Accountancy Test Questions
PAPER F8 (INT): AUDIT AND ASSURANCE
ANSWERS
1
BLAKE CO
Key answer tips
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The question requires an understanding of the purpose of control systems, namely payroll in this scenario. The student is also required to identify weaknesses relevant to the scenario and suggest improvements. This should not present any real challenge to a well prepared student as it is typical of the F8 exam. NOTE: there are 2 presentation marks for adopting a management letter style. The remainder of the question focuses on audit evidence/procedures. Once again students should be prepared for this. However, be careful to respond to the specific requirement, i.e.: (c) requires analytical procedures and (d) requires tests conducted to assess the accuracy of the time recording system. The highlighted words are key phases that markers are looking for. (a) Control Objectives – wages system – Employees are only paid for work that they have done – Gross pay has been calculated correctly – Gross pay has been authorised – Net pay has been calculated correctly Gross and net pay have been recorded accurately in the general ledger – Only genuine employees are paid – Correct amounts are paid to taxation authorities. (b) The Directors Blake Co 110 High Street Littlehampton HH1 7YY 3 December 2008 Dear Sirs Management letter As usual at the end of our audit, we write to bring to your attention weaknesses in your company’s internal control systems and provide recommendations to alleviate those weaknesses. (i) Weakness: The logging in process for employees is not monitored. (ii) Possible effect: Employees could bring cards for absent employees to the assembly plant and scan that card for the employee; absent employees would effectively be paid for work not done. (iii) Recommendation: The shift manager should reconcile the number of workers physically present on the production line with the computerised record of the number of employees logged in for work
ANSWERS
1
BLAKE CO
Key answer tips
Walk in the footsteps of a top tutor
The question requires an understanding of the purpose of control systems, namely payroll in this scenario. The student is also required to identify weaknesses relevant to the scenario and suggest improvements. This should not present any real challenge to a well prepared student as it is typical of the F8 exam. NOTE: there are 2 presentation marks for adopting a management letter style. The remainder of the question focuses on audit evidence/procedures. Once again students should be prepared for this. However, be careful to respond to the specific requirement, i.e.: (c) requires analytical procedures and (d) requires tests conducted to assess the accuracy of the time recording system. The highlighted words are key phases that markers are looking for. (a) Control Objectives – wages system – Employees are only paid for work that they have done – Gross pay has been calculated correctly – Gross pay has been authorised – Net pay has been calculated correctly Gross and net pay have been recorded accurately in the general ledger – Only genuine employees are paid – Correct amounts are paid to taxation authorities. (b) The Directors Blake Co 110 High Street Littlehampton HH1 7YY 3 December 2008 Dear Sirs Management letter As usual at the end of our audit, we write to bring to your attention weaknesses in your company’s internal control systems and provide recommendations to alleviate those weaknesses. (i) Weakness: The logging in process for employees is not monitored. (ii) Possible effect: Employees could bring cards for absent employees to the assembly plant and scan that card for the employee; absent employees would effectively be paid for work not done. (iii) Recommendation: The shift manager should reconcile the number of workers physically present on the production line with the computerised record of the number of employees logged in for work