This 20-mark question was based on Pineapple Beach Hotels Co and tested candidates’ knowledge of financial statement assertions, substantive procedures and working papers.

Part (a) was for 8 marks in total and in (ai) required four financial statement assertions relevant to year end account balances and part (aii) required an example substantive procedure for each assertion relevant to the audit of inventory. This question was unrelated to the scenario and was knowledge based, and candidates’ performance was on the whole unsatisfactory.

Financial statement assertions are a key element of the F8 syllabus and so it was unsatisfactory to see that a significant minority of candidates do not know the assertions relevant to account balances; with many giving incorrect assertions of accuracy and cut-off which are relevant to classes of transactions rather than account balances.

Where candidates did correctly identify the assertions they often failed to explain them adequately or did so with reference to transactions rather than assets and liabilities.

A number of candidates provided example procedures which were not related to inventory, but instead focused on non-current assets or receivables. This can only be due to a failure to read the question requirement properly.

In addition many example procedures were not relevant to the linked assertion, for example giving an existence test for confirming valuation. Also many of the procedures were vague such as “check inventory is valued at the lower of cost and net realisable value” without explaining how we would confirm this.