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Examination Technique Seminar (Case)

for

Module C on Business Assurance

Speaker

Mr. Harvey Lam

20 November 2012

QP Module CQP Module CExam Technique Seminar on

Section A (Case) –December12 Diet

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December12 Diet

20 November 2012

AgendaAgenda

• Introduction on HKCA1

• About Lecturer2• June 2012 Exam Paper and Dec 3


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• June 2012 Exam Paper and Dec 2012 Mock Paper3

• Study Tips4

• Q&A5

1. About HKCA1. About HKCA� HKCA Learning Media Limited (“HKCA”) is established to

provide professional accountancy training to universitygraduates and working adults who are keen to pursue anaccountancy qualification in Hong Kong and MainlandChina.

� We offer highest standard of accountancy training throughour experienced tutors who will lead our students towards


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our experienced tutors who will lead our students towardsexamination successes in QP. Our tutors are specialists inrelevant papers and give you “IDEAS to Pass”.

� HKCA is here “All for You to Pass”.

2. About Lecturer

Mr. Harvey Lam @ Module CBA, MSc, CPA,ACA

Since graduating from the UK, Harvey began his professional

career with one of the Big Four firms as auditor for more than 7

years. Harvey is a member of HKICPA and ICAEW.

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years. Harvey is a member of HKICPA and ICAEW.

He holds a Bachelor’s degree with First Class Honours and a

Master’s degree with Distinction in Accounting and Finance, and

was a prize winner in both of his undergraduate and postgraduate

programmes as the best performer. With his experience, Harvey

aims to pass his confidence to students for passing QP exam.

3.3. June 2012 Exam PaperJune 2012 Exam Paper

� Topics covered in June 2012

� Section A:� RoMM at Assertion Level – PPE (18 marks)

� RoMM at Assertion Level – Litigation and Claims (13 marks)

� Risk Assessment (5 marks)

� Corporate Governance (14 marks)


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Corporate Governance (14 marks)

� Section B:� Opening Balances (14 marks)

� Going Concern (9 marks)

� Specific Audit Evidence – Bank Reconciliation, Confirmation and Laywer’s Letter (15 marks)

� Ethics and Safeguards (12 marks)

3. June 2012 Exam Paper3. June 2012 Exam Paper

� Some Observations:� Focus more on Application (less on Blind-Copying)

� Require thorough understanding on Audit Concepts

� Read the question carefully before answering (there are always traps in questions!)

� Business Awareness and Common Sense are crucial


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� Business Awareness and Common Sense are crucial


� Examiner’s Comments:� Perform well in identifying Relevant Standards

� Perform well in identifying Assertions at Risk

� Not too well in designing Specific Audit Procedures

� Fail to apply knowledge in specific Case Context


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Question 1 (Total 18 marks –Approximately 32 minutes)

(a) Assuming you are ABC & Co., after reading the Internal Auditreport about the potential overstatement of certainexploration and production facilities, evaluate and explain thefinancial statement assertions that concern you most relatingto fixed assets.


to fixed assets.

(3 marks)

(b) In response to your risk assessment explained in Question 1(a),what audit procedures would you consider in addressing therisk of material misstatements you identified?

(15 marks)

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Tips for Answer 1

� Link between Existence and Completeness

� “MAP" Approach

� Key words for each assertion:

o Existence (Inspect, Observe, Inquire)

Completeness (Compare, Reconcile, Two-Ways testing, Check


o Completeness (Compare, Reconcile, Two-Ways testing, Check Arithmetic)

o Valuation (Verify, Understand, Assess, Examine)

� Think about the documents connected with the item

� Use Information given by Question!

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(a)Assuming you are ABC & Co., in response to the accident in theGulf of Sankala, identify three risks of material misstatementsof Super Energy’s financial statement as at 31 December 2011.

(3 marks)


(b)In response to the risk of material misstatements identified inQuestion 2(a), suggest and discuss the audit procedures that youwould perform in order to address the assessed risk of materialmisstatements.

(10 marks)

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Tips for Answer 2

� Be Careful => F/S Level vs Assertion Level

� Always think about which F/S Line Item and Assertions

� “MAP" Approach


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Assuming you are ABC & Co., in a recent dialogue with the InternalAudit, you understand that the Internal Audit has issued anunsatisfactory report on the access control of the Flex Accountswhich are the general ledger used by Super Energy worldwide. Forrisk assessment purposes, what are the additional procedures you


risk assessment purposes, what are the additional procedures youwould suggest to perform?

(5 marks)

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Tips for Answer 3

� Information System – key concerns:

o Data Integrity and Reliability

� Something may have gone wrong => What has management done to respond?


done to respond?

� Be careful of the audit phrase – Risk Assessment NOT Execution!

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According to the Code on Corporate Governance Practices inHong Kong and in response to the accident in the Gulf of Sankala,discuss how the following stakeholders could discharge or performbetter their own functional duties and related corporategovernance responsibilities towards financial reporting and internalcontrols:


controls:

(a)The board of directors

(6 marks)

(b)Audit Committee

(4 marks)

(c)ABC & Co.

(4 marks)

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Tips for Answer 4

� Make sure the Role played by each party

� Management (key driver in taking necessary actions)

� Audit Committee (Balance of Power, Oversight, Bridge)

� Auditor (Not directly responsible => F/S oriented)


� Auditor (Not directly responsible => F/S oriented)

� Use business sense

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3. Dec 2012 Mock Paper3. Dec 2012 Mock Paper


Mr. Choi is aware that there are some newly issued accountingstandards that may affect XYZ’s consolidation accounting. Mr. Choiinvited ABC to give a full-day presentation to XYZ’s seniormanagement regarding the application of the new accountingstandards.


After the presentation, Mr. Choi has given fruit baskets to eachpresenter in the audit team to express his gratitude.

Required:

Identify TWO independence considerations, and discuss anysafeguards or actions thatABC may implement.

(14 marks)

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Tips for Answer 1

� Use case information to assess significance of threats identified

� “5R” Approach


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You have been assigned to prepare for the audit planning meetingfor the final audit of XYZ’s year-end financial statements.

Required:

(a) State FIVE matters that should be discussed in the audit


(a) State FIVE matters that should be discussed in the auditplanning meeting as part of the planning process for the auditof XYZ’s financial statements for the year ended 31 December2012.

(5 marks)

(b) Explain the term “professional skepticism” and its roles in thedetection of fraud.

(5 marks)

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Tips for Answer 2

� Understand the purpose of Audit Planning Meeting

� Connect the whole Audit Process

� Understand the nature of Fraud


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One week before your team starts final audit fieldwork, youreceived a phone call from Mr. Choi. In the call, Mr. Choi requestedthat your team needed not send bank confirmations because XYZcan confirm the cash balance in the letter of representation. Mr.Choi believed that this can improve your audit efficiency.


Choi believed that this can improve your audit efficiency.

Required:

Evaluate whether you will accept Mr. Choi’s request in thiscircumstance, and determine your response.

(8 marks)

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Tips for Answer 3

� Be sure how you should gather Audit Evidence

� Why LoR cannot replace confirmation?


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Explain the audit procedures you would perform to examine thevaluation and allocation assertion of XYZ’s taxation payable as at31 December 2012.

(8 marks)


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Tips for Answer 4

� Apply MAP approach

� Think about the documents connected with the item


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In relation to the lawsuit, XYZ has made a provision ofHK$23,000,000 in the balance sheet as at 31 December 2012.

Required:


Required:

(a) ExplainABC’s responsibilities regarding the lawsuit.

(5 marks)

(b) Explain the THREE main approaches in auditing the adequacy ofthis HK$23,000,000 provision.

(5 marks)

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Tips for Answer 5

� Audit Approach vs Audit Procedure

� MAP approach again


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4. Study Tips4. Study Tips

� Applications� Identify which specific area you are asked

� Plan your answer before writing

� Logical and Step-By-Step presentation –marks are awarded for this!


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marks are awarded for this!

� Structure your answer in adequate depth

� Time Management (1.8 minutes per mark)

� Attempt all questions – the first mark is alwayseasier than the last mark


� Materials� HKICPA Handbook (the Auditing Standards)

� Learning Pack

� Flashcards

� Pass papers


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� Pass papers

� Critical file – MOST IMPORTANT:

� Learning outcomes for each topic

� Mindmaps

� Key points for each topic and extracts from pastpaper solutions (all you need in exam hall!)

� Tips to answer questions for each topic


Exam Date - 27 December 2012

“Failing to prepare is preparing to fail”


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“Failing to prepare is preparing to fail”

Our CoursesOur Courses


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5. Any Questions?5. Any Questions?

Questions?


Discussion?

Brainstorm?

Contact usContact us

Enquiry Hotline:

3107 0088

Email:

[email protected]


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Website:

www.hkcaexam.com

Demo Lecture: www.hkcaexam.com/studytips.asp

Messages from HKCAMessages from HKCA

All for You to ... PASS!All for You to ... PASS!All for You to ... PASS!All for You to ... PASS!

Good Luck!


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