*** ACCA Paper AAA September 2018 Exam was.. Instant Poll and comments ***

It was a new client as the question said “was assigned to the audit “ – apart from this it wasn’t very clear.

Audit risks for Q1 were as follows ;
– Listed Entity – risk of management bias I.e reversal of provisions
– New client – risk if misstated opening balanced
– Reliance on component auditor – risk of reduced audit quality
– Intangible Assets – included research costs, overstating assets and profit.
– finance costs not in line with increase in borrowing
– PPE increased with no sign of capex or depreciation
– goodwill increased by 130, 30 being unaccounted for. Risk of overstatement
– decline in revenue and Increased competition could merit impairment.

Ethical issues in Q1 – Integrated Report ;

Management responsibility + Self review threat. Mgt responsibility cannot be mitigated, decline request. Self review can be mitigated by use of different teams, howerver listed status would require to decline.

Q2 – Uncorrected Statements

Brief intro talking about how misstatements should be discussed with management and those charged with governance before modifying report.

Leases – Qualified – Not pervasive
Claims – Adverse – Material to both profit and assets.
Aggregate impact of leases and claims – Adverse opinion
Assets – Not material- Unmodofied

This is all I remember. Please feel free to add on to this,

I feel like most of you..spent 2 hours on question 1, so rushed through the other 2..

Did anyone else put component auditor and segmental reporting due to being listed as audit risks for Q1? I think I only put about 6 audit risks but calculated materiality on a couple of mentioned professional scepticism so hoping I’ll get a few extra marks here. Didn’t calculate any financial ratios or trends though!

I did the UK variant – what did others put for question 3 part b regarding the implications for the directors of Krupt’s actions on the going concern review? I believe this was a different question to the international paper.

@zubairhira said:
can anyone confirm me the Q1a Audit marks?And also if it was on ROMM.

24 marks RoMM + Detection Risk I think it was audit risk.

This is my second attempt after failing with 48% last time. I find the time pressure really hard and trying to get what’s in my head into paper in a methodical articulate way seems to be my greatest challenge !

I spent far too long on question 1. Answered most of the other questions other than the integrated report question in section 1 which I’ve just remembered I missed completely !

Happy with the fraudulent and wrongful trading question. Not that confident that I answered with the detail required for the professional papers. Happy that I put some decent points about ethics and professionalism but got in a muddle when thinking about audit risk in question 1. Carried out some ratio calcs but the main issues all seemed to be relating to the goodwill issue/acquisition of lynx .

Anyone question the validity of the Contingent consideration calculation being based on 18% interest rate discounted, when another point in the question mentioned company weighted average was 10%?

Question 1 was a bit evil. So much flicking back and forth between pages!

I answered every part to every question and stuck to my game plan, did not overrun anything, applied the best technique I could. Used the words ‘to verify’ a lot and the word because a fair bit to help remind myself to explain every point as much as possible.

Q2 I got Qualified ‘except for’ for opinion on the leases, adverse opinion on the claim because it was more than half of profit and affected more than one FS item (Assets, expenses and disclosers). Then the impairment was immaterial but I mentioned ISA 450 were you have to weight up the total misstatements except for trivial items.

Q3 I had fun plucking up loads of thing on part B’s scenario. The lack of qualification for the supervisor, the fact a cash settled scheme was treated as an equity one and the journal to reverse it, the poor planning to only arrange a meeting with the sick audit manager at the last minute, the fact that checking a expert website is not enough to be reassured of their competence, the fact the supervisor could use a lot more training and so on.

Q3 Part A was okay and similar enough to previous PFI questions.

Hoping I done enough to pass now. We shall see.

@lukman94 said:
It was a new client as the question said “was assigned to the audit “ – apart from this it wasn’t very clear.

Audit risks for Q1 were as follows ;
– Listed Entity – risk of management bias I.e reversal of provisions
– New client – risk if misstated opening balanced
– Reliance on component auditor – risk of reduced audit quality
– Intangible Assets – included research costs, overstating assets and profit.
– finance costs not in line with increase in borrowing
– PPE increased with no sign of capex or depreciation
– goodwill increased by 130, 30 being unaccounted for. Risk of overstatement
– decline in revenue and Increased competition could merit impairment.

Ethical issues in Q1 – Integrated Report ;

Management responsibility + Self review threat. Mgt responsibility cannot be mitigated, decline request. Self review can be mitigated by use of different teams, howerver listed status would require to decline.

Q2 – Uncorrected Statements

Brief intro talking about how misstatements should be discussed with management and those charged with governance before modifying report.

Leases – Qualified – Not pervasive
Claims – Adverse – Material to both profit and assets.
Aggregate impact of leases and claims – Adverse opinion
Assets – Not material- Unmodofied

This is all I remember. Please feel free to add on to this,

Q3 on forecasted profit n loss

Refer to latest sample from acca. It almost the same

@jmmyjimmy said:
Regarding case 2, I have put pervasive as the misstatement represents 50% of pbt. Do you think it is a mistake?

I would say no. Did you give the fact that it effect Assets, expenses and disclosures as another justification for saying it was pervasive? So more than one FS item for example. I think we’re okay as long as we did give a solid argument. And it was adverse of course because it would be down to a disagreement.

Them not wanting to recognize a major, major court action worth 1.2 million against the company by canceling out the liability and pretending it never happened sounds very pervasive alone.

looks like i might of done this wrong… i put £1.2m wasnt material to the PBT because it represented 5% (thoughts the PBT was £22m… probably read that bit wrong) therefore would give a qualified opinion as its unlikely to be pervasive to all the financial statements ??? .. ops! going with everyones previous comments looks like ive done it wrong!

Sat the UK variant.

Q1 agree very lengthy but plenty to go at so not overly concerned I didnt get everything that you guys have validly flagged, I think 10 or so solid points will be decent enough.

Other elements of part 1, being procedures on acq goodwill (good q), the component auditor (so so for me) and ethical points (usual rush to stick to exam technique plan I set myself!)

Q2 I got the same as Billy – lease issue my tech was rusty but think other bits were ok.

Q3 part a was great and part b was fantastic as i’m a qualified insolvency practitioner and work doing pfi reviews and insolvency.

Paper overall was fair from difficulty perspective imo but time was ridiculous for volume of info in 1.

Short term leases where less than 12 months with no option to purchase can be exempt but treatment must be the same if all items in the same class, so in the question, they should have treated all 3 the same and expensed directly to SOPL

Questionn 1 required a lot of planning before hand. obviously get the 5 marks for the ratios and the n you need 9 risks to give yu 24 marks. i only wrote 7-8 risks because of time but i still had more risks in the tank. I think it was where i did well because i chose my best and most obvious risks as per analytical procedure.

question 1 had a lot of easy marks .
1.evaluation of audit strategy 10 marks
2.audit risks 24 marks
3.goodwill procedures 6 marks
4. ethical and professional considerations on integrated reporting service engagement (e

question 3
legal claim 5 marks
impairment 5 marks
lease 7 marks (very hard for me )
review of audit planning and perfomance 8 marks (easy marks but time was limited)

question 2
consideration before accepting review engagement. 6 marks
procedures for auditing forecast. 9 marks ( saved me som time as i race through)
ethical and professional considerations arising from loan to audit member and request for secondment 10 marks ?