Part (a)

Candidates were required to explain audit procedures using audit software that could be used on receivables balances and then to explain the reason for each procedure.

The requirement verbs for this section were explain and then explain again. The emphasis on explain in this section was to highlight to candidates that it was necessary to show clearly why procedures were being used, not simply to list procedures. Linking comments to the use of audit software was also critical in this section and candidates were expected to select procedures that could be carried out using that software.

Some comments therefore identified audit procedures such as a receivables circularisation, showed how audit software could be used to select specific balances for circularisation and potentially produce letters to be sent to those receivables, and then explain the reason for that procedure in terms of audit assertions.

Some comments identified the need for a receivables circularisation but did not show how audit software assisted with this procedure and did not link the procedure to audit assertions.

Candidates could obtain the 9 marks on offer by explaining five procedures. As with many other questions there was no limit to the number of procedures that could be mentioned.

Common errors and reasons why those errors did not obtain marks included

Many answers also provided lists of procedures with little or no explanation for those procedures.

The overall standard for this section was inadequate. The majority of candidates failed to obtain even basic marks for casting the receivables ledger or performing some initial analytical review of balances.

Most answers focused on manual systems or the audit of sales, as noted above. The key point to remember from the question is that detailed knowledge of how Computer Assisted Audit Techniques (CAATs) work is not required, as the study guide for this paper states. However, that does not mean questions using CAATs will not be asked in the exam. Basic knowledge of audit procedures possible with CAATs, as shown in this question, is an exam requirement.

Part (b)

Candidates were required to explain the problems of using audit software at a specific client and also to explain how to overcome each problem.

The requirement verbs for this section were explain and then explain again. The emphasis this time to warn candidates that problems had to be identified from the scenario, and that solutions had to be relevant to each problem and hopefully realistic.

Comments therefore identified problems such as copy files being provided by the client for the auditor may not contain complete data, because of poor systems or possibly lack of experience on the part of client staff.

A realistic solution was therefore for the auditor to verify the copying process. However some comments mentioned that use of audit software was expensive, but did not state why this was the case or provide a solution such as deferring use of software until the client implemented a new system allowing a longer period of time for implementation payback.

Candidates could obtain the 8 marks on offer by explaining four problems and solutions. As with many other questions there was no limit to the number of procedures that could be mentioned.

Common errors and reasons why those errors did not obtain marks included

As for part (a), the standard for this section was inadequate. Many answers were brief and failed to relate points to the scenario itself. As indicated above, some standard candidates tended to state points clearly and succinctly, gaining marks quickly. Other candidates tended to provide relatively long and unfocused answers, indicating lack of knowledge in this area.

Part (c)

Candidates were required to explain the concept of auditing “around the computer”.

Unfortunately, this issue did not appear to be understood by the majority of candidates. Most answers focused on explaining how CAATs were used in auditing computer systems or how auditors could still use entirely manual audits but without reference to the risk of reliance on (untested) computer systems. However, some useful diagrams explaining the process of audit around the computer were provided showing that the term was known.

Candidates could obtain the 3 marks on offer by explaining the term in the question and then giving examples of the risk of auditing around the computer.

Common errors and reasons why those errors did not obtain marks included:

Again, the standard of answers was inadequate.