*** December 2021 ACCA AAA exam – Instant Poll and comments ***

What was the right opinion for the subsidiary that was accounted for as an investment?

Q1 24 marks significant audit risks followed by procedures question for 6 marks then Group auditor question for 12 marks and ethics question 4 marks.

Time management was still crucial.

it was time pressured,couldn’t fininish it…..

yes same, i concluded material and pervasive to issue adverse opinion

My Q3 was acquisition of subsidiary for which investment was put as ‘long-term investment’. I wrote that goodwill should have been calculated. I think it was qualified opinion with except for.

The other part of Q3 was KAM. Which matter should be included – I chose inventory valuation and system. Third one I said shouldnt be included in the KAM.

Q1 was very tricky – i couldnt understand what they meant by revenue being net of 14m??
I felt the whole question mainly focused on R&D.

lkleponyte wrote:My Q3 was acquisition of subsidiary for which investment was put as ‘long-term investment’. I wrote that goodwill should have been calculated. I think it was qualified opinion with except for.

I had that Q3 also, I hope your answer is 100% correct because that’s what I wrote aswell :))))

i think there were two different papers, what do you think?
Q1 – Jewellery brand with 3 wholly own subs
Audit risks
principal audit procedures for Inventory
Audit strategy
Ethics

Q2 – Ethics, QC and professional matters
Q3 – Matters to consider (going concern, impairment), KAM and Audit report

Yeah! thats was relating to the Goodwill at acq

Correct. There were two different variants. I had cloth and jewellery in 1, second it was ethics and lots of impairments. Third it was IT company about going concern, kam and opinion.

Q1 – 10 marks for identifying business risks in a Pharmaceutical industry. Possibly 8 marks here for identifying one from each of Financial, Compliance, operational and strategic risks from the info.
20 marks for Risk of Material Misstatement, which in theory could be anything to do with financial statements or our audit of them. Lots of info here, there was R&D, legal cases, loans, going concern risk, project investment, impairment, fair value etc
8 marks on audit procedures to do with R&D of project. I used Analytical, Enquiry, Inspection, Observation and Recalculation detail.
8 marks on ethics on long term associated audit firm and the advantages and disadvantages. Mainly threats of familiarity and self review. Advantages are reduction in cost, understanding of niche areas/expertise, disadvantages are cost, understanding new audit client, competition etc.

Q2 was weird – audit completion questions on a manufacturing and packaging supplier. Part1 around due diligence and whether the review could be undertaken by your firm and any matters to be considered – mainly around competence, deadlines, independence, oversight, ISQC1, arms length etc l.
Questions on enquiry’s to be be considered in relation to performing the due diligence review – this was tricky against the management accounts but generally I went with supply chain risks, ethics, related party transactions, conflicts of interest, shareholding’s etc.
Last section lf Q2 was on other matters relating to the second warehouse, this seemed to be asking what info you would request to assess the issues. I went with checking planning permission, checking loan requirements and lease etc
3 was ISA701 KAM so if you knew that well done because I didn’t. Essentially review risk of material misstatement and significant audit risk – so first two (inventory valuation and control) were KAM, management judgement is a key one. Last one isnt a conflict as there is no engagement.
Second part of question was on subsidiary consolidation which again was a bit niche. Noticed that they seemed to have overpaid for their share (52% of 28m is 14m, they paid 34m in cash). Questions around control – if control is correct then should form part of the consolidated financial statements. Material issue as 10% of Total Assets. Few other bits to hopefully grab some marks.

Idk how it went, think there was a lot to write about and I ran out of time towards the end. Spent too long on A in the audit risk section. See what happens in January – good luck all.

Do you remember if that acquisition of the sub was an event that occurred after year end? Just realized I didn’t pay attention to the date of acquisition.

Plus… Did you recommend an opinion in the event that management refused to change the accounting treatment

amnatanveer7@gmail.com wrote:Hi, do you remember the xact question of part 1 of Q2? wasn’t it what the audit committee think
whether the review could be undertaken by your firm? do u remember the exact question?

Yes. I remember this one. It was practice management but from the Group Audit committee’s perspective.

In my response I still made reference to the matters an auditor must consider before engaging a non-audit service however, I answered it from the committee’s perspective. Don’t know if this is what they asked for but i referenced the knowledge bit back to the scenario indicating resources, competence, independent, separate engagement letter needed and so on.