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Unfortunately I am in the 66% who failed the recent F8 paper (third time) and I have issues with Pami Bahl. After reading the examiner’s report there seems to be an inconsistency with her approach to the way questions are expected to be answered. With regard to Q1 ci the student has to take a leap of faith about what and how Lily’s system operates and then offer an answer which may or may not be connected. In Q5 Fucshia, going from a profit to a loss with further net cash outflows forecast it looks like trouble for Fucshia but to form an opinion that the company is not a going concern with such limited information and to state you would give an adverse opinion if the matter was unresolved would be incorrect. There are numerous explanations and possibilities for Fucshia. What if it has the reserves or funding to cover the outflow and the outflow is due to reorganisation expenses and the company has a trading profit forecast for the next twelve months? Fucshia then becomes a viable going concern.
In Pami’s report she states that candidates have answered questions they wished had been asked and not what was actually being asked. It seems applying knowledge and practical solutions is required to answer some of the scenarios but not others and if you don’t agree with her answers then you fail again.
One of many reasons for my fail is my answer to 4bi which was to return the financial statements to Daisy and ask the finance director to correct his mistake and I would then be in a position to audit the payables and accruals.(c) For the audit of the inventory cycle and year-end inventory balance of Lily Window Glass Co:
(i) Describe FOUR audit procedures that could be carried out using computer-assisted audit techniques
(CAATS);I don’t think you need a leap of faith here. There are two types of CAAT: test data and audit software. Whatever type of system Lily has you could use audit software to endure that the inventory files adds up, identify negative inventory and, perhaps slow-moving inventory. You could use test data (eg a ‘fake despatch’) to endure that despatches reduce inventory. You could use a ‘fake GRN’ with an incorrect product code to see what happens if this were processed. All of these ‘generic’ ideas would gain marks.
Obviously, Fuschia could have a cash mountain of $100m so going concern would an be an issue, but then the whole question becomes completely pointless and besides which I don’t understand why management has to be confident about further funding being obtainable. It is obviously a question where going concern is a real issue, and I see no reason to fight against the many clues the examiner has provided that this is the case.
With regards to 4b(i), you need to follow the requirements which were: “Describe substantive procedures you would perform to obtain sufficient and appropriate audit evidence in relation to the above three matters.” I’m afraid that asking the FD to amend the FS does not address the question asked here.
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