A new apple for MOCK

The coming mock paper is more focused on audit procedures and internal controls with some aspects of audit reporting.

There is more marks in the internal controls part therefore the recommended approach is to ensure that you fully cover the internal controls in detail from Chapter 7 and 8. Substantive audit procedures are very important so cover the last few chapters properly.

The paper difficulty is set at T8 level as opposed to previous PT which had included the harder F8 questions inside them. The balance of the PT answers will be posted soon, but they will have little bearing on the outcome for the MOCK.

Make sure you have covered all the slides and try your best to understand the process of writing up audit procedures.

Audit procedures = TOC + TOD + SAP

The beast reappears

T8 CAT Students - get ready for your battle

Requirements for reading before going into the exam

Read the article by ACCA on FRAUD
Read the article by ACCA on working papers
Read up ISA 700

Make sure you have fully covered the slides for C1 - C6 before going into the exam.

Permanent file contents

a) Copy of initial appointment letter if the engagement is of recurring nature
b) Record of communication with the retiring auditor, if any, before acceptance of the appointment as auditor
c) Clearance from previous auditor
d) Information concerning the legal and organisational structure of the entity.
In the case of a company, this includes the Memorandum and Articles of Association.
In the case of a statutory corporation, this includes the Act and Regulations under which the corporation functions .i.e.
i. In case of partnerships- Partnership deed
ii. In case of trusts- Trust deed
iii. In case of societies- Certificate of registration/ Rules and Bye-laws.
e) Organisational structure of the client
f) List of governing body including Name, Address and contact details. For Instance, the List of Directors in case of a company, List of partners in a partnership and list of Trustees in a Trust.
g) Extracts or copies of important legal documents, agreements and minutes relevant to the audit.
h) A record of the study and evaluation of the internal controls related to the accounting system. This might be in the form of narrative descriptions, questionnaires or flow charts, or some combination thereof.
i) Copies of audited financial statements for previous years
j) Analysis of significant ratios and trends
k) Copies of management letters issued by the auditor, if any.
l) Notes regarding significant accounting policies.
m) Significant audit observations of earlier years.
n) Assessment of risks and risk management
o) Major policies related to Purchases and Sales
p) Details of sister concerns
q) Details of Bankers, Registrars, Lawyers etc
r) Systems and Data Security policies
s) Business Continuity Plans

Current file has the following items

a) Correspondence relating to acceptance of annual reappointment.
b) Extracts of important matters in the minutes of Board Meetings and General Meetings, as are relevant to the audit.
c) Evidence of the planning process of the audit and audit programme
d) Analysis of transactions and balances.
e) A record of the nature, timing and extent of auditing procedures performed, and the results of such procedures
f) Evidence that the work performed by assistants was supervised and reviewed.
g) Copies of communications with other auditors, experts and other third parties.
h) Copies of letters or notes concerning audit matters communicated to or discussed with the client, including the terms of the engagement and material weaknesses in relevant internal controls.
i) Letters of representation or confirmation received from the client.
j) Conclusions reached by the auditor concerning significant aspects of the audit, including the manner in which exceptions and unusual matters, if any, disclosed by the auditor’s procedures were resolved or treated.
k) Copies of the financial information being reported on and the related audit reports.
l) Audit review points and highlight.
m) Major weakness in Internal control

Why audit working papers is needed
a) They aid in the planning and performance of the audit;
b) They aid in the supervision and review of the audit work and to review the quality of work performed, in accordance with ISA 220
c) They provide evidence of the audit work performed to support the auditor’s opinion
d) They document clearly and logically the schedule, results of test, etc.
e) The working papers should evidence compliance with technical standards
f) They document that Internal control has been appropriately studied and evaluated; and
g) They document that the evidence obtained and procedures performed afford a reasonable basis for an opinion.
h) They retain a record of matters of continuing significance to future audits of the entity;
i) They enable an experienced auditor to conduct quality control reviews
j) The process of preparing sufficient audit documentation contributes to the quality of an audit.
k) They fulfil the need to document oral discussions of significant matters and communicate to those charged with governance, as discussed in ISA 260.

Guidance on working paper
a) Filing/keeping of working papers
b) Checklist of documents to be obtained and maintained
c) Indexing of documents/ working papers
d) Proper numbering/ sequencing of working papers
e) Summarizing of overall findings
f) Writing of queries
g) Discussing with seniors on matters of importance
h) Disposing of Query -at staff level/ senior level/ partner level
i) Importance of the working papers to be signed, dated and approved by relevant level of audit staff with sufficient cross reference
j) Importance of depicting the client’s name, file number, accounting period, subject of working paper and reference of working paper with current or permanent file

Guidelines for working papers

a) Clarity and Understanding -As a preparer of audit documentation, step back and read your work objectively. Would it be clear to another auditor?
Working papers should be clear and understandable without supplementary oral explanations. With the information the working papers reveal, a reviewer should be able to readily determine their purpose, the nature and scope of the work done and the preparer's conclusions.
b) Completeness and Accuracy – As a reviewer of documentation, if you have to ask the audit staff basic questions about the audit, the documentation probably does not really serve the purpose.
Work papers should be complete, accurate, and support observations, testing, conclusions, and recommendations. They should also show the nature and scope of the work performed.
c) Pertinence – Limit the Information in working papers to matters that are important and necessary to support the objectives and scope established for the assignment.
d) Logical Arrangement – File the Working papers in a logical order.
e) Legibility and Neatness – Be neat in your work. Working papers should be legible and as neat as practical. Sloppy work papers may lose their worth as evidence. Crowding and writing between lines should be avoided by anticipating space needs and arranging the work papers before writing.
f) Safety- Keep your work papers safe and retrievable
g) Initial and Date- Put your initials and date on every working paper
h) Summary of conclusions- Summarize the results of work performed and identify the overall significance of any weaknesses or exceptions found.




Read about ethics

Read your standards ISA or IAS

For some of you, it might seem that reading the auditing standards is a waste of time and better spent watching tv or roaming the shopping malls.

If you are studying for medicine - reading the medical text is necessary, if you are studying law - reading the cases is necessary and if you are studying for accountancy - reading the standards is absolutely necessary.

If you cannot read the standards slowly - skim read, shallow read, speed read but make sure you READ THEM.

You are not required to memorize all of them, just read, don't take the dictionary for every word that troubles you, skip and move on - but READ THEM

P7 students - ISA 210, ISA 240, ISA 250 and ISA 260 are a must with ISA 700, 701, 705and 706, IFAC Code of ethics, ACCA Code of Conduct

F8 students - ISA 240, 260, 700, 701, 300, 315, 330, ACCA Code of Conduct

T8 students - ISA 700, 701, 240, 210, 315, 330, 300, ACCA Code of conduct

Where is the standards - download it from the big ISA picture on the right bar.

P7 Advance Audit & Assurance ACCA

Is this as more harder paper compared to F8, obviously it should be, since it is set at final level of ACCA. P7 examiner Lisa Weaver has already stated that the paper has some difference with the previous 3.1 paper - in terms of the accounting standards expected knowledge.

In the past, 3.1 was immediately after 2.5 but before 3.6(P2). This had limited the ability of Kim Smith (former examiner) to used P2 standards when setting the exam, but the situation has now changed, Lisa might be setting questions that test P2 standards.

In that sense, it would be wise to attempt P7 with P2 or after P2. P7 is also a preferred paper by the audit firms when it comes to options assessment, since the paper can be considered to be most testing audit paper around after F8.

Many that have taken F8 might be afraid of doing P7, since the difficulty of grasping the basics of audit, but basic audit is actually harder to grasp compared to advance audit aspects.

This was the same when I used to teach Chartered Institute of Marketing, the final level papers were sometimes rated as easier compared to the Level 2 by the students.

Finally, many students have asked me if the other P level papers are harder? Well it all depends on the following:

P5 is a move up from F5, P3 and sometimes P1, Shane Johnson the examiner might mix the elements to create "real" situations.

P4 has F9 and bits of P1 here and there.

P6 - only if you love tax and planning work.

In my opinion, you should select the papers that you feel you have a better grasp, review the past year papers for each one, make an assessment, ask friends that have done the paper. You cannot make a decision based on rumors and hearsay, nor can you attend a few "trial classes" to see if you understand the paper. You should be hungry for the knowledge when you attempt the paper and go for the class.

Final note for those that are interested in working in the audit firms, the P7 and P6 is seen as an added advantage. Do your best to add one into your examination diet.

New Classes

For all the new classes for F8 or T8, the following will be important matters for you to look into

1. You will need to download the ISA from IAASB

2. You should consider understanding note taking techniques and other techniques to improve you passing ability
CALPOLY STUDENT ACADEMIC SERVICES - Academic Skill library - MUST READ

Day to Day
A.
Take good notes. Very few students leave high school with this skill. College of DuPage's Learning Lab can help you here. Some suggestions and observations.
1.
Always take the notes for a particular class in the same notebook. Spiral bound notebooks were invented because they solved the problem of keeping related information consolidated in one place. Take advantage of this.
2.
Date each entry into your notebook.
3.
It is usually best to keep the notes for different classes separate from each other. Spiral notebooks with built in dividers are excellent for this purpose.
4.
Your notes should contain as complete a record of what the instructor said as possible. Of course, you should not try to write every word spoken, but don't leave out ideas. When you study, your notes should call back to your mind the entire sequence of ideas presented. Take care to spell all new words carefully. It you don't know how to spell a word, ask your instructor to write it on the board. Most will automatically do so for new or difficult terms.
5.
Anything the instructor writes on the board should appear in your notes. If the instructor took the time to write it out, he or she considers it important. You should do the same.
6.
If possible, try to take your notes in some kind of outline form. The organization of ideas is as important as the content of those ideas, especially when it comes to learning the material for an exam.
7.
You might find it useful to have a second color of pen or pencil available for highlighting important ideas or indicating vocabulary.
B.
Be involved in your classes. Don't simply pretend you are a sponge, ready to soak up whatever the instructor says. You are there to learn, not to be taught.
1.
If the instructor is moving too rapidly for you, or if you don't understand what is being said, say something!
2.
Ask questions if you are confused. Confusion is definitely your worst enemy.
3.
If your class includes group activities, participate as fully as you can. Such exercises are done for your benefit, not to provide a break for the instructor.
C.
Review your notes every day. This suggestion is one which we have all heard a thousand times. Unfortunately, most of us never really believe it until we actually try it. Spend 30 minutes or so each evening going over the notes from each class. There are at least two tremendous benefits to be gained from this discipline.
1.
Research has shown that reviewing new material within 24 hours of hearing it increases your retention of that material by about 60%. This means that you will be 60% ahead of the game the next time you walk into class. If you want to significantly reduce the time necessary to prepare for exams, this is the way to do it.
2.
Reviewing material before the next class period enables you to identify points of confusion or omission in your notes, which prepares you to ask the questions you need to ask before the next lecture. Again, confusion is your worst enemy.
D.
It is excellent policy to give high priority to new vocabulary. Language is the most fundamental tool of any subject, and it can seriously handicap you to fall behind in this.
E.
Keep up on your reading. Unlike most high school teachers, many college instructors don't give specific reading assignments. You are expected to go to your text for the reading related to the materials covered in class. Be independent enough to do this without being told.


II.
Using Your Textbook
A.
Don't expect your instructor to give you detailed, page by page textbook assignments. While some may do so, many do not. College teachers are much more likely to expect you to use your own initiative in making use of the text.
B.
In most cases, it will be most useful for you to at least skim the relevant chapters before each lecture. You should receive a course outline/syllabus at the beginning of the quarter, which will tell you the subject for each day. You may receive chapter references (or even page references), or you instructor may expect you to be perceptive enough to refer to the Table of Contents.
1.
When you first approach a chapter, page through it fairly quickly, noting boldface headings and subheadings, examining figures, illustrations, charts, etc., and thinking about any highlighted vocabulary terms and concepts. Also take note of the pedagogical aids at the end of the chapter--study questions, summary, etc.
2.
When you have finished surveying the chapter, return to the beginning and read in more detail. Remember to concentrate upon understanding. Don't simply read through the words. Any words which you don't understand you should look up. If you own the book and intend to keep it, you may want to write definitions of such words in the margins. You may also find it helpful to make observations and other useful notes in the margins. If you don't intend to keep the book yourself, you should carry out similar activities on a page in your class notebook.
3.
On this first trip through the chapter, you should concentrate upon catching the major subjects and points of the material. Also take note of those things which you don't understand. If the lecture on the material doesn't clarify those points, you should ask your instructor to explain.
C.
Following coverage of the chapter's material in class, you should go back to the book and read it again. It will probably be helpful to skim through it first, as you did when you first looked at it. The tables and figures should be more readily read in detail. If you are a truly conscientious student, you will outline the chapter and prepare a vocabulary list of the terms which are pertinent.
D.
At this time you should think seriously about the review and study questions at the end of the chapter. Do your best to answer all fo them as if they were a take-home exam.
E.
You may also want to develop a system of cross referencing symbols to use when comparing your class notes to your notes from the text.
F.
Remember that your instructor will probably not use the same words which you find in the text book. nothing is more frustrating than to discover that what you hear in class is no more than a rehash of what you read in the book. However, if your instructor knows his/her subject, and the author of your text knows his/her subject, the meat of what they say should be the same. NOTE: Nobody is infallible. Your instructor may make mistakes. Don't expect him or her to be more than human.





On that note, the notes for the classes are already in the following order







The notes for T8 is availabe from the following links

1. New class
2. Set 2 of notes
3. Set 3 notes
4. Set 4 notes
5. Set 5 notes
6. Set 6 notes
6.1 Set 6 extra
7. Set 7 notes
8. Set 8 notes
9. Set 9 notes

Mr Jay FCCA at KL

Well the July - December 2009 Semester is about to start and I have decided to enter the KL market for audit after some time away.

The location that I will be in KL is PAAC Wisma Kraftangan Jalan Tun Perak, City Centre, 55000 Kuala Lumpur, Kuala Lumpur, Malaysia, but the classes are only on Saturdays and some Sundays

Slides that were promised and balance of the questions

Sir, can you please explain what is the difference between test of controls and substantive procedures.For TOC we can use EIOU, so what should we use for SP?

Answer given
TOC means we are testing the control system of a organisation to make sure the data which are procced in that systam is correct and no error or any fraud had occured. and it can de done by EIOU

SP is the situation whare the auditor does not rely on internal control system and reperform all the duties done by the internal staff in sampling basis. reperform and TVMC can be used.
The explanation is acceptable but a bit weak

TOC is testing the control system, it is done when the controls have been evaluated to be effective. It usually uses the EIOU

SP covers the range of procedures that verifies the financial transactions have been correctly accounted by the accounting system. It covers the TOD and SAP


sir, can u let us know how to determine the materiality ? i mean the presentage . Like revenue 0.5% is consider as material...thanks~

It is in my notes, how to calculate is based on % and judgement by the auditor

sir ~ i got confuse between ICEQ ICQ and TOC ~~ T.T

Mr.ARC-ET-LOW
ICQ is used at R & E
ICEQ is used at E only
Both are for evaluation of the controls
TOC is at T level only

sir ~~ i still cnt understand the question is asking TOC or TOD ~~ i need help ~~~ reply ASAP ~

If the question asked for audit procedures - TOC and TOD is acceptable, only being limited by the availability of controls to write out TOC.
If the question asked for Substantive procedures then it is only TOD

Mr Jay
what do that mean by
'an increase in the extent to which the risk of material misstatement is reduced by operating effectiveness of control will increase the sample size'? can you please explain

- Without the context of the following words it will be hard to explain this statement.

sir, if the management repesentation did not agree with other evidence then all of the representation by the management cannot be trust is it?
- NO, that implies that more work needs to be done on that area only, not all representation cannot be trusted, but if there is management fraud suspected then all management representation cannot be trusted

if the assessed risk of material misstament is high for receivebles, why we use negative method of direct confirmation of receivables?
- No, when the RMM is high, we will always perform a positive confirmation, not a negative method.



can please explain what is meant by the term negative assurance?
Negative assurance report implies a lower level of assurance, less work is undertaken and the wording goes like "nothing came to our attention that indicates that the financial statement is not true and fair view"



mr jay may i know what is fee capping and also written representation?
Fee capping is the 15% AND 10% LIMITS that you studied in the ethics part
Written representation = MRL = ISA 580


sir ,if the fee basis changes( fee charges , example : fee increase by 10 percent ) ,then do the auditor issue a new engagement letter to the client ?
Yes


sir, can you provide a more detail description on the corresponding figures and the comparative financial statement?
Read the ISA 720 which can be downloaded from ISAAB in the link above

Sir, how to differentiate what is a transaction, balance or disclosure?
A transaction is Income Statement item
A balance is Balance Sheet item
A disclosure is Notes to financial statement item

if the materiality is high then the audit risk is low is it?
Audit risk is based on IR and CR evaluation. It is actually 2 stand alone item. AR influences materiality setting

I wanna ask is audit programme and audit procedure are the same ?
Audit programmes contains the audit procedures to be executed in the audit


mr.jey what is diffrent between management letter and management representation letter?
Management letter = Letter of weakness, is an output from the audit, management representation letter = evidence


what is meant by management threat to independence. i din't see this in ur slides
- Management threat implies that auditor behaves like management, and starts to give advice which makes them have management capacity

T8 Tips for June 2009 Exams

Well since the exam is a new paper, it would be hard to tip this semester

I suppose that the following is possible

1. Internal controls general theory - COSA, Mr.ERIC, MACCHOP, $1COAcH, SPAMSOAP or ACCAMAPS
2. Writing up specific control objective for any area - Sales, Purchases, Cash
3. Knowing the core control functions for inventory, sales, purchases and cash
4. Know the aspects of perpetual inventory takes, benefits
5. Application and general controls - concepts and examples

Possible for the audit procedure question
1. TOC for sales or purchases system
2. Audit procedures could be broad ranging question with all areas being asked
3. NCL, Bank, AP audit have the basics in your hand and be able to write out 5 procedures for each without too much thinking
4. Inventory audit - before, during and after
5. Specific work for internal audit - reliance on department and on work of IA
6. Assessment of expert evidence
7. Financial statement assertions and examples
8. Audit procedures and examples

Possible for the planning question
1. Ethical issues - FASSIM and possible safeguards
2. Confidentiality
3. Accepting the client and contents of engagement letter
4. Client screening matters
5. Finch type question - assessment of inherent risk
6. Explanation of audit risk and business risk approach - use the article
7. Audit documentation ISA 230, purpose, types, what should be kept

Finally the general question that covers a wide range of topical issues
1. Analytical procedures
2. Sampling issues - type of sampling and +/-
3. Audit report - contents
4. ISA scope and reason for development
5. Advantage & Disadvantage of audit
6. Going concern
7. Management representation letter - contents, purpose

Well that is what you should have covered, but make sure you have completed the following
1. Past year papers
2. Slides
3. Know all the short-cuts
4. Past year papers

Good luck