TARC ACCA 2005

Tips for paper2.6

Tips from BPP
Paper 2.6 Exam Tips
ACCA Paper 2.6 Audit & Internal Review (International Stream and UK Variant)
December 2004 Exam Tips
The following list is an idea of the type of question that may come up in the coming exam. The list highlights areas of the syllabus and how they may well be tested.
Suggested practice questions from the BPP Practice and Revision Kit (2004 edition) are shown after the relevant area.
It is also worth reviewing the past exam questions mentioned to give you an idea of how a topic has been examined recently. These are easily available on the ACCA website (www.accaglobal.com/students).
The examiner is not shy of covering the syllabus so do remember that the best way to ensure exam success is to have a reasonable spread of knowledge across the whole syllabus.
• Internal audit/ Internal review – You should anticipate at least one question from an internal audit/internal review perspective. Note that in addition to a specific question on internal audit or reviews conducted by internal or external staff, the question could be in the form of a report to management on control weaknesses with recommendations, very similar in substance to that produced by an external auditor (see Systems and Controls below) (P&R kit practice: Q6 Internal Auditors, Q8 Roxy Hotels)
• Substantive testing – This will be in the exam, but what will be tested? In June 2004 inventories (stock) (Q3) and payables (creditors) and accruals (Q4) came up. In December 2003 payroll audit was tested (Q2). In June 2003, Inventories (stock) (Q2) and provisions were tested (Q3). In the December 2002 exam, payables (creditors) (Q3) and inventories (stock) were tested (Q5). In June 2002 cash was tested (Q2) and in December 2001 receivables (debtors) were tested (Q4). That would appear to leave non-current (fixed) assets, bank/cash and receivables (debtors) as likely candidates for examination this time round. (P&R kit practice: Q35 Springfield Nurseries, Q39 Goodfoot & Q41 Villawood Computers)
• Systems and controls – Again this topic will be included in the exam in some format. In June 2004, they came up in the context of outsourced catering and payroll (Q5). In December 2003 controls over payroll were tested in Q2 and Q1 included controls over business risks in the areas of human resources, procurement and marketing. In June 2003, controls over non-current (fixed) assets were tested (Q6). In the December 2002 exam the sales system was tested (Q2). In June 2002 the cash system was tested (Q2) and in December 2001 Purchases/ capital expenditure were tested (Q3). Any of these could come up again: the purchases/payables and sales/receivables systems looking the most likely. (P&R kit practice: Q30 Cosmo & Q26 Internal Control Systems)
• Planning and risk assessment (from a scenario) – risk in one form or another comes up at every sitting. It is one of the key stages of the audit, but can also be examined in the context of a company's business risk as it was in June 2004. (P&R kit practice: Q16 EWheels & Q17 Nepco, Mock exam 1, Q1)
• Professional ethics – This is a core area not examined at the last sitting. It is still a topical issue with all of the recent corporate collapses bringing the independence and professionalism of their advisors into question. Recently, confidentiality came up in December 2003 (Q6), conflicts of interest in June 2003 (Q3) and objectivity in December 2002 (Q1). Any independence issues would be ripe for examination again at this sitting. (P&R kit practice: Q10 Billington Travel & Q11 Manly).
• Audit/ Assurance Reports – This is a very important area of the syllabus, it is deliverable from the end of all assurance engagements. You also need to be aware of the differences between internal audit reports/ external audit reports and other assurance reports such as review reports. It has been tested in December 2003 (Q3 b and c), June 2003 (Q3c and Q5), June 2002 (Q3b) and December 2001 (Q5), but not in the last sitting. (P&R kit practice: Q50 Audit and Review Reports, Q51 Cremorne)
• Parts of questions – The following topics could form discrete parts of questions at this sitting: fraud, management representations, audit regulation, materiality, e-technology (see article below) so make sure you are up to speed on these areas.
Please note the examiners deliberately try to discourage question spotting. Just because a question featured last time that doesn’t mean it won’t feature this time. Use the tips as areas to have a good look at, but remember that no-one knows what is in the exam, apart from the examiner. Your safest bet is to achieve good syllabus coverage in your revision, as the examiner aims to do this in the exam.
Relevant Articles from the Student Accountant magazine (or ACCA website)
• Audit risk in a brave new world
Namasiku Liandu, 30 September 2004

• Confirmation as audit evidence
Graham Cosserat and Katherine Bagshaw, 28 October 2003
• Electronic technology and the auditor
Katherine Bagshaw, 25 June 2003

• Service organisations
Katherine Bagshaw, 26 March 2003

• Internal audit and review reports
Katherine Bagshaw, 29 January 2003

• Divided opinion
Kim Smith, 5 November 2002.

• Corporate governance in the 21st century
Namasiku Liandu, 30 September 2002

• The independence of accountants
Namasiku Liandu, 10 June 2002.

• The role of internal audit in risk management
Katherine Bagshaw, 1 March 2002.

• Technique in auditing questions
Kim Smith, 4 September 2001

• Audit and internal review
Katherine Bagshaw, 1 June 2001


TIPS from LCA
Paper 2.6

1. Independence & confidentiality
2. Audit report qualifications
3. Accounting treatment & audit work (Research & development)
4. Controls & tests – sales system
5. Audit evidence – reliability

TIPS from FTC
paper 2.6
1. ethics (objectivity/conflict of interest)
2. planning (audit risk identification)
3. controls (purchases/fixed assets/debtors)
4. review (goin concern)
5. reports (practical scenarios)
6. internal audit (work they do/ VFM reports)

2.6 Audit and Internal Review ( FTMS )

Main topic areas:

• Internal audit, maybe linked to corporate governance
• Substantive testing: fixed assets, bank & cash,
• Controls: purchases
• Risk and planning
• Ethics
• Reporting
• Management representations and other confirmations
• Going concern
• IT and auditor

posted by Unknown @ 1:30 AM