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General Comments f y:,_#
The examination consisted of five compulsory questions.Section Acontained question 1 for 30 marks and question 2 for 10 marks.Section Bcomprised three further questions of 20 marks each. .Z:zZ_Ev
The majority of candidates completed all five questions;however therewas some evidence of time pressure as a significant minority of candidates didnot attempt all questions.This seemed to mainly occur for question 5 or for thequestions candidates found challenging,which are listed below.In addition asignificant minority answered question 1 last and their answers were oftenincomplete.As question 1 is the case study and represents 30 of the availablemarks,leaving this question until last can be a risky strategy,as many answerspresented were incomplete or appeared rushed. o%9*B%HO/
Candidates performed particularly well on questions 1b,2c,3ci and4bi.The questions candidates found most challenging were questions 1a,2b,3a,3ciiand 5b.This was mainly due to a combination of failing to read the questionrequirement carefully and insufficient knowledge.A number of these areas werenew to the F8 study guide in 2010 and hence as new topic areas should have beenprioritised by candidates. %h?x!,q
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A number of common issues arose in some candidate’sanswers: PYbVy<xc
•Failing to read the question requirement clearly and thereforeproviding irrelevant answers which scored few if any marks 0j"8@<
•Providing more than the required number of points t3(]YgF
•Illegible handwriting and poor layout ofanswers. SN7"7jo P<
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Specific Comments ydRC1~f0
Question One Y2o?gug
This 30-mark question was based on a retailer of ladies clothing andaccessories,Greystone Co,and tested candidates’ knowledge of internal controldeficiencies,trade payables and internal audit. p$O
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Part (a) for 5 marks required candidates to explain examples ofmatters that the auditor should consider in determining whether an internalcontrol deficiency was significant. _8Kx6s%
This part of the question was unrelated to the Greystone Co scenarioand hence tested candidates’ knowledge as opposed to application skills.Thisquestion related to ISA 265 Communicating Deficiencies in Internal Control tothose Charged with Governance and Management,which is a new ISA and new to theF8 study guide for 2010. VCXJwVb
Most candidates performed inadequately on this part of thequestion.The main reason for this is that candidates failed to read the questionproperly or did not understand what the requirement entailed.The question askedfor matters which would mean internal control deficiencies were significantenough to warrant reporting to those charged with governance.The question wasnot asking for examples of significant internal control deficiencies,howeverthis is what a majority of candidates gave.Many answers included a long list ofcontrol deficiencies such as “inadequate segregation of duties” this failed toscore marks as it was not answering the question. .Asv%p[W
It was apparent that many candidates had not studied the area ofsignificant control deficiencies,and as there is now an ISA dedicated to thisarea,this was unsatisfactory. S}p4iE"n
Part (b) for 14 marks required a report to management whichidentified and explained four deficiencies,implications and recommendations forthe purchasing system of Greystone Co.A covering letter was required and therewere 2 presentation marks available.
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This part of the question was answered well by the vast majority ofcandidates with some scoring full marks.The scenario was quite detailed andhence there were many possible deficiencies which could gain credit.Wherecandidates did not score well this was mainly due to a failure to explain thedeficiency and/or the implication in sufficient detail.Some candidates simplylisted the information from the scenario such as “purchase invoices are manuallymatched to GRNs” and then failed to explain the implication of this forGreystone Co. 8V^oP]Y
A significant minority also failed to score marks because theyprovided deficiencies which were unrelated to the purchasing system,such as“internal audit’s only role is to perform inventory counts.” This was outsidethe scope of the question requirement and hence did not gain credit.Candidatesare once again reminded that they must read the question requirementscarefully. &e6CJ
Many candidates failed to score the full 2 marks available forpresentation as they did not produce a covering letter.A significant minorityjust gave the deficiencies,implications and recommendations without any letterat all;this may be due to a failure to read the question properly.Also even whena letter was produced this was often not completed. V-<GT?
Candidates would provide the letterhead and introductoryparagraph,the detail of the deficiencies,implications and recommendations,butthen they would fail to include a concluding paragraph and letter sign off whichwould have earned a further 1 mark.In addition some candidates produced a memorather than a letter.In general,where candidates adopted a columnar approach totheir answer they tended to score well. T}V!`0vKw
The question asked for four deficiencies,implications andrecommendations,however many candidates provided much more than the requiredfour points.It was not uncommon to see answers which had six or sevenpoints.Whilst it is understandable that candidates wish to ensure that they gaincredit for four relevant points,this approach can lead to time pressure andsubsequent questions can suffer. ]QzGE8jp*
Part (c) for 5 marks required substantive procedures the auditorshould perform on year-end trade payables.This was answered satisfactorily formany candidates.The most common mistake made by some candidates was to confusepayables and purchases and hence provide substantive tests for purchases such as“agree purchase invoices to goods received notes”.As there was no reference toyear-end payables then this test would not have scored any marks.A minorityprovided tests of controls as well as substantive procedures and again thesewould not have scored any marks.
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The requirement verb was to “describe” therefore sufficient detailwas required to score the 1 mark available per test.Candidates are reminded thatsubstantive procedures is a core topic area and they must be able to producerelevant detailed procedures.Answers such as “discuss with management to confirmownership of payables” is far too vague to gain credit as there is noexplanation of what would be discussed and also how such a discussion could evenconfirm ownership. ]o cWt3|
Part (d) for 5 marks required additional procedures the internalauditors of Greystone Co could perform;this was in addition to their currentrole of performing regular inventory counts.This required candidates to usetheir knowledge of internal audit assignments and apply it to a retailerscenario.On the whole candidates performed satisfactorily on this question.Manywere able to identify assignments such as value for money audits,reviewinginternal controls,assisting the external auditors and other operational internalaudits.However some candidates restricted their answers to assignments theauditors would perform in light of the control deficiencies identified in part(b) of their answer.This meant that their answers lacked the sufficient breadthof points required to score well. n a9sm
Question Two *s9C!wYMZ
This 10-mark question covered the topics of true and fairconcept,International Standards on Auditing (ISAs) and auditdocumentation. 0"CG7Vg,zh
Part (a) for 4 marks required candidates to explain the true and fairconcept.Candidates’ performance was mixed on this question.Candidates clearlyare aware of the concept but struggled to explain it with sufficientclarity.Also many candidates failed to score full marks as they did not make asufficient number of points for 4 marks. Vn*tpbz
A common answer was to describe true as being"truthful"and to explainfair in relation to"fairness".This does not answer the question.In addition aminority also confused their explanations between true and fair,forexample,stating"true means unbiased”.Also a significant minority,having gainedcredit for stating that true and fair means that there are no materialmisstatements in the financial statements,then went onto a detailed descriptionof materiality which was not required. yW$0\E6<r
Part (b) for 2 marks required an explanation of the status ofISAs.Candidates performed inadequately on this question.Many candidates did notseem to understand what was required and were confused by theword"status”.However this requirement is taken from the study guide and relatesto the authority of ISAs,what types of assignments they apply to,their contentand also how they interact with other legislation. ,lZB96r0
Part (c) for 4 marks required four benefits of documenting auditwork.This question was answered well by most candidates.In addition the verbof"state"was addressed by most candidates and answers were generallysuccinct.Where candidates did not score full marks this tended to be becausethey repeated points or because they gave points which related to the benefitsof audit planning rather than the benefits of documenting auditwork. 5R(/Uiv3F
Question Three -FU}pz/
This 20-mark question was based on Redsmith Co which producedprinters.The question tested the areas of risk identification,planning andacceptance of new audit engagements. ~//fN}~R
Part (a) for 3 marks required the process an auditor would undertakefor an assessment of whether the preconditions for an audit were present.This isa new topic from the revised ISA 210 Agreeing the Terms of AuditEngagements. &f^, la
A large number of candidates did not attempt this question,andwhere it was attempted it was inadequately answered.Most candidates who providedan answer clearly did not know what the preconditions were and thereforeproceeded to write down anything they knew about new audit engagements.Mostprovided answers which covered ethical considerations for new engagements suchas contacting the outgoing auditors,or ensuring that they had an adequatelytrained audit team and other client screening procedures,also many covered thecontents of an engagement letter. 'nXl>
It was fairly apparent from the answers provided that many candidateshad simply not studied the new syllabus area of preconditions and hence wereunable to score any marks at all.In addition many candidates wrote atconsiderable length for a 3 mark requirement.This put them under significanttime pressure for later questions.Candidates must note the total number ofavailable marks and provide an answer in line with this. +L7n<