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F8 DEC 2007 ANS

F8 DEC 2007 ANS

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Published by Pakistan Dramas
for more visit http://acuteacca.tk
for more visit http://acuteacca.tk

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Published by: Pakistan Dramas on Nov 28, 2011
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04/15/2014

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FOR FREE ACCA RESOURCES VISIThttp://acuteacca.tkSEND YOUR REQUESTS ATemail@acuteacca.tkPAST PAPERS ARE UNDER COPYRIGHT©.FOR FREE ACCA RESOURCES VISIThttp://acuteacca.tkSEND YOUR REQUESTS ATemail@acuteacca.tkPAST PAPERS ARE UNDERCOPYRIGHT©.
 
Fundamentals Level –Skills Module, Paper F8 (INT)Audit and Assurance (International)December 2007 Answers1(a)
Audit procedures procurement and purchases system
(b)
Audit procedures prior to inventory count attendance
Procedure
Review prior year working papersContact client to obtain stocktaking instructionsBook audit staff to attend the inventory countsObtain copy of inventory count instructions from clientAscertain whether any inventory is held by third partiesObtain last year’s inventory count memoPrepare audit programme for the count.
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   7   D  –   I   N   T   I   X   P  a  p  e  r   F   8   I   N   T   7   D  –   I   N   T   A   A   P  a  p  e  r   F   8   I   N   T
ProcedureReason for procedure
Obtain a sample of e-mails from the store manager’scomputer. Trace details to the order database.Ensure that all orders are recorded and that the orderdetails are correct.Obtain a sample of orders in the order database, recorddetails of the order and trace to the paper delivery notefiled in the goods inwards department.To confirm that all goods ordered were received.For the sample of orders above, agree to the inventorydatabase.To confirm that goods received were completely andaccurately recorded in the inventory database.Obtain a sample of paper delivery notes and agree to theorder database and inventory database.To confirm that inventory received has been recorded inDinZee’s accounting system and that liabilities aretherefore not understated.For a sample of orders in the orders database, agreedetails to the payables ledger database, confirming detailsagainst the purchase invoice.To confirm complete and accurate recording of theinventory liability in the payables database.Note: To ensure goods received have been recorded as apayables liability the sample selected from the orderdatabase should be only those orders that have beenreceived. The invoice number in the order database isthen noted and traced to the payables ledger in thepurchase database.Within the purchase database, obtain a sample of invoicesrecorded in the purchase day book, agree details of priceand supplier to the purchase invoice record in thedatabase.To confirm that purchase invoice details have beencorrectly recorded in the payables database.For a sample of purchase invoices in the purchase daybook, agree details to the delivery notes for items on thatinvoice.To confirm that the purchase liability has been recordedonly for goods actually received.For the sample of purchase invoices above, agree detailsto the individual payables account in the payablesdatabase.To confirm that the liability has been recorded in thecorrect payables account.For a sample of supplier invoices, cast and cross castinvoice price and quantities confirming price to theoriginal order.To confirm the arithmetical accuracy of invoices andensure the company was charged the correct price forgoods received.Select increases in the purchase daybook and vouch tothe order database.To ensure that invoiced goods have been ordered,confirming the occurrence assertion.Using computer-assisted audit techniques, cast thepurchase day book and agree total of liability incurred tothe general ledger.To confirm the completeness and accuracy of the liabilityrecorded in the general ledger.
FOR FREE ACCA RESOURCESVISIThttp://acuteacca.tkSEND YOUR REQUESTS ATemail@acuteacca.tkPAST PAPERS ARE UNDERCOPYRIGHT©.
 
(c)
Weaknesses in counting inventory
(d) (i)
The aim of a test of control is to check that an audit client’s internal control systems are operating effectively.The aim of a substantive procedure is to ensure that there are no material errors at the assertion level in the client’sfinancial statements.
(ii)
Regarding the inventory count:
Test of control
Observe the count teams ensuring that they are counting in accordance with the client’s inventory count instructions.
Substantive procedure
Record the condition of items of inventory to ensure that the valuation of those items is correct on the final inventorysummaries.
2 (a)
Fundamental principlesIntegrity. A professional accountant should be honest and straightforward in performing professional services.Objectivity. A professional accountant should be fair and not allow personal bias, conflict of interest or influence of others tooverride objectivity.Professional competence and due care. When performing professional services, a professional accountant should showcompetence and duty of care by keeping up-to-date with developments in practice, legislation and techniques.
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   7   D  –   I   N   T   A   A   P  a  p  e  r   F   8   I   N   T   7   D  –   I   N   T   A   B   P  a  p  e  r   F   8   I   N   T
WeaknessReason for weaknessHow to overcome weakness:
Inventory sheets stated the quantity of items expected to be found in thestoreCount teams will focus on finding thatnumber of items makingundercounting of inventory more likely– teams stop counting when ‘correct’number of items found.Count sheets should not state thequantity of items so as not topre-judge how many units will befound.Count staff were all drawn from thestoresCount staff are also responsible for theinventory. There could be a temptationto hide errors or missing inventory thatthey have removed from the storeillegally.Count teams should include staff whoare not responsible for inventory toprovide independence in the count.Count teams allowed to decide whichareas to countThere is a danger that teams willeither omit inventory from the count oreven count inventory twice due to lackof precise instructions on where tocount.Each team should be given a precisearea of the store to count.Count sheets were not signed by thestaff carrying out the countLack of signature makes it difficult toraise queries regarding items countedbecause the actual staff carrying outthe count are not known.All count sheets should be signed toconfirm who actually carried out thecount of individual items.Inventory not marked to indicate it hasbeen countedAs above, there is a danger thatinventory will be either omitted orincluded twice in the count.Inventory should be marked in someway to show that it has been countedto avoid this error.Recording information on the countsheets in pencilRecording in pencil means that thecount sheets could be amended afterthe count has taken place, not justduring the count. The inventorybalances will then be incorrectlyrecorded.Count sheets should be completed inink.Count sheets for inventory not on thepre-numbered count sheets were onlynumbered when usedIt is possible that the additionalinventory sheets could be lost as thereis no overall control of the sheetsactually being used. Sheets may notbe numbered by the teams, againgiving rise to the possibility of loss.All inventory sheets, including thosefor ‘extra’ inventory, should bepre-numbered.
 
FOR FREE ACCA RESOURCES VISIThttp://acuteacca.tkSEND YOUR REQUESTS ATemail@acuteacca.tkPAST PAPERS ARE UNDER COPYRIGHT©.

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