousInactive- Topics: 0
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based on the answers from my fellow colleagues here am in the region of 20 to 27%
December 6, 2016 at 8:48 am #354424I looked at Q3 and went to skip then realised it was PFI and the notes to the CF prompted a lot of marks.
Q3a.
Evaluate the appropriateness of the cash flow forecast and suggest further audit procedures to perform. (14 marks)Appropriateness.
-Sale of investments: Held at FV of $350k yet management have recorded a sale at $500k in two years time.. optimistic.
-The company have negative projected CFs for the next 2 and a half years and expect the bank to loan $1.5m when the current loan expired and is repaid.. unlikely.
-Two more than I am struggling to remember!
Further procedures.
-Review prior performance of investment shares to confirm whether $500k is reasonable.
-Inspect all bank correspondace for evidence of previous defaults or mispayments of loan.
-Review competence of the CF preparer, look at credentials etc.
-Review sales forecasts to confirm the reasonableness of the cash receipts from customer.
Q3b.
Evaluate the matters to consider in respect on the loan from Mr J. Stewart. (6 marks)-Related-party transaction
-All parties to be adequately disclosed regardless of whether transactions occurred or not
-Disclose all related party transactions
Further procedures
-Obtain RPT list from the prior period and investigate any discrepancies / additions
-Discuss with management their procedures for recognising a RPT
-Inspect notes to FS to confirm all disclosures are appropriate and adequate.
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