Wednesday 9 December 2009
Reading and planning:
ALL FIVE questions are compulsory and MUST be attempted.
Do NOT open this paper until instructed by the supervisor.
During reading and planning time only the question paper may be annotated. You must NOT write in your answer booklet until instructed by the supervisor.
This question paper must not be removed from the examination hall.
The Association of Chartered Certiﬁed Accountants
Paper F8 (INT)
Fundamentals Level – Skills Module
ALL FIVE questions are compulsory and MUST be attempted
(a) Explain the importance of audit planning and state TWO matters that would be included in an audit plan.
Redburn Co, a publisher and producer of books of poetry, has been a client of your ﬁrm of Chartered Certiﬁed Accountants for a number of years. The manager in overall charge of the audit has been discussing the audit plan with the audit team, of which you are a member, prior to commencement of the work. The audit manager has informed the team, among other things, that there has been a growing interest in poetry generally and that the company has acquired a reputation for publishing poets who are still relatively unknown.
During your audit you determine:
Contracts with the poets state that they are given a royalty of 10% on sales. Free copies of the books are provided to the poets and to some organisations such as copyright libraries and to others, such as reviewers and university lecturers. No royalties are given on these free copies.
(ii) The computerised customer master ﬁle contains a code indicating whether a despatch is to earn a royalty for the author. This code is shown on the sales invoice and despatch note when they are prepared.
(iii) A computerised royalties ﬁle is held, all entries therein bearing the invoice number and date.
(iv) The company keeps detailed statistics of