This 30-mark question was based on a toy manufacturer, Tinkerbell Toys Co (Tinkerbell), and tested candidates’ knowledge of tests of controls, substantive procedures for receivables and revenue and fraud.

Part (a) for 12 marks required candidates to recommend six tests of controls for the sales cycle of Tinkerbell as well as the objective for each test.

Most candidates performed inadequately on this part of the question. The main problems encountered were that candidates struggled to differentiate between tests of control and substantive tests and hence often provided long lists of substantive procedures, which scored no marks.

In addition a significant minority of candidates did not read the question carefully, and instead of providing tests of controls, gave control procedures management should adopt. This scored no marks.

The approach candidates should have taken was to firstly identify from the scenario the controls present for Tinkerbell, they then should have considered how these controls could be confirmed by the auditor. In addition candidates’ explanations of tests were vague such as; “check that credit limits are set for all new customers.”

This procedure does not explain how the auditor would actually confirm that the control for new customer credit limits operates effectively. Tests that start with “check” are unlikely to score many marks as they do not explain how the auditor would actually check the control. Future candidates should practice generating tests; both substantive and tests of controls, which do not start with the word “check”.

The second part of this requirement was to explain the objective of the test of control provided. Again, this was not answered well. A common answer was to state that the objective was “to ensure that the control is operating effectively.” This was far too vague. All tests of controls are looking to verify that controls are operating effectively.

Instead, candidates should have considered the aim of the specific control being tested. Therefore the objective of a test over credit limits is “to ensure that orders are not accepted for poor credit risks”.

As noted in previous examiner’s reports candidates are often confused with the differences between tests of controls and substantive tests. Both are methods for obtaining evidence and are key elements of the F8 syllabus.

Future candidates must ensure that they understand when tests of controls are required and when substantive procedures are needed. They need to learn the difference between them and should practice questions requiring the generation of both types of procedures.

In addition, the question asked for six tests of controls and objectives, however many candidates provided much more than the required six points. It was not uncommon to see answers which had eight to ten points.

Whilst it is understandable that candidates wish to ensure that they gain credit for six relevant points, this approach can lead to time pressure and subsequent questions can suffer. A significant number of candidates presented their answers in a columnar format and this seemed to help them to produce concise and relevant answers.