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What came in the ACCA AAA June 2019 Exam?

Here is the summary of what the AAA June 2019 exam was all about including some recent comments made by the examiner on the performance of candidates in this sitting.

The AAA Examiner Report will highlight strengths and weaknesses in candidates’ performance and therefore offers constructive advice for future candidates including those who are planning to re-attempt this paper in September 2019.

Question 1

A compulsory 50-mark case study consisting of four parts and focused on the planning phase of the group audit of a new listed client. Requirement (a), for 12 marks asked candidates to evaluate the business risks arising from a new audit client which was a listed entity Group and a large digital subscription television company. Requirement (b), for 18 marks asked evaluation of significant risks of material misstatement arising from the scenario. Requirement (c), for 6 marks required discussion of ethical issues relevant to the details given in the scenario. Requirement (d) required discussion on difficulties in the identification of related parties and to design specific procedures to be performed surrounding a transaction given in the scenario.

Question 2

A 25-mark compulsory question which focused on completion and reporting and was in two parts. Requirement (a) for 10 marks, asked candidates to critically appraise an extract from an auditor’s report which had been incorrectly prepared and required amendment. Requirement (b) for 15 marks, required discussion, along with reasons for discussion, specific matters raised in the scenario which should be reported to those charged with governance.

Question 3

A 25-mark compulsory question which focused on the discussion of a published exposure draft and evaluation of accounting treatment for specific estimates given in the question scenario along with audit procedures to be performed. Requirement (a) for 8 marks, required candidates to discuss accounting estimates as being an area of high risk and the reasons for the development of the exposure draft. Requirement (b) for a total of 17 marks, was split into three sections and required candidates to evaluate the accounting treatment of three estimates given in the scenario.

  • Aim to achieve a minimum of 3 professional marks.
  • Keep introduction brief. Avoid writing half page introduction or a length conclusion.
  • Simple headed paragraphs are enough to score marks for structured, well presented answer.
  • Stop wasting time underlining or numbering heading. Keep it simple and clear which question is being attempted.
  • You are not penalized for poor spelling or grammar.
  • To get the marks for clarity – ensure your answer format makes it easy for the market to understand your response and your discussion satisfied the question requirement.

Reviews from Question 1

Evaluate the business risks arising from the scenario in the question, which focused on a new audit client.

It was pleasing to see that most candidates focused on the risks arising from the scenario and avoided speculative or generic risks.

There were 2 marks available for each business risk. It should be noted that risk factors can be described in various ways in order to attract credit.

  • The scenario detailed a significant risk surrounding the revocation of the company’s broadcasting licence. Marks could be awarded for development of the risk from a risk of non-compliance and the licence being revoked or that a fine may be imposed which could lead to going concern implications.
  • As is usual with Q1, marks were available in the question for calculating trends such as the percentage movement in revenue or the extrapolated revenue figure or EBITDA.
    • Many candidates failed to identify this and therefore did not calculate any relevant trends and were unable to gain these calculation marks.
    • It was disappointing to see those who did identify the opportunity to extrapolate the information also went onto extrapolate total assets which would not be appropriate.
  • The scenario detailed that the Group had obtained a stock market listing 15 years ago.
    • Risks surrounding failure to adhere to corporate governance or listing rule requirements were deemed as non-significant, based on the length of time the Group had been listed.

Reviews from Question 2

Critically appraise an extract from an auditor’s report which had been incorrectly prepared and required amendment.

The majority of responses were extremely disappointing and generally reflects weak knowledge of auditor reporting requirements.

There remain a number of candidates who continue to show lack of understanding of basic ISA requirements such as

  • incorrectly suggesting that an unmodified opinion should have ‘unmodified’ in the title of the opinion or
  • that a material uncertainty related to going concern should be included within an emphasis of matter paragraph.

Many candidates suggested that the use of “we believe” in the auditor’s report is not appropriate wording,

  • or that the use of “in our opinion” suggests that the auditor is not independent from the client and
  • therefore a familiarity threat is present.

This demonstrates a significant lack of understanding of auditor’s reports and ISA 700 Forming an Opinion and Reporting on Financial Statements.

Candidates were not expected to discuss what would or would not be present in a full report.

  • Where candidates discussed, for example, “the signature of the partner is missing” or “responsibilities of the auditor are missing”, this was not relevant to requirement, which asked candidates to specifically critique the extract as presented.

Discussion of given extracts of auditor’s reports, again, should follow a structured approach and practicing questions of this nature should allow candidates to score strong marks in these requirements.

Candidates would benefit from increased knowledge of ISA 700, and in particular should review the appendices which show real examples of auditor’s report and typical wording which is appropriate.

Reviews from Question 3

Discuss accounting estimates as being an area of high risk and the reasons for the development of the exposure draft.

Overall candidates had a good attempt at this requirement, and candidates that had read the article written by the
examining team had the potential to score highly.

Advice for the Future

Overall candidates appeared reasonably prepared for the examination in terms of their knowledge and understanding of certain areas of the syllabus, exam technique and time management.

Section A was generally answered well, particularly the risk element of the question.

A large number of candidates demonstrated a weak understanding of reporting and failed to score many of the marks available.

Candidates are urged to learn and obtain an understanding of the proper use of audit opinions and the content and form of auditor’s reports.

Candidates are urged to obtain an understanding of ISA 700 and to read the exam technique articles which are published on ACCA’s website regarding reporting style questions. These provide detailed guidance on how to approach and answer questions surrounding specific topic areas relevant to Advanced Audit & Assurance.

Candidates need to ensure they have a good understanding of SBR and be mindful that the full SBR syllabus is relevant and could be tested, where applicable, within Advanced Audit & Assurance.

Candidates need to spend enough time studying to acquire sufficient knowledge of all areas of the syllabus and answer plenty of exam-standard questions to develop their application skills.

Candidates must be able to identify what is important in scenarios and respond fully to requirement.

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