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Let this be the number one forum for all discussions and revision questions for F8 Audit and Assurance for the March 2017 sitting!
Audit risk is the risk that an auditor may issue an unqualified (clean) report while the financial statements are actually subject to misstatements. Those misstatement are due to fraud or error.
Substantive tests or the “tests of detail” are examining particular accounting transactions (entries) – for example checking sales invoice to the supporting evidence in order to prove that the sale has actually taken place or checking the fixed asset records for the evidence of fixed assets. The purpose of substantive tests is to assess that financial records are valid, accurate and complete.
Good day. Can anyone explain material but not pervasive and pervasive for me? Thanks.
Hi guys, I have one question regarding marking scheme.
If for instance questions states that it is scored by 6 marks and asks to provide examples of substantive procedures, how do i know how many procedures to list to get maximum of 6 marks?
Thanks in advanceWhen answering any question you should keep in mind two things – give a relevant and elaborative answer AND make marking as easy as possible. Another important rule is that 1 mark is a good sentence of approximately 15 words (no bullet points as they will prompt you to be two short).
So, for a 6 marker question on substantive procedures you will need to identify 6 procedures and describe each by two sentences. For example:
Substantive procedures for testing sales occurrence.
Select a sample of sales transactions recorded in the sales day book; agree the details back to a goods despatched note (GDN) and customer order (1 mark).
Review the monthly breakdown of sales per key product, compare to the prior year and budget and investigate any significant differences (1 mark).
Sorry, in the second paragraph I meant “describe each by one sentence”, which will gain one mark
@sytan520 said:
Good day. Can anyone explain material but not pervasive and pervasive for me? Thanks.A material but not pervasive misstatement means there is a misstatement which could affect the economic decisions of users of the financial statements, however the misstatement is confined to one area or balance of the FS and is not so large that it renders the FS useless – they can still be relied upon to some degree.
A material and pervasive misstatement is either so large it completely changes the meaning of the FS, or it is not confined to one area. This can include failure to make certain disclosures or preparing the accounts on the wrong basis (e.g. preparing them on a going concern basis when the entity is not a going concern).
@cr333 said:
A material but not pervasive misstatement means there is a misstatement which could affect the economic decisions of users of the financial statements, however the misstatement is confined to one area or balance of the FS and is not so large that it renders the FS useless – they can still be relied upon to some degree.A material and pervasive misstatement is either so large it completely changes the meaning of the FS, or it is not confined to one area. This can include failure to make certain disclosures or preparing the accounts on the wrong basis (e.g. preparing them on a going concern basis when the entity is not a going concern).
Thanks for your explanation.. finally I understand..
Hi
Can anyone tell me what came for December 2016 exam?
I am unable to find the past paper.thanks
if the question asks to give “audit procedures” then what exactly are we suppose to say?.. Substantive tests or Test of controls
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