TARC ACCA 2005

exam guidance from BPP ~ paper 2.6 (Int)

ACCA Paper 2.6 Audit & Internal Review
December 2005

The following list is an idea of the type of questions that may come up in the coming exam. The list highlights areas of the syllabus and how they may well be tested.

Please note that there was a new examiner in June 2005

Internal audit/ Internal review
Following the new examiner's recent article on how the internal audit department can assist in corporate governance and risk management, this was tested in June 2005. Note that in addition to a specific question on internal audit or reviews conducted by internal or external staff, questions 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)
Q7 Internal Auditors, Q8 Roxy Hotels)

Substantive testing
This will be in the exam, but what will be tested?
In June 2005 sales and tangible assets were tested.
In December 2004 substantive testing of payroll balances was tested (Q4).
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.
Q38 Springfield Nurseries, Q43 Goodfoot & Q45 Villawood Computers

Systems and controls
Again this topic will be included in the exam in some format.
In June 2005 Q3 was centred around a complex computer system. The examiner has warned that computers will be expected to feature in scenarios.
In December 2004 Q3 risks from a scenario had to be spotted, and controls recommended.
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.
Q32 Cosmo & Q27 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.
In June 2005 Q1 was a straightforward question looking for risks from a simple scenario.
In December 2004, Q2 was centred around planning and the information you require, and Q1 was about spotting the risks of fraud and error.
Q17 EWheels & Q18 Nepco

Professional ethics
This is a core area not examined at the last 3 sittings. 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.
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 was tested in June 2005 as an unpopular optional question asking for errors in a given audit report.
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 few sittings.
Q54 Audit and Review Reports, Q55 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.


Relevant Articles
The following articles can be found in the Student Accountant magazine (or ACCA website)

The regulatory environment, 4 January 2005
Audit risk in a brave new world, 30 September 2004
Confirmation as audit evidence, 28 October 2003
Electronic technology and the auditor, 25 June 2003
Service organisations, 26 March 2003
Internal audit and review reports, 29 January 2003
Corporate governance in the 21st century, 30 September 2002
The independence of accountants, 10 June 2002.
The role of internal audit in risk management, 1 March 2002.
Technique in auditing questions,4 September 2001
Audit and internal review, 1 June 2001

posted by Unknown @ 9:21 AM