*** F8 December 2015 Exam was.. Instant Poll and comments ***

Found the MCQ the hardest part of the paper. finished with 30 minutes remaining just going over everything again

@drice99 said:
How do ye remember the a b c d for the Mcqs do ye swipe the exam paper out of the exam Hall? Mine always gets taken off me?

noting down on hand i guess :p

For question 5 audit risk!

One risk is that directors are determing assets useful live this should be checked by external valuer.

Depreciation charge has decreased risk of understatement so need to recalculate..

Reconciliation outstandings are immaterial by directors point of view so obtain reconciliation for arithmetical accuracy and reconcile it at year end to consider whether outstandings are cleared.

Charging Insurance cost (risk….) inquire management on what basis they think it is recievable and inspect after year end payments or correspondence regaring claims.

@dunkthefunk said:
Hello all,

From my memory my answers were as follows:

1) I used the ASSIF mnemonic – I found that:

Familiarity due to playing at local tennis club and engaged with firm for 7 years. Requires a 2 year period to rest?

Self Interest – Contingent audit fees are against regulation and should be declined as they provide bias

Self Review – Valuation work at year end was to be reviewed by the same audit firm. They should consider using another partner to conduct the firm or decline the work overall. I guess this could all be seen as advocacy if it was also used to sell the WIP at any point.

b) I can’t remember this question

2)

a) I took a punt and said if the shareholders ousted the audit firm then they should the engagement should be re-evaluated.

If a change of management meant the business had a new objectivity then the audit firm would need consider the new business practice and agree to a new engagement.

b)

I used the CREST mnemonic here when considering a new engagement. So that was the Criteria, Report, Evidence, Subject Matter and Third Party relationship. I seem have got this totally wrong as well!

3

a) Cash flow

Threats to going concern status (from what I remember in summary):

Customer facing financial hardship – small amount of key customers indicate that the business may face signifiant loss of revenue. Risk here.

Break down in relationship with Payables – Shorter credit periods and cash demands reduce the working capital cycle. As such the business was at risk of becoming insolvent due to extended periods of receivables and shorter payables. Without deep reserves to cover the losses in the short term, the business was facing difficulty. Appropriate risk here..

Contingent Court Case – Discuss with appropriate legal professionals to consider the likelihood of the outcome of the court case the fees required relating the ongoing litigation to defend against the claim. Risk here..

Forecasting – Figures were not for the next 12 months. I think they were 9 months and so should be extended to 12 months post the engagement.. Also failed to include the legal claims etc..

I can’t remember the rest of the question!

4)

Audit Risks

Inventory – Located at many sites also selling magnets that seemed to be fashionable, potential they were overstated due to obsolesce.

Bonus related performance

Insurance provision

etc

5)

a) I thought there is a duty for the auditor to look into the direct impacts on the financial statements. Ultimately it is the managements reasonability to make sure it’s all legit but I thought the auditor should evaluate if there are any penalties outlying that might indicate there is an impact on the financial statements??

b)

Deficiency
Friends and family discounts
Petty cash passcode and banking
Inventory order by restaurant manager
Tips
Payables, Purchases and Inventory accounting sent late

Recommendation
How to improve the above..

Test Of Control
A ToC using AEIOU

Any input on this would be great for peace of mind!

except or CREST part which in my opinion doesn’t answer the required question\? may be I’m wrong !

i use reading time for the mcq, it was enough time to finish it, then i have more time for writing questions, just finished on time. The mcq answers i wrote on my hand, i think half of them may correct, f8 is the exam that more difficult than you think, hope finally can pass this time.
1,c 2,c 3,c 4,b 5,a 6, b 7,d 8,b 9,a 10,c 11,a 12,b

engagement letter i got:

– basis of fees
– auditors responsibilities
– management responsbililities
– need for use of entity internal audit team & other staff
– timings (interim & final audit)
– the requirement for representations from management

@sarahblundell1985 said:
engagement letter i got:

– basis of fees
– auditors responsibilities
– management responsbililities
– need for use of entity internal audit team & other staff
– timings (interim & final audit)
– the requirement for representations from management

GR8 it was for 6 marks right??

Hi all

These are the mcq ans tat I recalled so far:
1)C
2)C
3)C
4)A
5)A
6)B
7)D
8)A
9)D
10)C
11)A
12)C
Can someone please enlighten me for last mcq ? As I see some of ur ans for tat qs is A.

4th Mcq pi**ng me off lol

q: Reason that caused reduction in gross proft

A) Error in inventry Overstated
B) sales Mix
C) increase in trade discount

most of people here saying answer A which seems impossible:

$1,000 Beginning inventory + $5,000 Purchases
– $2,000 Ending inventory = $4,000 Cost of goods sold

if used ratio Gross proft/revenue
It gives increased in gross profit not reduction

But if the ending inventory is incorrectly stated too high, at $2,500, the calculation becomes:

$1,000 Beginning inventory + $5,000 Purchases
– $2,500 Ending inventory = $3,500 Cost of goods sold

Thank you Ehsan for your reply!

i thought it cant be purchase discount because this would lower purchases increasing profit?

i did wonder about sales mix but it doesnt state wether sales would be higher or lower unless im missing something?!

so i went with closing inventory overstated

all seems similar with what I have answered except these two from what I remember
10th was A (Deffo A)
and 12th was D (May BE)

@sarahblundell1985 said:
i thought it cant be purchase discount because this would lower purchases increasing profit?

i did wonder about sales mix but it doesnt state wether sales would be higher or lower unless im missing something?!

so i went with closing inventory overstated

Rather strange question.

If closing inventory were overstated then disposal had been at lower cost, otherwise closing balance would have been lower (not if we assume that additions were overstated, then disposals would have been more expensive). If we have discounts from our suppliers, then again we have lower cost of disposals.

As I remember the question was specificly about decrease in growth margin. So the only option left is sales mix – more products or services with lower margin were sold.