ADVANCED AUDITING

ICAP Module F Refresher Session December 2009

Prepared by: Zaryab Hyder

SEMINAR OBJECTIVES
How to start advanced audit preparations? What to study and how? Practice material. Key areas of study. Analysis of June 2009 attempt Question Answer session.

STARTING PREPARATIONS
Advanced auditing is the extension of Audit exam of Mod D. Things covered at Mod D level may or may not be asked directly but it lays the foundation for the examination at Mod F level. Grip and revise things of Mod D. Students at this level have at least 2.5 years of practical audit experience, which is also necessary to handle the practical situations. Avoid being a Doctor without MBBS In open book exams, students are expected to have grip on auditing standards i.e. which requirement is written where. Further, answers require knowledge from other areas which are not covered in ISA handbook.

STARTING PREPARATIONS (cont.)

If you fail to plan, you are planning to fail 1. Studying this subject in isolation is a blunder. 2. Mock exams specially between 2-5pm will be very fruitful. 3. Revision is necessary. This subject is very lengthy therefore having synopsis or pass cards could make all the difference.

WHAT TO STUDY?
Advanced Audit is the last paper in Mod F. Beside studying material related to audit, it also requires knowledge of others papers studied earlier i.e. Corporate Laws and IFRS. International Standards on Auditing (ISAs) Audit TRs issued by ICAP. Members handbook containing CA Ordinance and ByeLaws. Selected Opinions by ICAP. Accounting TRs issued by ICAP. Relevant requirements of Corporate Laws. Relevant requirements of IFRS. Circulars relevant to the audit. Current issues and articles i.e. ACCA or ICAEW.

PRACTICE MATERIAL
Past ICAP papers. Last 4 to 5 attempts. ACCA P7 ethical related matters and ISQC. ICAEW for specific practice i.e. going concern etc. Practical issues i.e. Satyam / Enron for weaknesses. Matters raised at ICAP for discrepancies in the audit / matters raised by SECP.

KEY AREAS
S.N O
1

Key areas

Marks asked in past papers June09

22 marks

Win08
22 marks

June08
25 marks

Ethical requirements including quality control considerations.

Requirements of ISAs including ICAP TRs and Corporate Laws.

51 marks

58 marks

32 marks

Requirements of ISRE, ISRS, ISAE, IAPS and reports relating to them.

17 marks

10 marks

29 marks

Reporting requirements for audits and special audits.

10 marks

10 marks

14 marks

KEY AREAS cont

Ethical considerations including quality control
Important areas of code of ethics: Independence (Link with ISQC requirements relevant) Confidentiality Fees and related matters Professional appointments (This is to be read with ISQC client acceptance) Ethical conflicts

Major areas of quality control are: Client acceptance and continuance requirements Engagement performance Study a) b) c) d) the above topics from: Code of ethics ISQC-1 + ISA 220 CO 1984, CA bye-laws and CCG + ICAP QCR related circulars etc. SO and audit TRs relevant to above topics.

Practice them from: a) ICAP past papers b) ACCA P7 questions are relevant here c) ICAEW part A questions d) Ethical lapses in Satyam or Enron scandals etc.

KEY AREAS cont

ISAs along with ICAP TRs and Corporate Laws
Specific questions can be set on requirements of a particular ISA i.e. going concern or management representations. Therefore students should hold strong grip on ISAs. In case of open book, this can be achieved through summaries of requirements in a particular ISA coupled with the related matters specified in IFRS or local laws + SO / TRs of ICAP. Correlation is extremely important here, which can never be achieved by merely studying the ISAs. Questions will be scenario based thus practical knowledge plays a vital role. Every question has answer in ISA coupled with in IFRS or local laws. Therefore students should understand and answer from ISAs and not on baseless grounds. Students should be able to remember the matters right from planning till the conclusion, including issues they encounter and its resolution throughout their practical exposure with the firm. Example of CO 1984 is question in June09 requiring to prepare AP on dividend, in which students also required to mention CO requirements.

KEY AREAS cont

ISRE, ISRS, ISAE, IAPS and reports relating to them
These are specific standards and question can be set considering any one of them. Not knowing a particular standard can cause a whole question loss in the exam. The important thing relating to them is to understand the scope of the question. Example would be a particular scenario requiring procedures and subsequently report. Students need to understand the scope i.e. whether assurance is needed or not and if yes what level. This would make all the difference in losing or getting marks. ACCA or ICAEW questions are not relevant and should not be considered for this portion unless specifically having matching requirements. IAPS are now part of ICAP syllabus. However students need not to make synopsis of IAPS. Knowing the core requirements will be enough except IAPS relating to small companies and compliance with IFRS, which have very few requirements. Example would be in case of IAPS relating to bank audits, knowledge of risks relevant to banks or specific procedures will ensure passing marks in the exam.

KEY AREAS cont

Reporting
Reporting can be asked in three manners: 1. 2. 3. One requires reports to be drafted. Others which requires students opinion on specific matters and its impact on the audit report. Reporting to management. (Management letter etc).

Reports can be asked from ISA 700 to 720 and ISA 800. Reports relating to ISRE, ISRS and ISAE have already been covered. Other reporting responsibilities are mentioned in Corporate Laws, which may not may not be asked. Example would be auditor certificates on free reserves or dividend remittance. Knowledge acquired in Mod E Corporate Laws plays a significant role. Students should be good at drafting. Watch your grammar, punctuation, handwriting and spelling.

Analysis of June2009 attempt

Question # 1 2 3 4 5 6 7 8 9 Level of difficulty Average 10 marks Average 10 marks Difficult 15 marks Easy 9 marks Average 15 marks Easy 10 marks Easy 7 marks Average 12 marks Difficult 12 marks Key areas Area 2 and 4 Area 2 and 4 Area 2 Area 2 Area 2 and 3 Area 1 Area 3 Area 1 Area 2 How to answer
Consider materiality & relevant IAS. Further accounting TR is asked. Based on materiality & treatment justify impact or report. Practical exposure plays vital role. Answer from ISA 570. Specific requirements given. Reproduce the adverse opinion from ISA 570. Warrant is an accounting estimate, covered under ISA 540, therefore ISA 540 matters should be considered. Further practical exposure would be vital. Easy marks. ISA 315 provides guidance, however can not be answered specifically. Knowledge of RPTs are also important. This requires knowledge of accounting TR & scope of the report. It is very imp as students can answer it from ISAE or ISRS. Easy to obtain as simple things relating to confidentiality written in code of ethics. Simple marks from compilation. Reproduce report from ISRS 4410. Answer from ISQC and code of ethics independence & ICAP Ordinance. It requires knowledge of CO 1984 provisions and audit experience to prepare AP considering all assertions.

Question Answer session

Questions are appreciated !!!

Thank you and best of luck for your exams.