This 20-mark question was based on Hawthorn Enterprises Co and tested candidates’ knowledge of financial statement assertions and substantive procedures.

Part (a) was for eight marks in total and comprised of (ai) which required four financial statement assertions relevant to classes of transactions and events and part (aii) which required an example substantive procedure for each assertion identified which would be relevant to the audit of revenue.

This question was unrelated to the scenario and was knowledge based, and candidates’ performance was unsatisfactory.

Financial statement assertions are a key element of the F8 syllabus and so it was very disappointing to see that a significant minority of candidates do not know the assertions relevant to classes of transactions and events.

A significant proportion of candidates provided existence and valuation which were irrelevant as these are assertions relevant to account balances. Where candidates did correctly identify the assertions they often failed to explain them adequately or did so with reference to assets and liabilities rather than transactions.

Also many explanations were too brief or simply repeated the assertion, such as, “accuracy ensures the amounts in the financial statements are accurate”.

A number of candidates provided example procedures which were not relevant when testing revenue, but instead focused on receivables or purchases.

This can only be due to a failure to read the question requirement properly. In addition many procedures were vague or incomplete, such as agreeing goods despatch notes to sales invoices but not then agreeing the invoices to the sales day book.

Also many of the procedures were tests of control rather than substantive procedures. The direction of the occurrence and completeness tests were often confused resulting in incorrect procedures.

The direction of occurrence tests should generally start at accounting records, whereas completeness procedures should begin at source documents.

The remainder of the question provided candidates with three short scenarios detailing matters that had been brought to attention prior to the audit fieldwork and candidates were expected to produce appropriate substantive procedures relevant to each matter.