SINGAPORE QUALIFICATION PROGRAMME EXAMINER'S REPORT
MODULE: Assurance
EXAMINATION DATE: 15 December 2015
Section 1
Module performance
Written Examination
Number of Candidates who attempted the paper
Pass rate
Highest overall mark
Lowest overall mark
Median mark
44
48%
56
15
44
Overall Results (incorporating PD workshop marks)
Pass rate
Highest overall mark
Lowest overall mark
Median mark
48%
59
27
50
Section 2
General comments
The overall performance of the Candidates was below expectations. Despite receiving
general feedback that the examination paper was perceived to be not as difficult as the
previous examination paper, the quality of the answers had in fact deteriorated. Candidates
should provide more details in the audit procedures. Providing generic answers such as
“review source documents” will not earn any marks. Audit procedures should also be
logically arranged where appropriate.
Section 3
Analysis of individual questions
Question 1
Question 1 focuses on audit procedures used to verify various consolidation elimination
transactions, including intra-group sales, receivables and payables, unrealised profit, and
goodwill. Generally, most Candidates were able to describe the procedures. However,
Candidates could have included more details instead of just stating the assertions.
Quite a number of Candidates quoted specific paragraphs of SSA which were not required.
Some answers were directly lifted from the Candidate Learning Pack without customising to
the specific situations in the case.
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Question 1(f) and (g) – Candidates could have improved their answers by describing the
impact of the misstatements on the group statement of financial position and income
statement.
Question 2
Question 2 relates to an audit client attempting to solicit a second opinion to influence the
auditor’s judgment.
Question 2(a) requires Candidates to discuss the ethical threat that the auditor faces when
the client intends to seek a second opinion on the audit issues. Most Candidates correctly
identified intimidation threat without any elaboration.
Question 2(b) requires Candidates to discuss the ethical threats the audit firm that provides
a second opinion could face. Those Candidates that correctly identified this as a second
opinion engagement were able to discuss the ethical threats and safeguards well.
Question 2(c) was poorly answered by most Candidates. Many failed to recognise that the
issue is the lack of sufficient appropriate evidence to verify validity of sales, i.e. limitation on
scope of audit. Given the case stated the potential effect is material and pervasive, the
appropriate opinion should be disclaimer of opinion. Most proposed an adverse opinion
which is appropriate in the case of material and pervasive misstatements.
Furthermore, the case clearly stated the company is NOT a Singapore registered company.
Thus, it is not subjected to Singapore Companies Act. However, most candidates referred to
the Act in the audit opinion. This could be due to Candidates lifting the opinion paragraph
directly from the auditing standards or Candidate Learning Pack without customising it to
the situation in the case.
Question 2(d) – This requirement tests Candidates’ knowledge on SSA 710 – Comparative
Information – Corresponding Figures and Comparative Financial Statements, and
specifically, how a prior year’s audit issue that continued to affect the current year’s audit
opinion should be reflected in the audit report. Candidates lost marks by not mentioning
this in the basis paragraph, that the problem arose last year and caused the prior period’s
audit opinion to be modified.
Question 2(e) – Most Candidates correctly identified limitation on scope as a reason for not
accepting the nomination. However, few Candidates discussed the potential effect of the
limitation being material and pervasive and thus lost precious marks. Not many Candidates
were able to identify a second reason which is the concern on management integrity.
Question 2(f) – Most Candidates correctly referred to SSA 510 – Initial Audit Engagements –
Opening Balances but failed to use the information from the case – the inability to review
the working papers of the predecessor auditor, resulting in a source of evidence is
unavailable.
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Question 2(g) - This question requires Candidates to describe audit procedures to verify
inventory quantity as at 1 December 2015. Most Candidates were able to describe
procedures in relation to attending a current count and conducting a roll back. Some
Candidates failed to focus on the “quantity” aspect, and described procedures to verify
“valuation”.
Question 3
Question 3(a) – Most Candidates were able to identify the inadequacies in the test count
performed by the audit staff at Warehouse East, i.e. did not test for existence and did not
examine the contents in the boxes.
Question 3(b) – Most Candidates were able to provide satisfactory answers to this
requirement.
Question 3(c) – Most Candidates were able to use FRS 18 – Revenue to discuss the transfer
of risk and reward of ownership of the goods in justifying whether the customer-reserved
inventories should be included as closing inventories or not. Very few Candidates used the
“Bill and Hold” sales arrangement in FRS 18 to elaborate further.
Question 3(d) - Those Candidates that identified the customer-reserved inventories could be
“Bill and Hold” were able to provide more details in the audit procedures to be performed.
Question 3(e) - Most candidates failed to mention the need to stop the stock count
immediately and request the client to restart the count in a proper manner. Most
Candidates also did not provide JUSTIFICATION as stated in the requirement.
Question 3(f) - Most Candidates correctly described procedures to confirm the reliability of
the estimation method used by the client.
Question 3(g) - This requirement is generally well-answered.
Question 3(h) – Candidates generally were able to describe the use of documents such as
Purchase Orders (POs), Goods Received Notes (GRNs) and supplier invoices to reconstruct
the inventory cost. However, some Candidates used the above-mentioned documents
interchangeably which shows that there was a lack of understanding on the differences
amongst these documents.
Question 3(i) - This requirement is generally well-answered.
Question 4
Question 4 is on an internal audit assignment for a non-assurance client. The client has
requested the audit firm, DEKP, to perform specific procedures and report on factual
findings.
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Question 4(a) requires Candidates to describe the specific procedures in five parts, (i) to (v).
Question 4(a)(i) requires Candidates to describe the procedures to confirm whether there
are any fictitious tutors.
Many Candidates suggested checking HR records with no other procedures. This would not
be sufficient to gain all 3 marks.
Question 4(a)(ii) requires Candidates to describe procedures to identify ex-tutors who
continue to receive salary payment. Logically, the procedures should first identify tutors
who have left during the year – this should form the population for further testing. The next
step should be to determine their last day of service and then examine payroll records after
their last day to see if any of them continue to be paid even after their last day of work.
Most Candidates did not perform any procedures to identify ex-tutors. This shows that the
level of logical thinking and professional reasoning is poor.
Q4a(iii) asks for the follow-on procedures from Q4a(ii) – if there are ex-tutors who continue
to receive salary after they have left, the loss to the client is the amount that these ex-tutors
have received. The requirement is to quantify the loss. Most could not answer this
requirement satisfactorily.
Q4a(iv) and Q4a(v) – Most Candidates were able to provide appropriate procedures.
Question 4(b) - Quite a number of Candidates did not correctly conclude that this is an
agreed-upon-procedures engagement and thus failed to refer to SSRE4400 – Engagements
to Perform Agreed-Upon Procedures Regarding Financial Information and consequently
failed to obtain any marks for this question. Some Candidates incorrectly stated that this is
negative assurance engagement when the client did not ask for any assurance.
Question 4(c) focuses on controls that PREVENT unauthorised use of agents. Some
candidates suggested controls that DETECT unauthorised use of agents and some answers
did not address the issue at all.
Question 4(d) - Most Candidates answered this question well.
Question 4(e) - There are two parts to this question. Firstly, to discuss the ethical issues.
Secondly, to discuss whether the client’s request is possible or strictly prohibited. Most
Candidates were able to discuss the ethical issue which is significant familiarity threat
affecting objectivity. However, few Candidates were able to relate to the case that the
engagement is not an assurance engagement but an agreed-Upon procedures engagement.
Many failed to discuss SSRE 4400.7 that provides guidance on such independence issues.
Some Candidates were confused and stated that the firm should not accept the audit
appointment when the case is not about an audit appointment.
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