Tuesday, November 22, 2011

Audit Exam Ultimate Pass Key


Last summer I successfully passed ACCA exam, P7 “Advanced Audit & Assurance”. While preparing for the exam, I designed succinct and universal “question tackling plan”, which helped to structure my ideas on auditing. In this post I would like to share my knowledge just before coming ACCA examination session.  
I believe it would be useful for all exams related with financial audit. So the candidates for qualifications like CPA or ICAEW are welcomed to utilize it as well. J
The logic is simple: the plan consists of common subjects/questions and points suggested to be addressed.

Question Tackling Plan

1.      Ethics area question
1.1.   Technical competence;
1.2.Objectivity/Independence (possible threats: self-review, familiarity, intimidation, self-interest, advocacy)
1.3.   Professional behavior;
1.4.   Integrity;
1.5.   Confidentiality.
Mnemonic: TOPIC

2.      Professional (audit business) area question
2.1.   Competence;
2.2.   Resources/costs;
2.3.   Reputation;
2.4.   Staff quality;
2.5.   Quality control: Acceptance; Directorship; Supervision; Review; Consulting; Disputes.

3.      Audit Opinion related question
3.1.   Clarity;
3.2.   Details (standards, amounts, scope);
3.3.   Structure (is heading on the right place?) of opinion and its Consistency (starts like “except for” and finishes like adverse opinion);
3.4.   Types of appropriate opinions. This depends on evidences (sufficient, mistake material and pervasive?);
3.5.   Prior year opinion.

4.      Audit Matters (audit evidence/process) question
4.1.   Materiality;
4.2.   Standard breached (IFRS, recognition, valuation criteria etc.);
4.3.   Risks of misstatement;
4.4.   Impact on Audit Opinion;
4.5.   Reliability (source of evidence).

5.      Audit Evidence question
Mnemonics:

Sources of evidence -  DADA3:
Document
Asset
Director (interview/representations)
Accounting record
3rd Party
Procedures AE IOU:
Analytical (plausibility/predictability)
  Enquiry & Confirm (written/verbal)
    Inspection (documents/assets)
      Observation (assets, process)
RecalcUlation (opening balance check)

Elements of evidence:
5.1.   General: budgets/plans, accounting policy;
5.2.   Calculations: rates, models, risks, probabilities, impairment reviews, useful lives, assumptions reasonableness explanation;
5.3.   Disclosure: draft notes;
5.4.   Documents types:
5.4.1.      Bank statements, invoice, bill, dispatch/delivery note;
5.4.2.      Contract, agreement, insurance policy, title deed;
5.4.3.      Claim litigation copy, insurance claim;
5.4.4.      Log books, time-sheets;
5.4.5.      Minutes, orders, policies;
5.4.6.      Correspondence, letters;
5.4.7.      Tax returns;
5.5.   Reconciliations (with tax authority, debtor), confirmations;
5.6.   Record of discussion, interview, talk with employees;
5.7.   Valuation reports, surveys;
5.8.   Breakdowns (check for misclassification), samples.

Golden Rule:
Your answer should be always close to the question scenario: (1) the answer should be relevant; (2) the question text contains hint for answer.
You are welcomed to share your tips for audit exams. Good Luck! J


          Disclaimer:
"This group is not associated with or approved by ACCA and the views expressed on this page do not necessarily reflect the views of ACCA".

18 comments:

  1. Very helpful summary for tackling audit questions.

    Thanks.

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  2. This comment has been removed by the author.

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  3. Good good…this post really deserves the praise nice post :P AQM Auditing

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  4. Very good post. I like your way of explanation.All the details were explained in detail manner.Keep it up.Thanks for sharing Inventory Audit
    Visibility Audit
    Fixed Assets Audit

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  5. This comment has been removed by the author.

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