Audit Elective FAE 2012

faer2203

I ran out of time and just said to refer to the appendox in the ISRS!, hope they see my reasoning!!

xnightwishx

I don't usually post here but it's interesting to see all the view points especially for Sim 1. I decided that we shouldn't extend our liability to a third party and suggested negotiation with the client as to the work to be done and limit it to factualf indings as there was a small note at the end of the report that said 'for non-audited entities use form HIA2'. Drafted report and engagement letter points, never even thought about engagement acceptance because they were an existing client oops. Then for things to dicuss with client I just discussed the format of information we'd use etc.. wasn't really sure what to put there.

Sim 2: gearing, going concern, valuations that kind of thing, Opening balances and comparative information and different procedures.

Sim 3: audit risks, AEM, bad debts, estimates, previous audits, and subsequent procedures as the account were approved before the AGM.

baxter55

Quite a few people are saying there was an ethics indicator in SIM II relating to the fact the client was hoping to obtain "advice" relating to the property industry as the previous "advisors" were not up scratch.

What's everyones view on this? I think there was an ethical implication there.:mad:

Peach12

From what I can remember I just mentioned the need to spell out to the client the duties of the auditor just so he didnt expect us as auditors to be giving "advise". Based on his comments of the previous auditors he seemed to reckon that auditors should be more advisers than reviewers etc. Explained not to be making any management decisions etc. I didnt structure it as a full indicator though rather a chunky paragraph somewhere in the middle of my answer. Its a bit of a blur at this stage.

baxter55

Peach 12 - I think that's exactly what they were looking for. I think we were expected to recognise the potential management threat. I could be wrong though! I think the fact that SIM II was 60 minutes long and yet there was only 2 explicit indicators (1 - identify the risks and 2 - state the audit work required) adds further weight to the argument that there was an additional ethics indicator included.

Anyone else have a view on this?

notanocelot

baxter55 wrote: »

Peach 12 - I think that's exactly what they were looking for. I think we were expected to recognise the potential management threat. I could be wrong though! I think the fact that SIM II was 60 minutes long and yet there was only 2 explicit indicators (1 - identify the risks and 2 - state the audit work required) adds further weight to the argument that there was an additional ethics indicator included.

Anyone else have a view on this?

Damn. You are TOTALLY right. I missed that. And it would have been so easy to answer!

KenHy

I think it could well have been an indicator - I think every case must have at least 3.

I don't see how the balance of the indicators in that case was fair - if one was listing risks, then that is a huge amount less work then the second one of addressing those risks.

Unless they had specific things that they wanted you to see and address all as one indicator (say maybe opening balances, going concern, Fair values and ethics?) - but in that case what about other legitimate risks you come up with and address? will be interested to see how it's marked - could make a big difference to how people do in that case.

baxter55

KenHy - Interesting point regarding the possibility of merging the ethics into the second indicator however I'm not sure you could really term an ethical issue as an audit risk. Could still be a possibility though.

My opinion on ethics in the audit elective is that they have to be relatively well "hidden" so to speak. I think 95% of students are going to be able to quote the relevant ethical standard and identify the threats and safeguards provided they spot the indicator in the first place. I think the examiner is therefore forced into making ethics indicators quite difficult to spot which is exactly what he/she done in this case.

I think that was a separate stand alone ethics indicator in SIM II.

KenHy

Sorry - what I was saying was that when it comes to marking it that each of those points will be an indicator on it's own - so say for Opening balances, identifying it would be point one (maybe getting RC) then to get C you have to address it, HC for addressing it very well.

Ethics would be a separate indicator then! - Thinking that as it doesn't seem fair if you can get as good as marks for listing risks as detailing procedures to address all of those risks!

Only problem with that would be that how would they credit risks that they haven't made an indicator - I know I put in lots of risks, so if they wanted 3/4 specific ones (including ethics - which as you said doesn't really qualify as an audit risk) then I wasted a lot of time and maybe didn't deal with the important ones in enough depth!

baxter55

KenHy - I agree it doesn't seem fair that some indicators require much more time and attention than others but its just the way the system is I suppose. It's the same in core eg you could write 2 pages to get a C in a strategy question whereas a 4 line answer would potentially get you a C in tax.

I think its very unlikely that separate audit risks identified in SIM II would be marked as separate indicators. I think identifying 3/4 risks would get you a C and probably the inclusion of Opening balances would be difference from C and HC.

KenHy

baxter55 wrote: »

KenHy - I agree it doesn't seem fair that some indicators require much more time and attention than others but its just the way the system is I suppose. It's the same in core eg you could write 2 pages to get a C in a strategy question whereas a 4 line answer would potentially get you a C in tax.

I think its very unlikely that separate audit risks identified in SIM II would be marked as separate indicators. I think identifying 3/4 risks would get you a C and probably the inclusion of Opening balances would be difference from C and HC.

Your prob right - and I hope so cause I don't think I did enough to get many good marks if each of them were individually indicators!

Depreciated09

Guys, do any of ye think in Sim 3 there may have been an indicator due to the sub events reviews not being performed correctly in the prior year as they need to get report signed prior to AGM on 1 March and this resulted in errors due to them not performing sub events correctly and not obtaining all debtor confirms or performing alternative procedures? I threw it in but now I'm worried that I may have misinterpreted it.

chursy

Just Enrolled on the ACCA for december for Proff exams!!! F**k this CAI ****!!!

Clanno

chursy wrote: »

Just Enrolled on the ACCA for december for Proff exams!!! F**k this CAI ****!!!

pm:D

xnightwishx

I looked at it at a different way in that they didn't have auditors last year although they were above the audit exemption threshold and there might be penalties arising that we would need to take into account.

rustygus

KenHy wrote: »

I think it could well have been an indicator - I think every case must have at least 3.

I don't see how the balance of the indicators in that case was fair - if one was listing risks, then that is a huge amount less work then the second one of addressing those risks.

Unless they had specific things that they wanted you to see and address all as one indicator (say maybe opening balances, going concern, Fair values and ethics?) - but in that case what about other legitimate risks you come up with and address? will be interested to see how it's marked - could make a big difference to how people do in that case.

The first sim on last years paper was 55 mins long and only had 2 indicators so there is no minimum amount of indicators.

I could be wrong but on sim 2 did they not say all engagement acceptence procedures have been completed,If this is the case an engagement letter would have been sent explaining our role as auditors meaning theres no need to re explain our role,thats how i took it up. but this is the institute so i wouldn't put it by them to stick a sneaky indicator like that in there

notanocelot

The report is up!

http://www.cassi.ie/wp/wp-content/uploads/2011/06/2012-FAE-Programme-Report.pdf

Any thoughts? I hope ISRS 4400 was the right one...

chursy

I am pretty pretty sure ISRS 4400 is the right report . Should consider Dropping an email to Sean Murray!!! I wonder if he is going to do an online session on the exam :P

chursy

I sent an email to SEAN MURRAY re SIM1 and got the following response

Thank you for your recent e-mail in relation to Sim 1 in the recent FAE Audit Elective examination. Your query relates to whether the appropriate response to the question was the utilisation of ISRS 4400. Yours is not the first query I have received in that particular respect and I set out my views below:-


1. Paragraph 3 of the Sim states “… that she requires engagements such as this to be structured as agreed upon procedures engagements in accordance with International Standards on Related Services (ISRS 4400) …”.

2. Arising from 1. above, it is understood that it is the firm’s policy to handle engagements of this nature as AUP engagements.

3. Accordingly, the orthodox response to the question is to deal with the engagement as an AUP engagement, utilising ISRS 4400.

4. However, paragraph 2 indicates that the client (Happy Holidays) “… have been seeking assurances regarding the financial stability of the company and its service providers”. This may imply that the client wants some type of “assurance” engagement as distinct from an AUP engagement.


5. The possibility referred to in 4. above may be further encouraged by the commentary contained in paragraph 4 of the Sim which, inter alia, asks for:-


· Your consideration and views on whether or not the firm should accept the engagement.

· The content of any engagement letter which may be required.

· Any comments you have on the nature/requirements of the report forwarded by John.

· Including an alternative draft report if you deem the existing one unsuitable.



6. Arising from 5. above (and in the absence of Siobhan O’Kane (Partner)), it is not unreasonable that you, in your capacity as audit manager, might decide to structure it as an assurance engagement. In such circumstances, the appropriate authority would be ISAE 3300 and, in the circumstances described, would almost certainly be a “limited assurance” engagement.

Arising from 4 to 6 above, provided you set out your consideration of the fact that you felt an assurance engagement was required and/or more appropriate in the circumstances (as contrasted to an AUP engagement) and proceeded to deal with the issues in the Sim on that basis, I would consider such approach to be acceptable.

7. An acceptable approach drafted on the basis of it being a “limited assurance” engagement would be expected to deal with the indicators as follows:-

· Primary indicator no. 1 – engagement acceptance
The issues arising here would be no different in an assurance engagement as compared to an AUP engagement.

· Primary indicator no. 2 – form and content of the required engagement letter
The form and content of the required engagement letter would be in line with the content of paragraphs 10 and 11 of ISAE 3000 (which in the themselves are not particularly informative); consequently, the content of the letter would also require one to draw from the matters set out in paragraphs 12 to 40. In this context, it would sufficient for a student to make summary comment in relation to the subject matter (para. 18), suitability of criteria (paras. 19/20), materiality (paras. 22/23), experts (paras. 26/32), evidence (paras. 35/36) and representations (paras. 38/40).

· Primary indicator no. 3 – nature/requirements of the report
This information would draw on paragraph 49 of ISAE 3000.

· Primary indicator no. 4 – matters to be ascertained through discussions with the client in advance of fieldwork
This would involve consideration of issues such as:

- Does the Holiday Industry Association have specific criteria that they wish to be used?

- Does the Holiday Industry Association have a materiality threshold when analysing the split between the different levels of turnover?

- How does a client analyse the data to provide the information required by Holiday Industry Association?

- To what extent has an analysis of categories of turnover been done in the audit work that has been completed?

- Did any issues arise during the recently completed audit that casts doubt on the veracity of the figures or the controls in place in relation to the recording of turnover?

- Has adequate time/fee levels been determined for the likely time input required to complete the assignment?



I have had an opportunity with the FAE Board and have related by views to the Board as outlined above.

Username2011

chursy wrote: »

I sent an email to SEAN MURRAY re SIM1 and got the following response

Thank you for your recent e-mail in relation to Sim 1 in the recent FAE Audit Elective examination. Your query relates to whether the appropriate response to the question was the utilisation of ISRS 4400. Yours is not the first query I have received in that particular respect and I set out my views below:-


1. Paragraph 3 of the Sim states “… that she requires engagements such as this to be structured as agreed upon procedures engagements in accordance with International Standards on Related Services (ISRS 4400) …”.

2. Arising from 1. above, it is understood that it is the firm’s policy to handle engagements of this nature as AUP engagements.

3. Accordingly, the orthodox response to the question is to deal with the engagement as an AUP engagement, utilising ISRS 4400.

4. However, paragraph 2 indicates that the client (Happy Holidays) “… have been seeking assurances regarding the financial stability of the company and its service providers”. This may imply that the client wants some type of “assurance” engagement as distinct from an AUP engagement.


5. The possibility referred to in 4. above may be further encouraged by the commentary contained in paragraph 4 of the Sim which, inter alia, asks for:-


· Your consideration and views on whether or not the firm should accept the engagement.

· The content of any engagement letter which may be required.

· Any comments you have on the nature/requirements of the report forwarded by John.

· Including an alternative draft report if you deem the existing one unsuitable.



6. Arising from 5. above (and in the absence of Siobhan O’Kane (Partner)), it is not unreasonable that you, in your capacity as audit manager, might decide to structure it as an assurance engagement. In such circumstances, the appropriate authority would be ISAE 3300 and, in the circumstances described, would almost certainly be a “limited assurance” engagement.

Arising from 4 to 6 above, provided you set out your consideration of the fact that you felt an assurance engagement was required and/or more appropriate in the circumstances (as contrasted to an AUP engagement) and proceeded to deal with the issues in the Sim on that basis, I would consider such approach to be acceptable.

7. An acceptable approach drafted on the basis of it being a “limited assurance” engagement would be expected to deal with the indicators as follows:-

· Primary indicator no. 1 – engagement acceptance
The issues arising here would be no different in an assurance engagement as compared to an AUP engagement.

· Primary indicator no. 2 – form and content of the required engagement letter
The form and content of the required engagement letter would be in line with the content of paragraphs 10 and 11 of ISAE 3000 (which in the themselves are not particularly informative); consequently, the content of the letter would also require one to draw from the matters set out in paragraphs 12 to 40. In this context, it would sufficient for a student to make summary comment in relation to the subject matter (para. 18), suitability of criteria (paras. 19/20), materiality (paras. 22/23), experts (paras. 26/32), evidence (paras. 35/36) and representations (paras. 38/40).

· Primary indicator no. 3 – nature/requirements of the report
This information would draw on paragraph 49 of ISAE 3000.

· Primary indicator no. 4 – matters to be ascertained through discussions with the client in advance of fieldwork
This would involve consideration of issues such as:

- Does the Holiday Industry Association have specific criteria that they wish to be used?

- Does the Holiday Industry Association have a materiality threshold when analysing the split between the different levels of turnover?

- How does a client analyse the data to provide the information required by Holiday Industry Association?

- To what extent has an analysis of categories of turnover been done in the audit work that has been completed?

- Did any issues arise during the recently completed audit that casts doubt on the veracity of the figures or the controls in place in relation to the recording of turnover?

- Has adequate time/fee levels been determined for the likely time input required to complete the assignment?



I have had an opportunity with the FAE Board and have related by views to the Board as outlined above.

Right.
So does that mean that either an AUP or an assurance approach would be grand?!

chursy

Username2011 wrote: »

Right.
So does that mean that either an AUP or an assurance approach would be grand?!

Yes I think he is implying that a traditional approach was aup which I think most ppl went with but alternative approach with respect to assurance report would be correct too.

Username2011

Thanks! Good luck Friday Chursy

chursy

Username2011 wrote: »

Thanks! Good luck Friday Chursy

Good luck man ! I hope we all are in 75% pass rate!!!

rustygus

Report is up,I knew once i read the solution it would make it seem so easy. Thanks to everyone that posted on this forum over the summer its a reall help just reading what everyone is studying and knowing i'm not the only one freaking out.

AMT123

faer2203 wrote: »

Anyone do interplant plc and tangent ltd case? cant see where there getting the 750k from (is it half of 1,500k, and if so why are they doing that) Thanks

Ah this is such a long shot considering u posted this 4years ago! I have the exact same query for this Elective question. I don't suppose u remember what the solution was? I have no idea where the £750k potential write down is coming from either, as the impairment is £1500k?