ACCA AA Syllabus 2023

ACCA Audit and Assurance (AA)

ACCA AA Syllabus 2023

Topic-wise Notes

What is Audit?

First of all the basic means of Audit is investigations.

Another way in accounts, this word being used Audit for the examination of Financial Statements prepared by entities annually.

Balance sheet
Statement of profit and loss
Income statement
Statement of changes in equity
Statement of cash flow

Likewise, ACCA AA (F8) is a theoretical paper that Probably consists of 90% theory and 10% calculations.

In theory, the examiner tests the concepts of students by giving a situation, and students need the resolve that situation in different ways in different questions, like Analytical procedures, Tests of controls, internal controls

Also, other parts of the parts consist of calculations, Calculations of this part are probably from IAS-IFRS, like if the examiner explains the situation by referring to IFRS-16 then you should be attentive there is something wrong in the calculation of IFRS 16 which examiner wants you to correct this problem,

Furthermore, like assets are recorded correctly, Disposals are calculated in the right way, Depreciation treatments accounting according to the IFRS 16,

Similar to other accounting standers.

The main motive of the ACCA AA paper

This is to develop a basic understanding and knowledge of the audit process to give an assurance engagement to a Clint by following the Professional Regulatory Framework

However, to pass AA you need to:

Concepts regarding the audit and assurance
what are the procedures of an audit, and how does an auditor perform his audit assignments
Understand and evaluation of internal controls to assess the risk factors

Study Plan

Material for topic preparation: Any approved learning provider content along with the revision notes.

Material for Question practice: Past exams (Any Revision Kit- The answers on the ACCA website do not reflect the changes in the accounting and auditing standards). Please use the latest Kit (for Sept 2017 exam session) for answers.

Key preparatory recommendations:
-Attempt each question first yourself
-then read the answers
-Read the answers constructively- annotate and underline the key points that you missed, commonly used terminology, etc.

ACCA AA Practice Questions Topic Wise

Topic	Questions
Assurance & Regulation	June 2015-Q5c Dec 12- Q2a,c June 12- Q1c
Accepting audit engagements	Sept/Dec Hybrid 2015-Q2 a,b Dec 2013-Q4a,b June 11 Q2b
Audit planning	Sept/Dec Hybrid 2015-Q2c Sept/Dec Hybrid 2015-Q4 June 2015-Q5b
Audit planning	June 2014-Q3a Dec 2013-Q1a,b,c June 2013-Q3 ( Ratios)
Audit planning	Dec 2012-Q3a,b Dec 2010-Q3 ( Ratios)
ICS-Sales	Dec 2014-Q5a Dec 2013-Q3 June 11- Q1a,c
ICS-purchases	June 2015-Q4 June 2013-Q1b,c Dec 10- Q1a,b, Q4b
ICS-payroll	Sept/Dec Hybrid 2015-Q5 a,b June 2014-Q1a,b Dec 2011- Q1a
Other IC topics	June 10- Q3b June 2015-Q2 Dec 09- Q3b June 2012- Q1a
Evidence and procedures	June 12- Q4a June 11- Q3a
Substantive-Sales and trade receivables	June 2015-Q6a and Q6biii Dec 2014-Q5b
Audit procedures-Inventory	Sept/Dec Hybrid 2015-Q6a, bi Dec 2014-Q6bii June 2014-Q3b Dec 2012-Q1a,b June 2012-Q4a
Substantive-Property, Plant & Equipment And Equity	Dec 2014-Q6bi June 2013-Q4a June 2012-Q1b,c
Substantive-purchases and trade payable s	June 2015-Q6bi
Payroll	Sept/Dec Hybrid 2015-Q5c Dec 2014-Q1 June 2014-Q1c,d
Intangible assets	Sept/Dec Hybrid 2015-Q6bii
Bank	June 2015-Q6bii June 2013-Q1d
Remuneration	June 2014-Q3c
Relying on work of others	Dec 2014-Q6a
Substantive practice	Dec 2013-Q1d Dec 2012-Q4b June 2012-Q4b
Fraud, Laws & regulations	June 2015-Q5a Dec 12- Q2b June 12- Q3a
Audit documentation	June 12- Q4c June 11- Q2a
CAATs	Dec 10- Q2c
Sampling	Dec 2012-Q1c June 12- Q2b
Going concern review	Sept/Dec Hybrid 2015-Q3 June 2014-Q5a,b,c June 2012-Q5a,b,c
Subsequent events review, overall review	Dec 2011-Q5a, bi, and bii Dec 2008-Q5 June 2013-Q1a Dec 2010-Q5a,b
Audit opinion & report	Sept/Dec Hybrid 2015-Q6c June 2015-Q3 Dec 2014-Q4 Dec 2014-Q6c June 2014-Q5d
Audit opinion & report	June 2013-Q5c Dec 2012-Q5 June 2012-Q5d Dec 2011-Q5biii June 2011-Q5c
Ethics	Sept/Dec Hybrid 2015-Q1 June 2015-Q1 June 2014-Q3d Dec 2013-Q4c June 2012-Q3b,c
Corporate governance	Dec 2014-Q3
Internal audit	June 2014-Q4 June 2013-Q4b,c,d June 2013-Q5a,b Dec 2012-Q3c June 2012-Q1d,e June 2012-Q3d
Full exam paper under exam conditions ( time managed)	March/June 2016 Sept 2016 Dec 2016 March/June 2017

ACCA Audit and Assurance Topic-wise questions for practice, To help out students we are providing you this list, so when students learn one topic they can practice its relevant question to get a full grip on that topic

How to Pass ACCA AA

AA Video Lectures

Books & Revision Kits

AA Pass Rate

Dec 2017	Jun 2018	Dec 2018	Jun 2018	Dec 2019
40%	40%	38%	39%	38%

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Previously Known as F8

Client acceptance or continuance audit

Steps before the acceptance of an audit client

Client Acceptance or Continuance– Need to Know when to say no or yes. Asking the right questions from the client while considering new clients or continuance of existing clients, is a key first step for establishing a quality audit and relationship between the auditor and client.

International Code of Ethics for Professional Accountants ACCA AA & AAA

Conceptual Framework

What is Auditor Independence?

Auditors are expected to provide an unbiased opinion on the work that they have performed. An auditor who has a lack of independence or has threats to auditor independence, his audit report useless to those who rely on it.

For example, consider yourself a potential shareholder in XYZ Company. If you know that the auditor for XYZ Company keeps a personal relationship with the CEO of the company, would you trust that the audited work is a fair representation of the company’s financial standing? How can you be certain that the auditor and CEO did not influence issues a favorable audit report? so must ensure that Auditor no have Threats to Auditor Independence

Once you have identified a threat from the question scenario, you will need to name the threat, explain WHY it is a threat to the auditor and tell the safeguard for that threat.

Here are a few techniques that can be avoided Threats to Auditor Independence,

Threats to Auditor Independence?

In Audit, there are five threats that hurt the independence of the auditor. Before the start of an audit engagement, it is crucial that each member of the audit team independence. If an auditor is exposed to a certain threat, He/she should either develop safeguards to reduce the threat to an acceptable level or resign from audit engagement. here we are going to discuss threats to auditor independence and possible remedies

QCR: Quality Control Review ( independent partner review)- Having a professional accountant who was not involved with the non-assurance service review the non-assurance work performed

Chinese walls: The use of separate engagement teams, with different engagement partners and team members

Public interest entities are:

(a) All listed entities; and
(b) Any entity:
- Defined by regulation or law-making as a public interest entity
- OR
- For which the audit is required by law and regulation to be conducted in compliance with the same independence requirements that apply to the audit of listed entities. Such regulation may be circulated by any relevant regulator, including an audit regulator

1. Self interest threat and safeguards

The threat that a financial or other interest will inappropriately influence the auditor’s judgment or behavior.

Threat		Safeguard
Direct financial interest	A member of the assurance team or the firm having a direct financial interest in the assurance client.	Remove the individual from the audit team the self-interest threat created would be so significant that no safeguards could reduce the threat to an acceptable level.
Gifts and hospitality		Nature, value and intent of offer to be considered Not allowed unless insignificant ( politely decline)
Fee dependence	A firm having fee dependence on total fees from a client.	Listed clients: If gross recurring fee from one client greater than 15% of the firm’s revenue for two consecutive years,– Tell client’s BOD– Independent QCR or external QCR before OR After issuing 2nd year’s opinion Other clients:– Reducing the dependency on the client;– External quality control reviews OR Consulting a third party, such as a professional regulatory body (E.g ACCA, ICAEW) or a professional accountant on key audit judgments.
Recent Service with an Audit Client	If a member of the audit team has recently served an employee of the audit client	Remove from the team if worked at the client in the year being audited at a position to exact significant influence over the subject matter.
Close business relationship	A member of the assurance team (or the firm) having a significant-close business relationship – Commercial relationship, Common financial interest Examples: a joint venture with the client or a controlling owner/ director, formal marketing of each other’s product, combine the services of the firm with those being offered by the client and market the package.	If material, not allowed (The threat created would be so significant that no safeguards could reduce the threat to an acceptable level.
Contingency fee	Firm going to enter into a contingency fee arrangement relating to an assurance engagement	Politely decline the proposed contingent fee arrangement, Inform the client that the fees will be based on the level of work required to obtain sufficient and appropriate audit evidence.
Overdue fee	Might be regarded as being equivalent to a loan to the client if fees due from a client(Audit Client) remain unpaid for a long time, especially if a significant part is not paid before the issue of the audit report for the following financial year	Discuss with TCWG the reasons why the payments have not been made. Should agree with a revised payment method which will result in the fees being settled before much more work is performed for the current year audit
Loans and guarantee		If not under normal lending conditions, No safeguard acceptable under normal lending conditions- review by network firm.
Serving as a Director or Officer of an Audit Client		Not allowed. (Particular reference made by the code to the role of the Company Secretary. If allowed under local laws or professional rules, the duties and activities shall be limited to those of a routine and nature of administrative, such as preparing minutes and maintaining statutory returns)
Recruitment services (especially hiring of senior management)		Listed clients: Not allowed for directors or senior positions related to Financial Statements preparation. Otherwise, The final decision should be by the client and DO NOT negotiate on the client’s behalf firm can undertake roles such as reviewing a shortlist of other candidates. However, they must ensure that they are not interfering to undertake management decisions and so must not make the final decision on who is appointed
Employment negotiations with the audit client.	A member of the audit team entering into employment negotiations with the audit client.	Remove the individual from the audit team– A review of any significant judgments made by that individual while on the team
Compensation and Evaluation Policies	when a member of the audit team is evaluated on or compensated for selling non-assurance services to that client	Audit partner should not be evaluated on or compensated based on that partner’s success in selling non-assurance engagement to the partner’s audit client

2. Self Review threat and safeguards

The threat that an auditor will not appropriately evaluate the results of a previous judgment made or service performed by himself.

Threat		Safeguards
Self-Review	The threat that the auditor will not appropriately evaluate the results of a previous judgment made/or service performed by him	Provision of other services to an audit client (Note: other threats due to this are self-interest because of the fee element and advocacy Safeguard for Listed Clients: Most non-assurance services related to financial reporting are not allowed. Other clients: Segregation of duties, Chinese walls, QCR
Temporary staff assignments	The lending of staff by a firm to an audit client	Should ideally not be made a part of the audit team. Generally acceptable if no management responsibility is taken up and the audit client shall be responsible for directing and supervising the activities of the loaned staff
Recent Service with an Audit Client	a member of the audit team has recently served as an employee of the audit client- The threat is that the member of the audit team has to evaluate elements of the financial statements for which he had prepared the accounting records while with the client	Remove from the team if worked at the client in the year being audited at a position to exert significant influence over the subject matter

3. Familiarity Threat and safeguards

The threat that due to a long or close relationship with a client or employer,

Threat		Safeguard
Long Association	Long Association of Senior Personnel with an Audit Client	Listed clients: 7 years plus 1 year of flexibility than a gap of two years for audit partner– In these 2 years gap period, cannot participate in the audit Or provide quality control for the engagement, Or consult with the engagement team or the client regarding technical or industry-specific issues Other clients: Rotate members, & QCR
Family and Personal Relationships		Remove from the team if the relationship is with a senior person at the client with influence over the financial statements.
Employment with an Audit Client	The director or a senior member of the audit client has been a member of the audit team or partner of the firm in the past	Listed client: for partners, ok if twelve months have passed since the individual was Partner. Other safeguards- Modifying the audit plan;-any work already undertaken by that individual should be independent reviewed.-Assigning individuals to the audit team who have enough experience in relation to the individual who has joined the client

4. Advocacy Threat and safeguards

The threat that an auditor will promote a client’s or employer’s position to the point that the auditor objectivity is compromised.

Threat		Safeguard
Legal services	Legal services To audit client ( For example contract support, litigation, mergers, and acquisition legal advice, and support to clients’ internal legal departments)	If they relate to resolving a dispute or litigation when the amounts involved are material to the Financial Statements: Not allowed
Promote client/shares	The auditor asked to promote client/shares in a client or asked to accompany the client to a meeting with the bank	Not allowed (Politely decline)

5. Intimidation Threat and safeguards

The threat that an auditor will be deterred from acting objectively because of actual or perceived pressures, including attempts to exercise undue influence over the auditor.

Threat		Safeguard
Threat of dismissal	Threat of dismissal or replacement of auditor/or his close family member over a disagreement about the application of an accounting principle.	Tell client’s TCWG– ensure that all audit engagements are conducted in accordance with International Standards on Auditing– Ensure you gather sufficient appropriate evidence A dominant personality at the client attempting to influence the decision-making process, for example, the application of an accounting principle. A firm being pressured to reduce inappropriately the extent of work performed in order to reduce fees. *An auditor feeling pressured to agree with the judgment of a client employee because the employee has more expertise on the matter in question.
Actual or Threatened Litigation	(For example regarding a previous audit report)- When the firm and the client’s management are placed in adversarial positions by actual or threatened legally, affecting management’s willingness to make complete disclosures	QCR– If a team member involved, remove from the – Withdraw from the cement if very significant
Fee dependence	Fee dependence, close personal relationships, business relationships also cause intimidation threats.	The safeguards for each will be the same as discussed earlier.

6. Conflict of Interest Threat and safeguards

Threat		Safeguard
Firm competes with client or firm has a joint venture with a competitor of a client or the firm has competitors as clients		Members should place their clients’ interests before their own and should not accept or continue engagements which threaten to give rise to conflicts of interest between the firm and the client. Any advice given should be in the best interests of the company.
		A conflict of interest arises where an auditor acts for both a client company and for a competitor company of the client. Where the acceptance of an audit engagement would, despite safeguards, materially prejudice the interests of any clients, the appointment should not be accepted, or one of the appointments should be discontinued.
		Where the acceptance of engagement would, despite safeguards, materially prejudice the interests of any clients, the appointment should not be accepted, or one of the appointments should be discontinued.
		Managing conflicts of interest 1. Full disclosure is important – both companies should be fully aware that the firm is acting for the other party. 2. Regular review of the situation by an independent senior partner 3. Use of different partners and teams of staff for different engagements 4. Internal procedures within the firm -Procedures to stop access to information, for example, strict physical separation of both teams, private and secure data filing. -Clear guidelines for members of each assurance engagement team on issues of security and confidentiality. These guidelines must be included within the audit engagement letters. -Potentially the use of confidentiality agreements signed by employees and partners of the firm 5- Advising at least one or all clients to seek additional advice

ACCA Past Papers Attempt These past papers questions to check your understanding:

Sept/Dec Hybrid 2015-Q1
June 2015-Q1
June 2014-Q3d
Dec 2013-Q4c
June 2012-Q3b,c

This is the detailed explanation on Threats to Threats to Auditor Independence, and how its work, don’t forget to give us feedback by commenting below

Fundamental principles of ethics

Here are Fundamental principles of ethics described by ACCA to be followed by all ACCA members, Students must be memorized all of them, this can be tested straightforward and in MCQ’s in CBE.

AA & AAA

5 Fundamental principles of ethics described by ACCA

Integrity

The auditor should be straight forward & honest in all professional and business relationships. Auditors will be associated with communications, returns or other information and reports where they believe that the information contains materially false or misleading statements.

Objectivity

Members should not allow bias, conflicts of undue or interest influence of others to override professional or business judgments.

Appointment Removal & Role Of An Auditor

Appointment Removal & Role Of An Auditor. an auditor is a compulsory requirement for all companies to operate in the majority all over the world. So here are a few rules…

The Auditor’s duties

Fundamental duties are to:

– An opinion that shows whether the financial statements give a true and fair view and are prepared in accordance with the applicable reporting framework

– issue an audit report.

Duty to check and ensure: Adequate accounting records, Compliance with legislation, Truth and fairness, Adequacy of financial statements disclosures

The Auditor’s Right

1. Right of access at all times to the company’s books, accounts, and vouchers.

2. The right to require from the staff of the company such information or explanations as they think necessary for the performance of their duties as auditors.

3. Right to receive all communications relating to written resolutions.

4. Right to receive all notices of, and other communications relating to, any general meeting which a member of the company is entitled to receive.

5. Right to attend any general meeting of the company.

6. Right to be heard at any general meeting in which an auditor attends on any part of the business of the meeting which concerns them as an auditor.

Appointment of auditors

Only a member of a recognized supervisory body is eligible to be appointed as an auditor. The person to be appointed as the auditor is required to hold a professional accountancy qualification.

1. Appointed by shareholders

2. The appointment of the auditor runs from the end of the Annual General Meeting (AGM) until the end of the next AGM.

3. On appointment, need to ask ‘clearance’ from the outgoing auditor

For entities in which a share is owned by the state, the auditor is appointed by the Secretary of State or Ministry of Finance (or a person authorized by the Ministry of Finance)

Removal of Auditors

1. RESIGNATION: Sometimes it is necessary for the auditors to resign. If an auditor resigns, they should do so in writing and they may wish to speak to the shareholders to explain their reasons

2. FORCED REMOVAL: Sometimes, the Board of Directors or some shareholders may wish to remove the auditors. A General Meeting must be called so that the shareholders can vote on the proposal of a new auditor (via an ordinary resolution).

3. AUDITORS DO NOT WISH TO SEEK REAPPOINTMENT: Sometimes the auditors finish the annual audit and decide they do not wish to audit the company in future years. As such, when the board asks them to accept nomination for the following year, the auditors should politely decline and issue a Statement of Circumstances.

Key points

1. Directors cannot remove the auditors themselves.

2. Auditors Can be removed by a simple majority at a general meeting.

3. The auditors should be given notice of such a meeting

4. They are allowed to speak at the general meeting

5. Deposit at the company’s registered office a statement of the circumstances connected with the removal/resignation or a statement that there are no such circumstances. They can request an Extraordinary General Meeting (EGM) of the company to explain the circumstances of the resignation.

Audit exemption for small companies

However, the main reasons for exempting small companies are:

– for owner-managed companies, those receiving the audit report are those running the company (and hence preparing the accounts!)

– the advice/value which accountants can add to a small company is more likely to concern other services, such as accounting and tax, rather than audit and which may also give rise to a conflict of interest under the ethics rules

– the impact of misstatements in the accounts of small companies is unlikely to be material to the wider economy

– it may also not be cost beneficial for the small entities.

Types of Assurance Engagement

What is assurance & Types of Assurance Engagement

What is Assurance Engagement:

Assurance Engagement Definition: Any assignment/engagement which has five elements(Below) becomes an assurance engagement

Five Elements of an Assurance Engagement

A three-party relationship, involving: the practitioner, a responsible party and intended users.

Appropriate subject matter.

Suitable criteria.

Sufficient, appropriate evidence to support the conclusion.

A conclusion contained within a written report.

An assurance engagement will require a three-party relationship comprising:
- a) The intended user who is the person who requires the assurance report (Share Holders, Lenders, etc, etc)
- b) The responsible party, which is the organization responsible for preparing the subject matter to be reviewed (Board of Directors)
- c) The practitioner who is the professional who will review the subject matter and provide assurance. (i.e. an accountant)
The second element is required for an assurance engagement is a suitable subject matter. The subject matter is the data that the responsible party has prepared and which requires verification (e.g Financial statements)
The subject matter is then evaluated or assessed against suitable criteria in order for it to be assessed and an opinion provided (e.g IAS & IFRS)
The practitioner must ensure that they have gathered sufficient appropriate audit evidence in order to give the required level of assurance engagement.
In the last one, an assurance report provides the opinion which is given by the practitioner to the intended user(ShareHolders)

Types of assurance Engagement

Difference between audit and assurance OR Assurance meaning in accounting OR Types of assurance services

Types of Assurance assignments

Reasonable Assurance

An Assurance engagement in which the Practioner(Auditor) reduces engagement risk to an acceptably lower level in the circumstances of the engagement as the basis for the practitioner’s conclusion.
Example: External Audit
High level of assurance but NOT absolute or 100% A high level of assurance but not the absolute level of assurance is provided, this is known as reasonable assurance.
More testing (Analytical procedures, a test of controls and substantive testing) Going concern review also carried out
Positive conclusion- Wording: ‘in our opinion, the financial statements give (or do not give) a true and fair view of the state of the company’s affairs’.

Limited Assurance

An assurance engagement in which the practitioner(Auditor) reduces engagement risk to an acceptable level in the circumstances of the engagement but where that risk is greater than for a reasonable assurance engagement
Example: Review of financial statements
Moderate level of assurance The practitioner gathers sufficient appropriate audit evidence to be satisfied that the subject matter is credible, in this case, negative assurance is given whereby the practitioner confirms that nothing has come to auditor's attention which indicates that the subject matter contains material misstatements in financial statements
Lesser testing-focus on obvious errors only (Analytical testing and Enquiry) Going concern review will not be performed The procedures undertaken are not nearly as comprehensive in assurance engagement, with procedures such as analytical review and inquiry used extensively. Also, the practitioner does not need to comply with ISAs And IFRSs as these only relate to external audits.
Negative conclusion-Wording: “Nothing has come to light to suggest errors or problems exist’' However, the assurance is given in the absence of any indication to the contrary.
Review engagements are often take up as an alternative to an audit and involve a practitioner reviewing financial data, such as six-monthly figures. This would involve the the practitioner takes up procedures to state whether anything has come to their attention which is the reason the practitioner to believe that the financial data is not in accordance with the financial reporting framework.

Assignments were no Assurance is given

Agreed-upon procedures: A report on factual findings is given but assurance will not be given. Users must judge for themselves and draw their own conclusions
Compilation engagement: Users of the compiled information gain benefit from the accountant’s involvement but no assurance is expressed. It is used to collect, classify, and summarise financial information. It means to present data in a manageable and understandable form