Audit Elective FAE 2012

Username2011

funkymonkey9 wrote: »

Sean said in the lecture on those standards to ignore para 29 to 38 of m39 as it is covered in Isrs4400,I think the key thing to take from m39 is the contents of appendix 2 where it describes wording you should avoid in reporting to third parties,like don't say we reviewed something and ensure they know the work was not an audit,I have the following paragraphs highlighted from watching the lecture 7,10,14-19,23-25,26,28. Also in the wrap up lecture I actually crossed m39 off my competency statement because read said if aup comes up,the isrs is the relevant document!additionally it's doubtful that will appear again this year and Sean had a strong feeling it will be prospective financial information.

Thanks! That really helps! Thanks!

figrolls

probably have left this waaay too late but,

was going to look at the sean murray online lectures this week as I was unable to go to my lectures due to work

are they worth it? or would my time be better spent reading the ISA's?

funkymonkey9

figrolls wrote: »

probably have left this waaay too late but,

was going to look at the sean murray online lectures this week as I was unable to go to my lectures due to work

are they worth it? or would my time be better spent reading the ISA's?

Don't start watching lectures at this stage,I'd advise you look at the revision document for session 9 I think and look at the standards on it,Sean had a feeling Isa 600 and prospective financial info are going to come up and Isa 402,no going concern Isa 570 inside out especially the impact on the audit report of the different scenarios,Isqc1 in particular engagement acceptance and Isa 240!maybe Isa 610 too,think doing the cases would be a good thing to do as a lot of things can't be learned from standards like controls,reviewing a workpaper,identifying risks and designing procedures,practise is important for those areas!

figrolls

funkymonkey9 wrote: »

Don't start watching lectures at this stage,I'd advise you look at the revision document for session 9 I think and look at the standards on it,Sean had a feeling Isa 600 and prospective financial info are going to come up and Isa 402,no going concern Isa 570 inside out especially the impact on the audit report of the different scenarios,Isqc1 in particular engagement acceptance and Isa 240!maybe Isa 610 too,think doing the cases would be a good thing to do as a lot of things can't be learned from standards like controls,reviewing a workpaper,identifying risks and designing procedures,practise is important for those areas!

Thanks for that!

Have gone through most of the ISA's at this stage and have done all the questions at least once, found the mock and past papers way better than the resource pack questions

thanks again for your advice!

KenHy

Username2011 wrote: »

Another question if that's ok.

It's to do with reports to third parties
I understand the the differences between a review (ISRE 2400), agreed upon procedures (ISR 4400) and a compilation (ISR 4410).
However, what is confusing me is how M39 Reporting third parties relates to this.

Take for example the 2011 audit elective paper. The audit senior was asked by his client Chevhall to prepare an agreed upon procedures report on a company who holds a franchise with Chevahall. The solution states:

"We have performed the procedures agreed with you and detailed below with respect to the consignment inventory held by Executive Motors Limited, set forth in the accompanying schedules. Our engagement was undertaken in accordance with Miscellaneous Technical Statement M39 "Reporting to Third Parties" OR the International Standard on Related Services applicable to agreed-upon procedures engagements. "

If I was preparing the solution to this I would have stated "Our engagement was undertaken in accordance with ISRS 4400". Would this have been correct? And if so, in what circumstances does one ever use M39?

on M39 - I always saw it as supplementary to the others - I know Sean said that you could use other standards instead, but most of them reference back to M39! It's specifically for when the report is for an external 3rd party (e.g. a bank), so ISRS 4400 is relevant for AUP engagements - that's all you have to worry about if it's been performed for say senior management in a divisionlised organisation, but in the Chavell case, I think both are independently relevant as you are performing an AUP engagement for a 3rd party.

Just my view on it, could be wrong, but my reading of the standards and the lectures would not lead me to think that you could ignore M39 in favour of something else - nothing else deals with limiting your liability to 3rd parties so there is nothing that replaces it!

figrolls wrote: »

probably have left this waaay too late but,

was going to look at the sean murray online lectures this week as I was unable to go to my lectures due to work

are they worth it? or would my time be better spent reading the ISA's?

I found the lectures very useful (I watched all of them online, but it was just after the mocks!) - if you feel like your a bit of the ball on some of the standards I'd definitely watch, maybe have a read through the session notes first to see if you want to spend time on whatever standards he covers in that particular lecture. I think it's much easier to learn them with someone pointing out the important bits and putting them into a context (would be time consuming at this stage though!) -

If your confident enough on them already and just want to make sure you've got everything, just give the standards a read and make sure there's nothing on them that somehow passed you by previously, no need to see lectures at that stage

notanocelot

Don't cross off M39.

M39 is about limiting our liability to the third parties which is VERY IMPORTANT.

An indicator along the lines of "client wants us to do up this thing to show to the bank, can you look at that and tell me what sort of engagement letter we should do up?"

is going to require

i) IS?? xxxx (The actual engagement and how we perform it)
and
ii) M39 (the different ways we can cover ourselves with regard to the third party, like setting a liability cap, or getting them to acknowledge that we have no liability)

because if we just go ahead with the non-audit engagement without putting any of these caveats in place bad things could happen.

figrolls

Just came across this in the 2011 fae thread, the second tab is indicators idex for the audit elective, needs to be updated for Mock 2012 and 2011 paper but might be some help to us!

tomfoolery60

Username2011 wrote: »

Hi guys - just wondering if anyone has looked at SIM 3 of the Audit elective paper in 2011?
It's the RX Pharmaceutical products where you are looking at their revenue recognition.

The solution has the journal as follows:

Primary Indicator #3
[FONT=Arial,Arial][FONT=Arial,Arial]Correcting entries as follows:
DR Trade debtors / Accrued income 660,000
CR Revenue 660,000
being recording of sale to customer

DR Cost of sales 600,000
CR Trade creditors / accruals 600,000
being recognition of invoices from Medical Suppliers Inc.

But a note in the examiner comments says:
Credit was given for recognising stock at year end if appropriate assumptions were adequately documented.

I had my journal as
Dr Consignment stock 600k
Cr Trade creditors / accruals 600k

I was just wondering if Consignment stock was what the examiner was referring to here?
[/FONT][/FONT]

It would just be stock, rather than consignment stock (the idea being that RX had the stock on their premisies - not stock it owned at another location). If you meant to indicate that it was not really RX's stock, then the sale would be the appropriate treatment (you wouldn't recognise the stock in RX's books in that instance).

Username2011

tomfoolery60 wrote: »

It would just be stock, rather than consignment stock (the idea being that RX had the stock on their premisies - not stock it owned at another location). If you meant to indicate that it was not really RX's stock, then the sale would be the appropriate treatment (you wouldn't recognise the stock in RX's books in that instance).

Oh yes, that's right. It definitely wouldn't have been consignment stock in hindsight. Thanks!

funkymonkey9

Can anyone tell me when revenue should be recognised in the accounts?is it on despatch of goods,is it when the customer signs the delivery docket or is it when we send an invoice?also in terms of services,do we recognise revenue when we've completed the service or when we invoice for it? Thanks

Username2011

funkymonkey9 wrote: »

Can anyone tell me when revenue should be recognised in the accounts?is it on despatch of goods,is it when the customer signs the delivery docket or is it when we send an invoice?also in terms of services,do we recognise revenue when we've completed the service or when we invoice for it? Thanks

There's no one answer for this. Like everything else, it depends.
Say you work in Easons shop. They will probably recognise the sale when the money is handed over by the customer.
Now say you are Littlewoods and someone orders a book online and you deliver it. The sale is probably recognised when the book is delivered to your house.
Finally, say that you are a construction company and you are building a hospital. And it takes three years to build. And it's the only thing you are working on for those three years, that doesn't mean that you have no revenue for the three years, but rather you recognise revenue on completion of key milestones (e.g. recognise 40% of revenue when 40% of building is done, recognise another 20% when 60% is done etc).

It depends on the terms and conditions of the sale and when the risks and rewards of ownership pass. IAS 18 will set it out for you much better than I can.
Hope that helps

funkymonkey9

Username2011 wrote: »

funkymonkey9 wrote: »

Can anyone tell me when revenue should be recognised in the accounts?is it on despatch of goods,is it when the customer signs the delivery docket or is it when we send an invoice?also in terms of services,do we recognise revenue when we've completed the service or when we invoice for it? Thanks

There's no one answer for this. Like everything else, it depends.
Say you work in Easons shop. They will probably recognise the sale when the money is handed over by the customer.
Now say you are Littlewoods and someone orders a book online and you deliver it. The sale is probably recognised when the book is delivered to your house.
Finally, say that you are a construction company and you are building a hospital. And it takes three years to build. And it's the only thing you are working on for those three years, that doesn't mean that you have no revenue for the three years, but rather you recognise revenue on completion of key milestones (e.g. recognise 40% of revenue when 40% of building is done, recognise another 20% when 60% is done etc).

It depends on the terms and conditions of the sale and when the risks and rewards of ownership pass. IAS 18 will set it out for you much better than I can.
Hope that helps

So when someone places an order say with littlewoods what are the accounting entries?then when it's delivered what are the entries?do the risks and rewards pass when the item is delivered or when we get a signed delivery docket because customers can refuse to accept delivery if goods don't match their order etc?thanks for the help!

alphacalc

funkymonkey9 wrote: »

So when someone places an order say with littlewoods what are the accounting entries?then when it's delivered what are the entries?do the risks and rewards pass when the item is delivered or when we get a signed delivery docket because customers can refuse to accept delivery if goods don't match their order etc?thanks for the help!

It would depend on the product and the underlying T & C of the sale; there's not a "one fits all" answer with Revenue Recognition.

Username2011

alphacalc wrote: »

It would depend on the product and the underlying T & C of the sale; there's not a "one fits all" answer with Revenue Recognition.

Yep. The case should specify when they recognise revenue so you'll have to apply it then. For example, if they recognise it on delivery, when the GDN is signed by the customer, you'd cr revenue then. But if they recognise it on dispatch, you'd cr revenue when it leaves the warehouse.

figrolls

Could anybody clear up a few things on ISRE 2410 Interim Reviews for me

PLC's are required to have six monthly reviews - would this be the appropriate type of engagement for this or does that require a full audit every six months?

Are we required to report to the financial regulator as a result of this review - eg internal control weaknesses, if the report is modified in some way etc

Are we required to report to the relevant authorities in relation to fraud if one comes to our attention during an interm review/ mangement informs us of one such as reporting to the guards?

figrolls

anybody any ideas on the above??

KenHy

Yes ISRE 2410 is the relevant guidance for Interim "audits" (technically not an audit at all but a review engagement)

It doesn't effect any reporting obligations you have as you are still the auditor. (as in you still have to comply with reporting requirements the same as if you unearthed the information during the full audit)

figrolls

KenHy wrote: »

Yes ISRE 2410 is the relevant guidance for Interim "audits" (technically not an audit at all but a review engagement)

It doesn't effect any reporting obligations you have as you are still the auditor. (as in you still have to comply with reporting requirements the same as if you unearthed the information during the full audit)

That was kinda my thinking on it but wasnt too sure - thanks for clearing that up for me! Cheers!

figrolls

Im having a bit of a brain freeze here at the moment, maybe somebody can enlighten me...

ISAE 3000 reviews of historical financial information

When would this ever happen in real life - an audit exempt company looking for a report for banking purposes maybe??

Im just trying to figure if this could come up as a question as theres not much else they could put with it really....

faer2203

figrolls wrote: »

Im having a bit of a brain freeze here at the moment, maybe somebody can enlighten me...

ISAE 3000 reviews of historical financial information

When would this ever happen in real life - an audit exempt company looking for a report for banking purposes maybe??

Im just trying to figure if this could come up as a question as theres not much else they could put with it really....

I think it could be like internal controls, complaince with grants, that kinda situation,

On a seperate note, in chemical sisters case, does anyone know why the discontinued operation is not adjusted as it happened in June 2011 and the year end was June 2011?

figrolls

faer2203 wrote: »

I think it could be like internal controls, complaince with grants, that kinda situation,

Just googled it and got this on the IFAC website, thanks!

ISAE 3000 (Revised) establishes basic principles and essential procedures for all assurance engagements other than audits or reviews of historical financial information covered by ISAs and ISREs, for example, assurance engagements regarding:


•Environmental, social and sustainability reports;

•Information systems, internal control, and corporate governance processes; and

•Compliance with grant conditions, contracts and regulations.

I still would have probably but those into ISRS 4400 agreed upon procedures though....

faer2203

figrolls wrote: »

Just googled it and got this on the IFAC website, thanks!

ISAE 3000 (Revised) establishes basic principles and essential procedures for all assurance engagements other than audits or reviews of historical financial information covered by ISAs and ISREs, for example, assurance engagements regarding:


•Environmental, social and sustainability reports;

•Information systems, internal control, and corporate governance processes; and

•Compliance with grant conditions, contracts and regulations.

I still would have probably but those into ISRS 4400 agreed upon procedures though....

Yeah theres such an over lap, very hard to know which one to use

notanocelot

faer2203 wrote: »

Yeah theres such an over lap, very hard to know which one to use

ISAE 3000: You have the ability to follow up on things you've found and perform extra procedures.

Agreed-upon procedures you state every test you're going to do in the engagement letter and you do absolutely nothing else.

If we come across a question where it would be practical do either, just state your assumption and move on. Internal controls wouldn't work for agreed-upon procedures because you have to first make the inquiries and secondly perform tests of controls upon the controls you've discovered exist. Meanwhile grant claims do work for agreed-upon procedures.

Mat85

Im nearly sure ISRS4400 wasn't on the course last year and thats why it wasn't referenced in the report.

faer2203 wrote: »

figrolls wrote: »

Just googled it and got this on the IFAC website, thanks!

ISAE 3000 (Revised) establishes basic principles and essential procedures for all assurance engagements other than audits or reviews of historical financial information covered by ISAs and ISREs, for example, assurance engagements regarding:


•Environmental, social and sustainability reports;

•Information systems, internal control, and corporate governance processes; and

•Compliance with grant conditions, contracts and regulations.

I still would have probably but those into ISRS 4400 agreed upon procedures though....

Yeah theres such an over lap, very hard to know which one to use

figrolls

Im confused....

I hope we just get PFI as thats a much more clear cut situation!

With regard to M42,ISRS 4410 and ISRE 2400 - sean murray said that the wrong version is in the toolkit, is there much differences between these and the correct versions??

I had a quick glance on chariot and couldnt see a massive difference so didnt print them out but now im wondering if I should...

KenHy

M42 is quite different I think, certainly when I started going through it not knowing that it was the wrong one I picked up very quickly that it wasn't corresponding with what I already knew an looked it up and found out it wasn't the examinable document. - never even looked at the wrong versions of the other two, so no idea there!

What notanocelot said for ISAE 3000! - It's kind of an overview document though - there are quite a few ISAE standards that deal with more specific engagements which build on ISAE 3000- of which ISAE 3400 (perspective financial information) is the only examinable one. I think it's probably unlikely that they' actually ask anything on ISAE 3000 directly as most conceivable scenarios already have some guidance published - it's just not examinable. ISAE 3000 is necessary (in theory) to properly understand ISAE 3400 which is probably why it's on the competency statement to start with.

zamaramo99

Hey guys, Could someone please attach a copy of the 2012 Mock paper and solution.

Thanks.

dee359

Re reporting to 3rd parties- silly question maybe but can't find it stated anywhere in my notes.

Can anyone confirm which engagements require independence ie. where u cannot be the firm's auditors as well? Is it when reasonable assurance is given as opposed to limited assurance? Thanks in advance.

Ex 88

dee359 wrote: »

Re reporting to 3rd parties- silly question maybe but can't find it stated anywhere in my notes.

Can anyone confirm which engagements require independence ie. where u cannot be the firm's auditors as well? Is it when reasonable assurance is given as opposed to limited assurance? Thanks in advance.

Agreed upon pro isrs4400 and engagement to compile financial info isrs4410! But u have to disclose you're not indepen in the report

dee359

Ex 88 wrote: »

Agreed upon pro isrs4400 and engagement to compile financial info isrs4410! But u have to disclose you're not indepen in the report

Thanks a mil. So independence not required with those two and need to say in report if not independent for ISREs and ISAEs?

Username2011

Ex 88 wrote: »

Agreed upon pro isrs4400 and engagement to compile financial info isrs4410! But u have to disclose you're not indepen in the report

Wait so if we're auditors, we can't do agreed upon procedures as well? Why is that?? I didn't see that in the standard

Ex 88

You dont have to be independent in Isrs 4410 para 5 and isrs 4400 para 7?

notanocelot

You do NOT have to be independent.

You just have to state that you're not independent in the report.

figrolls

notanocelot wrote: »

You do NOT have to be independent.

You just have to state that you're not independent in the report.

Sorry Im just a bit confused.....

Does this mean that the financial statement auditor can perform any of these reports - ISAE 3000, ISAE 3400, ISRE 2400, ISRE 2410, ISRS 4400 and ISRS 4410??

and in ISRS 4400 and 4410 we have to disclose this fact?


Or is complete independence required from all reports expcept ISRS 4400 and 4410 in which it has to be disclosed?
and is this independence in terms of not auditors or in terms of family etc??

Sorry if that doesnt make sense, im a bit confused...

dee359

figrolls wrote: »

notanocelot wrote: »

You do NOT have to be independent.

You just have to state that you're not independent in the report.

Sorry Im just a bit confused.....

Does this mean that the financial statement auditor can perform any of these reports - ISAE 3000, ISAE 3400, ISRE 2400, ISRE 2410, ISRS 4400 and ISRS 4410??

and in ISRS 4400 and 4410 we have to disclose this fact?


Or is complete independence required from all reports expcept ISRS 4400 and 4410 in which it has to be disclosed?
and is this independence in terms of not auditors or in terms of family etc??

Sorry if that doesnt make sense, im a bit confused...

I'm very confused as well. If i remember correctly, In the mock this year we were the auditors but we still carried out the engagement re prospective fin info. Is it just a matter of having a different engagement partner working on the assurance engagement (or the usual other safeguards) I wonder?

funkymonkey9

Has anyone found the elective cases tricky in terms of how far you have to go in an indicator?for example red Ireland,in the case it asks you to outline the key considerations and issues for us as principal auditors to be sent to the component auditors,the solution looks at group engagement team responsibilities,understanding the component auditor,setting materiality and then the communication with the component!also in the last indicator they explain how to account for the investment properties (as was asked in the case)but then they go further and describe the specific procedures to do on the investment properties which to me wasn't even a non directive indicator in the case!how do you know how much detail to go into?

KenHy

funkymonkey9 wrote: »

Has anyone found the elective cases tricky in terms of how far you have to go in an indicator?for example red Ireland,in the case it asks you to outline the key considerations and issues for us as principal auditors to be sent to the component auditors,the solution looks at group engagement team responsibilities,understanding the component auditor,setting materiality and then the communication with the component!also in the last indicator they explain how to account for the investment properties (as was asked in the case)but then they go further and describe the specific procedures to do on the investment properties which to me wasn't even a non directive indicator in the case!how do you know how much detail to go into?

I think anytime you get asked how to account for something then that goes hand in hand with explaining how to audit it too.

Norman123

Theres only days left til this kick off!

What are peoples plan for the last few days before the exam???

I've went through all cases, lectures and notes but am just unsure where my time will be best spent for the run up to this thing...Any suggestions??

06431755l

Hey does anybody know did we get a draft rep letter to use in ROI?

There is one in the appendix at end of isa 540 but i have wrote beside it "do not use, NI only"?

Thanks a mil.

figrolls

06431755l wrote: »

Hey does anybody know did we get a draft rep letter to use in ROI?

There is one in the appendix at end of isa 540 but i have wrote beside it "do not use, NI only"?

Thanks a mil.

Pg 131 of the audit elective book

notanocelot

Does anyone have anything about company laws they could put up?

I just looked at Interplant & Tangent, the case study about calculation of distributable reserves, which wants you to know about different treatments between plcs and limited companies. Cannot find that anywhere in my course material.

Similarly the other day looking at the exam q where you have to comment on the CLIENT's anti-money-laundering setup. M42 goes on in detail about our own responsibilities towards choosing our clients well and training our staff, but in all the stuff about 'powers and duties of companies' etc I can't see anything where it says what companies in general should have!

Clearly I'm just missing something, and if it comes up Thursday it's a big fat NC on that indicator.

starfair

Hi guys, would anyone be able to upload the Red Ireland Ltd case study? Can't see it on the list of attachments

I'm a repeat student and we didn't get that case study. I know Sean Murray mentioned it in his wrap up lecture as a good case to look at for Group Audits.

funkymonkey9

notanocelot wrote: »

Does anyone have anything about company laws they could put up?

I just looked at Interplant & Tangent, the case study about calculation of distributable reserves, which wants you to know about different treatments between plcs and limited companies. Cannot find that anywhere in my course material.

Similarly the other day looking at the exam q where you have to comment on the CLIENT's anti-money-laundering setup. M42 goes on in detail about our own responsibilities towards choosing our clients well and training our staff, but in all the stuff about 'powers and duties of companies' etc I can't see anything where it says what companies in general should have!

Clearly I'm just missing something, and if it comes up Thursday it's a big fat NC on that indicator.

As far as I'm aware there's nothing that details a money laundering policy a company should have on our syllabus,can't see it coming up but I plan just using that case as my guide on the off chance it did come up!in terms of the distributable reserves,in the resource pack there's a few documents detailing directors duties,auditor duties etc under company law and go one of them it tells you how to calculate distributable reserves,can't remember which one but I can look tomorrow,if you don't find it let me know and I'll look into it

zamaramo99

starfair wrote: »

Hi guys, would anyone be able to upload the Red Ireland Ltd case study? Can't see it on the list of attachments

I'm a repeat student and we didn't get that case study. I know Sean Murray mentioned it in his wrap up lecture as a good case to look at for Group Audits.

There you go pal!

starfair

zamaramo99 wrote: »

There you go pal!

Thanks zamaramo99

Best of luck to everyone in the exams!

KenHy

notanocelot wrote:

Similarly the other day looking at the exam q where you have to comment on the CLIENT's anti-money-laundering setup. M42 goes on in detail about our own responsibilities towards choosing our clients well and training our staff, but in all the stuff about 'powers and duties of companies' etc I can't see anything where it says what companies in general should have!

M42 is only guidance on how to comply with legislation, it's not specific to accountants. The same guidance would apply to other companies in Financial Services, which could be clients. So if anything comes up on AML setup for clients you can still apply M42.

zamaramo99

If anyone has a copy of the 2012 mock paper and solutions could you please attach it here. It would be greatly appreciated. Thanks

macatax

zamaramo99 wrote: »

If anyone has a copy of the 2012 mock paper and solutions could you please attach it here. It would be greatly appreciated. Thanks

Here ya go!

zamaramo99

Thanks Macatax

figrolls

I was just flicking through the articles at the front of the resource pack

It says that if information comes to our attention when we are performing non audit work (and we are not the auditor) we do not have to report to the ODCE however if we discover doing non audit work (and we are also the auditor) we have to report

is this understanding correct??