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Hello Gormit
i appreciate all your help
i have created this thread to ask you some important questions which will build up in the next few days while i complete the f8 course.
i am just confused with the following question:
“ISA 315 Identifying and assessing the risks of material misstatement through understanding the entity and
its environment sets out matters that should be documented during the planning stage of an audit.
Required
List six matters that should be documented during audit planning”is this question asking us about the understanding of the entity during risk assessment?
please advise
Yes.
The objective of ISA 315 is:
The objective of the auditor is to identify and assess the risks of material misstatement, whether due to fraud or error, at the financial statement and assertion levels, through understanding the entity and its environment, including the entity’s internal control, thereby providing a basis for designing and implementing responses to the assessed risks of material misstatement.
hi gromit
for f8 exam do we need to learn the names and number of the auditing standards? for example ISA 200, 315 etc
thanks. have you ever heard about this book for auditing https://www.amazon.co.uk/Students-Guide-Auditing-Alan-Lewin/dp/0857322036
if you have then do you think its suitable for f8 exam? please advise
no worries.
i have one question regarding audit assertions (transactions. accounting bal etc)
are assertions is the criteria that we use to test a particular item in the financial statements?
for example if sales are given in a scenario and if we want to assess the risk then should we use the assertion criteria to assess where the problem lies?
and should we use the AEIOU mechanism to test whether or not the sales fig is correct?
please advise since i just want to confirm my understanding of assertion topic.
thanks a bunch
basically my understanding is that the main purpose of audit testing is to get evidence about the assertion. So for example if the assertion is that sales are 200,000 then auditor needs to find evidence on its occurrence, completeness, accuracy, cut off and classification. for this the auditor uses AEIOU mechanism to test and find evidence. is this understanding correct?
also where does tests of controls fit in here? does the auditor performs tests of internal controls first before AEIOU since AEIOU comes under substantive procedures. is this correct?
You are correct: auditing and audit tests are about evidence.
Evidence can be substantive (eg the auditor traces invoices amounts to the proper accounts or reperforms wage calculations), or the auditor might decide to rely on testing the controls that the client has in place. If the controls are designed well and are operating well then this is evidence that the risk of errors is small.
The auditor does not really care how evidence is obtained that there is reasonable assurance that the FS do not contain material misstatements (though tests of control, if applicable, are more efficient). Either collect evidence directly about amounts (substantive) or collect evidence that the controls are working well.
AEIOU does apply to substantive but EIOU also applies to tests of control: enquire if controls are operating (weak evidence), inspect evidence about control operation (eg signature authorising amounts), observe the operation of controls (eg staff counting receipts of goods) and recalcUlation and reperformance of controls (eg reperform a bank reconciliation). Analytical procedures cannot be used to test the operation of controls.
thanks gromit for clarifying this. i have another question. i have heard that f8 needs some f3 knowledge so then it will be easier to understand and spot the issues within scenarios related to items of financial statements. for example inventory, prepayments etc
can you please give me a quick hint as to which of the areas in the following link below shall i quickly review?https://opentuition.com/acca/f3/acca-f3-lectures/
Well, you need to know what accruals and prepayments are, but you wouldn’t need to get into the double entry, so F3 would be too detailed.
You also need to be able to do simple ratios (interpretation of financial statements) such as gross profit %, receivables collection period, inventory days etc as these could be relevant to analytical review. If you don’t know these then look at F3 notes chapter 26.
ok thanks.
I have 1 question regarding Deficiency in ICS. I am actually confused when the auditor should let the management know about Deficiencies and when should they contact those charged with gov?
should they contact those charged with gov ONLY if there are significant Deficiencies?
should they contact management ONLY if there are just Deficiencies (not significant)?
please clarify. thanks
hi gromit i have another question. please see the following example of one of the indicators of significant deficiencies in internal control:
“Restatement of previously issued financial statements that were corrected for a material
misstatement due to fraud or error”please explain what this means. i really appreciate it
thanks
It simply means that in a previous period they got the FS wrong because of fraud or error. That would imply poor internal control as good internal control should have prevented/corrected errors.
@Anas Sorry to spoil your fun, but it would be easier for other students to follow / find , if you created new topic for every new problem (unless it is directly related)
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