ACCA F8 考试：ANSWERING AUDIT RISK QUESTIONS (Part 3)
RESPONSES TO AUDIT RISKS
Having identified the audit risk candidates are often required to identify the relevant response to these risks. A common mistake made by candidates is to provide a response that management would adopt rather than the auditor.
From Question 3b June 2011, in relation to the risk of valuation of receivables, as Donald Co had a number of receivables who were struggling to pay, many candidates suggested that management needed to chase these outstanding customers. This is not a response that the auditor would adopt, as they would be focused on testing valuation through after date cash receipts or reviewing the aged receivables ledger.
Auditor’s responses should focus on how the team will obtain evidence to reduce the risks identified to an acceptable level. Their objective is confirming whether the financial statement assertions have been adhered to, and whether the financial statements are true and fair.
Responses are not as detailed as audit procedures; instead they relate to the approach the auditor will adopt to confirm whether the transactions or balances are materially misstated. Therefore, in relation to the risk of going concern, the response is to focus on performing additional going concern procedures, such as reviews of cash flow forecasts.
Also, auditor responses should not be too vague such as ‘increase substantive testing’ without making it clear how, or in what area, this would be addressed.
In addition, candidates’ must ensure that they do not provide impractical responses. A common example of this is to request directly from the company’s bank as to whether the bank will provide a loan or renew a bank overdraft. The bank is not going to provide this type of information to the auditor, especially if they have not yet informed the company, and therefore this response will not generate any marks.
LIMITED RANGE OF RISKS IDENTIFIED
In order to score well in risk questions it is advisable to aim to identify a breadth of points from the question scenario. If the question asks for a specific number of audit risks, such as five, then it is not sufficient to identify just one or two risks. In addition, a common mistake is to identify a risk such as going concern and then give this answer over and over again. In Question 3b of the June 2011 exam, there was only a maximum of one mark available for the description of going concern risk.
Each scenario will have a variety of audit risks and candidates should, as part of their planning, aim to identify as many as possible. They should then decide which of the identified risks they will explain/describe in their answer. If the question asks for five risks, candidates should aim to identify six or seven points during their initial reading of the question. Candidates should then review their list and pick the five risks and responses that they feel they can expand on the most when writing up their answer.
CONCLUSION
Audit risk is, and will continue to be, an important element of the Paper F8 syllabus. Candidates must understand the syllabus outcomes, understand what the question requirements involve and practise risk questions prior to the exam.
Written by a member of the Paper F8 examining team
Last updated: 20 Apr 2015
