TEChNiCAL examiner s RELEVANT To ACCA QuALiFiCATioN pApER F8 This article considers the examiner s approach to the Paper F8 exam

and aims to recognise a change in examiner with effect from the June 2010 exam. The aim of Paper 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 paper continues to be practical in application, as well as aiming to ensure that candidates who pass this paper understand the basics of an audit. The exam strikes a balance of technical knowledge as well as a practical application of this knowledge. The case study Question 1, illustrates this well and Question 1 from the December 2008 exam is a good example of technical knowledge being applied. This syllabus builds on the knowledge gained in Paper F3, Financial Accounting and then prepares candidates for Paper P1, Professional Accountant and Paper P7, Advanced Audit and Assurance. The accounting standards examined in Paper F3 form the basis of questions on how to apply auditing procedures in respect of those standards, and candidates must not be afraid to bring their accounting knowledge into this paper. Question 1e from the December 2009 exam demonstrates this. The exam will continue to contain questions set in as practical an application as possible. I recognise that it has become more common that candidates have not been involved in, or had exposure to, a real audit. That aside, this paper 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 just rote learnt it. It is crucial that candidates practise the skills required for application questions by working through past papers to time and reviewing the examiner solutions to identify areas for improvement. Rote learning of technical material alone will not result in exam success; however, practising questions, reading examiner reports and relevant technical articles will improve the chances of passing the exam. Explanation of capabilities Paper F8 focuses on seven capabilities. Table 1 on page 3 shows how I expect each of these capabilities to be examined, and details comments on the type of questions that could be asked. Format of the exam The exam format will continue in the same style as the past five exam sessions. There are five questions and they are all compulsory. Section A contains Question 1 for 30 marks and question 2 for 10 marks. Section B contains three questions each for 20 marks. All questions require some form of written response. However, a few questions will also require the calculation and interpretation of some basic ratios in the context of audit planning or review. Question 1 This question will be a case study and will always be based on a scenario, and will be broken down into a series of sub-questions, which will examine a range of audit procedures. Candidates will need to analyse the scenario to identify the appropriate points to make in their answers. Candidates are provided with 15 minutes of reading time, and I would encourage them to use some of this time reading the scenario and

thinking about the requirements. The sub-requirements are usually a mixture of technical knowledge and scenario specific points. 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. RoTE LEARNiNg oF TEChNiCAL mATERiAL ALoNE wiLL NoT REsuLT iN ExAm suCCEss; howEVER, pRACTisiNg QuEsTioNs, REAdiNg ExAmiNER REpoRTs ANd RELEVANT TEChNiCAL ARTiCLEs wiLL impRoVE ThE ChANCEs oF pAssiNg ThE ExAm.

sTudENT ACCouNTANT issue 05/2010 Studying for Paper F8? performance objectives 17 and 18 are linked approach 02 my Aim is ThAT pApER 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. The scenario is more likely to be based on an organisation which is profit making rather than non-profit making. It is to be assumed that all entities will use computer-based systems, however detailed knowledge of how to use computer-assisted audit techniques will not be expected. Questions in the past have focused on areas such as identification of system deficiencies, implications of these and recommendations, writing of management reports, control objectives and tests of control, substantive procedures over income statement and statement of financial position entries, audit evidence and audit planning. These areas will all continue to be examined as Question 1 topics as well as areas such as audit risk, internal audit and assurance. This list is not exhaustive. Question 2 The question for 10 marks, will, as in previous exams, be a shorter factual question. This question will normally be based on International Standards on Auditing (ISAs), but will also cover other key technical areas of the Study Guide. As with previous exams, there will normally be two or three requirements covering different areas, and this allows candidates to demonstrate their basic knowledge of auditing. Questions will normally be based on ISAs. However, answers will obtain credit if valid points are made. I am not expecting rote learning of ISAs; rather, an understanding of the key principles underlying auditing.

Also, candidates should not worry about learning ISA numbers, as there is no credit available for listing the ISA numbers. It is particularly important that candidates focus on the requirements in this question, as if they are required to list then their answer should contain brief points, it should not stretch to pages of text. Many candidates are writing far too much and this is at the expense of other questions. Questions 3 and 4 These questions, each worth 20 marks, will usually be loosely based around a scenario, and could cover any of the topic areas within the Study Guide. The format will be similar to past exam questions. These scenarios could be based on either profit or non-profit marking organisations such as Question 4 from the December 2008 exam, which was based on a charity. These questions will aim to test a balance of technical knowledge, but also an application of this knowledge to the given scenario. Question 5 This question, for 20 marks, will, as in previous exam sessions, be mainly based on the topic areas of audit review and reporting. The question format will also be similar to previous exams. Candidates are reminded that audit reports in particular represent the only output for the shareholders after the audit is completed and, therefore, it is important that candidates understand what an audit report is, how it may be modified, and when these modifications are relevant. CoNCLusioN My aim is that Paper 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. My advice, therefore, is to study the basics of auditing, read 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. Pami Bahl is examiner for Paper F8 with effect from the June 2010 exam

TEChNiCAL TAbLE 1: pApER F8 CApAbiLiTiEs Capability Comment Explain the nature, purpose and scope of assurance Questions may focus on the fa ctual areas of the legal or engagements, including the role of the external audit aspects, they may cover the ethical framework in a and its regulatory and ethical framework. scenario-based question. Assurance cou ld feature in any question in the exam. Explain the nature of internal audit and describe its role as The work of intern al audit could feature in any question in part of overall performance management and its relationship the exam. However, t here may not always be an internal audit with the external audit. question. It is more likely to appear in Questions 1, 3 or 4. Demonstrate how the auditor obtains an understanding of Questions in this area w ill relate to the planning of the the entity and its environment, assesses the risk of audit. They will normally f eature aspects of audit risk, audit material misstatement (whether arising from fraud or other audit planning proces s, fraud and error as well as irregularities) and plans an audit of financial statements. analytical procedure s. These areas are more likely to appear as scenario- based questions, however knowledge based elements could appear in Question 2. Describe and evaluate information systems and internal This capability, and the next, will relate to the testing of controls to identify and communicate control risks and their controls, and the c ollection of audit evidence using potential consequences, making appropriate. compliance and substantive testing a s appropriate. It is recommendations. 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 in terms of production of management reports. Identify and describe the work and evidence required to Questions for this capab ility are likely to focus on the meet the objectives of audit engagements and the application of substantive proc edures to either income application of the International Standards on Auditing. statement or statement o f financial position areas (refer to the Study Guide). This will usually feature in Question 1 as well as elsewhere in the exam. Evaluate findings and modify the audit plan as necessary. This area will generally be tested in Question 5 however

knowledge-based elements could appear in Question 2. Explain how the conclusions from audit work are reflected Candidates will not be required to draft an entire audit in different types of audit report, explain the elements of report. The emphasis of questions in this area will instead each type of report. be on explaining audit reports. If extracts are provided such as Question 5 December 2007, this will normally relate to an explanation of standard terms, or an explanation of how a standard report can be modified, or (in a limited number of cases) supplying appropriate wording for the modification only. 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 (where relevant to this paper). Questions will potentially provide extracts of audit reports, and require candidates to identify where ISA guidance has not been followed.