ACCA F8 考試：MATTER OF OPINION (Part 3)

Earnings per share (EPS)

The second issue is that of the EOM paragraph. Ask the question referred to earlier: does the scenario refer to a disclosure made in the financial statements concerning an uncertain future event? Clearly the answer is no. Therefore, an EOM paragraph is not appropriate.

If this is the case how should the matter be dealt with? Well, go through the same questions again. First, is there a misstatement?

The directors have failed to disclose the EPS for the year. This contravenes both IAS 33, Earnings per Share and (in the UK) FRS 22, Earnings per share, which require the basic and diluted EPS to be disclosed in the financial statements of all listed companies. There is, therefore, a misstatement in the financial statements.

Next we consider whether the matter is material. The clarified ISA 320, Materiality in Planning and Performing an Audit requires the auditor to consider the informational requirements of the users. EPS is a vital investor analysis tool and can therefore be considered material by nature. For listed companies, it is a requirement of financial reporting standards that EPS is disclosed with prominence in the financial statements. There is therefore a material misstatement in the financial statements.

Finally the auditor should consider whether the matter is pervasive to the financial statements. The lack of disclosure of the EPS ratio is unlikely to render other elements of the financial statements unreliable; it is an isolated error. In this instance a qualified opinion should be given on the basis of a material misstatement of the financial statements.

APPLICATION TO THE PAPER F8 EXAM

The concepts considered above are equally as relevant to the Paper F8 exam. However, the wording of the questions to date has been slightly different from the Paper P7 exam. So far candidates have been provided with short scenarios and asked to either state or explain the effects of the matters on the audit report. The approach discussed above may be applied in the same way to these questions.

The matters considered so far (in the December 2007 and December 2009 exams) include: a failure to depreciate non-current/fixed assets, an auditor not being able to attend the year-end inventory/stock count, and a failure to disclose a contingent liability in the financial statements.

Candidates should also prepare for questions requiring them to define or explain the terms referred to above.

This style of requirement is illustrated in Question 2 from the June 2009 exam paper.

CONCLUDING THOUGHTS

Audit reports are a fundamental part of the auditing process and are therefore significant for audit students at all levels. This will continue to be a regular exam topic.

If you do struggle with these questions it is NOT a good strategy to suggest every possible form of opinion hoping that one of them will be correct.

Auditing requires critical appraisal, the use of professional judgement and the ability to offer a reasoned opinion.

By asking yourself a series of simplified questions you will go through a critical thought process that allows you to come to your own conclusion and, more importantly, offer your own opinion.

This will undoubtedly allow you to present an answer that stands out from the others.

Simon Finley is an audit subject specialist at Kaplan Publishing

Last updated: 20 Apr 2015