The aim of F8, Audit and Assurance is to develop knowledge and understanding of the process of carrying out the assurance engagement and its application in the context of the professional regulatory framework. The exam continues to be practical in application, as well as aiming to ensure that candidates who pass this exam understand the basics of an audit. Consequently the exam aims to strike a balance between technical knowledge as well as a practical application of this knowledge.
This syllabus builds on the knowledge gained in F3, Financial Accounting and then prepares candidates for P1, Governance, Risk and Ethics, and P7, Advanced Audit and Assurance.
The accounting standards examined in F3 form the basis of questions on how to apply auditing procedures in respect of those standards. Candidates often display a lack of relevant accounting knowledge and candidates must not be afraid to bring their accounting knowledge into this exam.
The exam will continue to contain questions set in as practical a context as possible, recognising that it has become more common for candidates to have not been involved in, or had exposure to, a real audit. That aside, this exam is like any other, and the basic principles must be understood. Therefore, application questions will continue to feature heavily in the exam as they demonstrate whether candidates have understood a topic or simply rote learnt it.
It is crucial that candidates practise the skills required for application questions by working through past questions to time and reviewing the solutions to identify areas for improvement. A specimen exam is available (see 'Related links') and ACCA's Approved Learning Partners – content providers’ revision question banks contain a large number of questions taken from past exams which have been adapted to the question styles currently used in the exam, as well as being technically updated. Rote learning of technical material alone will not result in exam success; however, practising questions, reading examiner’s reports and relevant technical articles on the ACCA website will improve the chances of passing the exam.
EXPLANATION OF CAPABILITIES
F8 focuses on five capabilities. Table 1 shows how each of these capabilities may be examined, and details comments on the type of questions that could be presented.
Explain the concept of audit and assurance and the functions of audit, corporate governance, including ethics and professional conduct, describing the scope and distinguishing between the functions of internal and external audit.
This area may be tested within the OT case and elements of this area could also feature as part of the 30 or 20-mark written question. Questions may focus on the factual areas of the legal aspect or cover the ethical framework in a scenario‐based question. Assurance and the work of internal audit could feature in any question in the exam.
However, there may not always be an internal audit question.
Demonstrate how the auditor obtains and accepts audit engagements obtains an understanding of the entity and its environment, assesses the risk of material misstatement (whether arising from fraud or other irregularities) and plans an audit of financial statements.
Questions in this area will relate to the planning of the audit. They will normally feature aspects of audit risk, the audit planning process, fraud and error as well as analytical procedures.
These areas are more likely to appear as scenario-based questions –however, knowledge-based elements could appear in Section A questions or as part of a Section B written question.
Describe and evaluate internal controls, techniques and audit tests, including IT systems to identify and communicate control risks and their potential consequences, making appropriate recommendations.
This capability, and the next, will relate to the testing of controls, and the collection of audit evidence using compliance and substantive testing as appropriate. It is important that candidates understand the difference between these two types of procedures. Reporting of recommendations regarding deficiencies in internal controls, or other issues found in an audit, will continue to be examined including the production of management reports.
Identify and describe the work and evidence obtained by the auditor and others required to meet the objectives of audit engagements and the application of the International Standards on Auditing.
Questions for this capability are likely to focus on the application of substantive procedures to either profit or loss or statement of financial position areas (refer to the Study Guide). This can feature in the Section A and Section B written questions.
Explain how consideration of subsequent events and the going concern principle can inform the conclusions from audit work and are reflected in different types of audit report, written representations and the final review and report.
This area will generally be tested in the OT cases and elements of this area could also feature as part of a long written question. With regards to audit reports, candidates will not be required to draft an entire audit report. Questions in this area will focus on explaining audit reports. Candidates are also likely to be required to review a scenario and explain the implications for the audit report including relevant modifications. Knowledge of the content of ISAs in the 700 series will be expected (including ISA 700, 701, 705 and 706). Questions will potentially provide extracts of audit reports, and require candidates to identify where ISA guidance has not been followed.
FORMAT OF THE EXAM FROM SEPTEMBER 2016 ONWARDS
The exam format will change with effect from the September 2016 exam. All questions continue to be compulsory and the exam is divided into two sections; Section A and Section B.
This section is comprised of three questions referred to as OT cases. Each question will contain a single scenario against which five objective test items worth two marks each will be set, therefore each OT case is worth 10 marks. The OT cases can be set from any area of the syllabus. There will be a mix of knowledge and application questions allocated to each case.
Given that Section A is worth 30 marks candidates should expect to spend approximately 58 minutes on this section. Candidates are advised to allocate an appropriate amount of time to each OT case rather than to individual objective test items.
This section contains three written questions and will be comprised of one 30-mark question and two 20-mark questions. All questions in Section B will predominantly require a written response. However, questions may also require the calculation and interpretation of some basic ratios in the context of audit planning or review or calculation of materiality.
This question worth 30 marks will be based around a detailed scenario and candidates will be required to answer several requirements. The 30-mark question will predominantly test the areas of planning and risk assessment, internal controls and audit evidence although the scenario may focus on one particular section of the audit process. In addition other syllabus areas may feature in these questions.
Given that the question will focus on a detailed scenario it is likely that there will be several issues/requirements to be dealt with and this may include knowledge and application of several technical areas. Candidates will be expected to analyse the information included in the scenario to identify the relevant points that will be required for their answer.
Elements of the question may also test knowledge and understanding of the ISAs. Candidates are reminded that there is no credit available for listing the ISA numbers and as such rote learning of ISAs is not appropriate rather, an understanding of the key principles underlying auditing need to be obtained and applied to the situation detailed in the question.
It is particularly important that candidates focus on the requirements in this question and allocate their time accordingly. Candidates should allocate approximately 58-59 minutes to read, plan and answer a 30-mark question. Candidates are reminded how important it is to plan an appropriate answer to each aspect of the question prior to answering the question. This will help to ensure that the answer provided is focussed and covers enough relevant points to score the marks available. Candidates are reminded that only valid points that address the requirements of the scenario will receive credit.
As part of this planning process candidates are also encouraged to read the requirement verb carefully. If the requirement is to ‘describe’ or ‘explain’ then detailed answer points should be produced however if the requirement is to ‘list’ then answers should contain brief points and should not stretch to pages of text. Many candidates fail to take note of the requirement and often spend too much time on more knowledge based requirements at the expense of more applied requirements.
These questions, each worth 20 marks, will again be based around a scenario, and will predominantly test the areas of planning and risk assessment or internal controls or audit evidence. In addition other syllabus areas may feature in these questions. The format will be similar to past scenario-based exam questions as included in the F8 exam up to June 2016.
The approach to answering the 20-mark questions is similar to that of the 30-mark question in that candidates again will need to analyse the scenario to identify the appropriate points relevant to their answers and should allocate sufficient time to each question. It is recommended that candidates allocate approximately 39 minutes to read, plan and answer each 20-mark question.
Candidates are encouraged to spend time analysing the requirement in detail, noting whether the requirement is to list/state/identify/define/explain/describe or discuss as these all require differing levels of detail. In addition, it is important to identify whether the question requires general knowledge or the application of this knowledge to the scenario.
For all questions included in Section B the scenarios could be based on either profit or non-profit marking organisations and it is to be assumed that all entities will use computer-based systems.
The overall aim of the exam is that F8 can be passed by a candidate who understands the underlying theory of auditing and can apply that theory to relatively basic audit situations – knowledge itself is not sufficient to pass this exam. It is imperative therefore, that candidates study the basics of auditing, read the examiner’s reports on past exams, read relevant technical articles and then practise applying their audit knowledge to scenarios, as this is the key to being successful in this exam.
Written by a member of the F8 examining team