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Hi Mike,
I’m well aware that the secret to passing this paper (P7) is to master the EXAM TECHNIQUE
but yet i failed this paper in Dec.
For question 1 in the exam, let’s say the question is about “evaluating audit risks”
Would you say my exam technique is right?
1. Assess the materiality
2. Apply the right accounting treatment
3. Explain how the wrong accounting treatment given in the scenario will affect the P/L and B/S
I used this technique for all the audit risks in Q1 in the Dec 15 exam.
so that’s my first question to you sir.
My next question is regarding something you told another student on this forum.
You said ” No more than one point in any one sentence. no more than one sentence in a paragraph ”
My question is, how do i fit the entire exam technique(above) into one sentence?
I have to admit, my paragraphs during the exam were kind of thick(5 lines) because it was hard to summarize my point into a simple yet well explained sentence.
Your answer appears to be addressing the issue of financial statement risk!
“You said ” No more than one point in any one sentence. no more than one sentence in a paragraph ”
My question is, how do i fit the entire exam technique(above) into one sentence?” – You’ve just explained the steps to me in three sentences! Applying reverse logic, what I used to find during many years as a marker was an answer that would read something like:
“Assess the materiality and then apply the right accounting treatment explaining how the wrong treatment will affect the financial statements”
That’s three points! And you could make it into 4 points by splitting that last bit into:
1) explaining how it could affect the statement of profit or loss (the adjustment would increase profit after tax by an amount of $xxxx), and
2) explaining the knock-on affect on the statement of financial position (retained earnings will increase by $xxxx at the same time tangible non current assets will increase by $xxxx)
You could even go further and say that:
3) because retained earnings and tangible non current assets have increased by a material amount, it would be appropriate to recalculate materiality levels
Are you getting the idea?
Dear Sir,
That’s exactly what i’m trying to figure out.
How in the world did I fail this paper if I applied the correct EXAM TECHNIQUE???
I would say I’m pretty weak at coming up with AUDIT PROCEDURES.
which I am mastering now.
But other than that, I’m not sure where I’m going wrong.
Your original post went on about ….
“1. Assess the materiality
2. Apply the right accounting treatment
3. Explain how the wrong accounting treatment given in the scenario will affect the P/L and B/S”
….but this has nothing to do with your premise “let’s say the question is about “evaluating audit risks””
Maybe that’s where you’re going wrong! You’re answering a question that is different from the one the examiner is asking!
I see.
Then what would be a better way of answering an ‘audit risk’ question?
1. Identify the inherent/control/detection risk from the scenario
2. Explain how those risks would affect the auditor’s opinion if not corrected
Is this better ?
When you say apply right accounting treatment, does it mean you say what the standard says?how the standard should have been applied ? This session it’s financial statement risk and business risk coming, the more we know the stuff the better.
Yes, it’s vital that you know the correct accounting treatment.
Let’s face it! If you’re auditing in real life, it’s no good simply checking that the $ value is correct according to the client accountant’s calculations. You need also to make sure that, for example, an operating lease has not been treated as a finance lease
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