JUNE 2024 EXAM PREPARATION GUIDANCE:

ASSURANCE
(Foundation Programme)

KEY THINGS TO NOTE

e-Exam techniques
Please note that you will not be able to upload excel attachments into the e-Exam
platform. You will need to copy and paste your answers from Excel/spreadsheet onto
your e-script and show your workings where necessary.

When answering essay type or qualitative questions, you are to type, format and
edit your answers directly on your e-script.

Only answers entered on your e-script will be marked.

You can still bring calculators permitted by the ISCA to the exam.

Exam techniques
As you progress in your study plan for this exam, the Institute of Singapore Chartered
Accountants (ISCA) has put together key things to do to improve your chances of
achieving a good grade. Candidates who do well in their exams tend to do the
following:

1. Spend at least 100 hours studying (excluding exam preparation) in your

studies. Refer to the Study Guide published on the ISCA website to ensure
that you have covered the Learning Outcomes for this module.

2. Attempt Mock Exam to familiarise yourself with the e-Exam platform if you
have never accessed the e-Exam platform before. Please refer to the
Examination Guidelines and Rules Document under the e-Examinations and
Remote Proctoring section of the ISCA website for information on the e-Exam
platform.

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3. During the exam, allocate appropriate amount of time according to the
marks on each question.

4. Go through Examiner Guides for past semesters.

5. Have a good understanding of the entire syllabus. Only then will you be
able to spend additional time in a meaningful way on the following areas
for the exam coming up on Tuesday, 25 June 2024:

The focus of the exam is the core topics throughout the process of an audit of financial
statements. Based on past examination performance, Candidates performed better at
the testing stage of the audit (i.e. test of details and test of controls) and reporting
stage than the appointment stage and planning stage.

Candidates should be familiar with the requirements and guidance in the following
auditing standards and technical pronouncements relevant to the appointment stage
and planning stage of an audit of financial statements.

Appointment stage
Auditor is required to consider the following factors when deciding whether to accept
an audit appointment:

• SSQM 1
The integrity and ethical values of the client, including management and, when
appropriate, those charged with governance;

The firm’s ability to perform the engagement in accordance with professional

standards and applicable legal and regulatory requirements.

• ISCA Code
The ISCA Code includes requirements for the consideration of conflicts of interests
in accepting or continuing a client relationship or specific engagement and

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 communication with the existing or predecessor firm when accepting an
engagement that is an audit or review of financial statements.

• SSA 210
SSA 210 requires the auditor to agree the terms of the audit engagement with
management and, where appropriate, those charged with governance. This
includes establishing that certain preconditions for an audit, responsibility for which
rests with management and, where appropriate, those charged with governance,
are present.

Planning stage
• SSA 320
SSA 320 requires the auditor to determine materiality for the financial statements
as a whole (thereafter known as “materiality”). Para A4 to A8 of SSA 320 provides
guidance on the determination of materiality, including selecting an appropriate
benchmark and determining a percentage to be applied to a chosen benchmark.

• SSA 315
SSA 315 deals with the auditor’s responsibility to identify and assess the risks of
material misstatement in the financial statements.

The risks of material misstatement may exist at two levels:

o The overall financial statement level; and

o The assertion level for classes of transactions, account balances and
disclosures.

Risks of material misstatement at the financial statement level

Risks at the financial statement level relate pervasively to the financial statements as
a whole and potentially affect many assertions. For example, management under
pressure to secure further financing to maintain working capital increases the
susceptibility of misstatement due to fraud risk factors that affect inherent risk (i.e., the
susceptibility of the financial statements to material misstatement because of the risk
of fraudulent financial reporting, such as overstatement of assets and revenue and
under-statement of liabilities and expenses to ensure that financing will be obtained).

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Other events or conditions that may indicate risks of material misstatement at the
financial statement level include:

• Lack of personnel with appropriate accounting and financial reporting skills.

• Control deficiencies – particularly in the control environment, risk assessment
process and process for monitoring, and especially those not addressed by
management.
• Past misstatements, history of errors or a significant amount of adjustments at
period end.

SSA 330 requires the auditor to design and implement overall responses to address
the assessed risks of material misstatement at the financial statement level.

Overall responses to address the assessed risks of material misstatement at the

financial statement level may include:

• Emphasising to the audit team the need to maintain professional scepticism.

• Assigning more experienced staff or those with special skills or using experts.
• Changes to the nature, timing and extent of direction and supervision of
members of the engagement team and the review of the work performed.
• Changes to the overall audit strategy, such as the determination of performance
materiality.

Risk of material misstatement at the assertion level

SSA 200 explains that risks of material misstatement are assessed at the assertion
level in order to determine the nature, timing and extent of further audit procedures
necessary to obtain sufficient appropriate audit evidence.

Risks of material misstatement at the assertion level consist of two components,

inherent and control risk.

For the identified risks of material misstatement at the assertion level, a separate
assessment of inherent risk and control risk is required by SSA 315.

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An example in relation to inherent risk is changes in regulation may cause the fixed
assets of a company to be replaced earlier than initially expected. This relates to the
valuation of assets in terms of revision to the useful life and impairment allowance.

An example in relation to control risk is weak physical controls over inventory

increases the risk of material misstatement of inventory in relation to existence.

SSA 330 also requires the auditor to design and perform further audit procedures
whose nature, timing and extent are based on and are responsive to the assessed
risks of material misstatement at the assertion level.

An example of a modification to the audit procedure in response identified risk is as

follows:

• The auditor may request external confirmation of the terms of agreements,

contracts, or transactions between an entity and other parties. External
confirmation procedures also may be performed to obtain audit evidence about
the absence of certain conditions. For example, a request may specifically seek
confirmation that no “side agreement” exists that may be relevant to an entity’s
revenue cut-off assertion.

Subsequent Events
Candidates should know that there are differences between the events after the
reporting period in the FRS 10 – Events After the Reporting Period and the subsequent
events in SSA 560 – Subsequent Events.

In FRS 10, events after the reporting period are those events, favourable and
unfavourable, that occur between the end of the reporting period and the date when
the financial statements are authorised for issue.

In SSA 560, subsequent events are those occurring between the date of the financial
statements and the date of the auditor’s report, and facts that become known to the
auditor after the date of the auditor’s report.

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Furthermore, SSA 560 differentiates the subsequent events as follows:

1. Events occurring between the date of the financial statements and the date of the
auditor’s report;

2. Facts which become known to the auditor after the date of the Auditor’s Report but
before the date the financial statements are issued; and

3. Facts which become known to the auditor after the financial statements have been
issued.

The following diagram depicts the differences:

Year- FS authorisation for issue

end date
date
FRS
10

Year- Audit report date FS issue

end date
date
SSA
560

As illustrated in the above diagram, auditor’s responsibilities in relation to subsequent

events go beyond the date of the auditor’s report. Briefly, auditor has a duty to perform
audit procedures in relation to material adjusting events and material non-adjusting
events up to the date of the auditor’s report (SSA 560 para 6).

After the date of the auditor’s report, the auditor has no obligation to perform any audit
procedures regarding the financial statements. However, the auditor is required to
respond if there are facts that become known to the auditor that, had it been known to
the auditor at the date of the auditor’s report, may have caused the auditor to amend
the auditor’s report (SSA 560 para 10 and 14).

For example, the Business Times in 2018 reported that the auditor of 1MDB retracted
the audit reports for financial years ended March 2010, 2011 and 2012 (i.e. not to rely

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on its reports over three years), as the auditor did not have access to relevant
documents that Malaysia's new government has since declassified. The withheld
information would have "materially impacted" the assessments had it been made
available to the auditor. This is an example of an auditor’s response when a fact is
known becomes known to the auditor that, had it been known to the auditor at the date
of the auditor’s report, may have caused the auditor to amend the auditor’s report. The
objective is to prevent reliance on the auditor’s report (SSA 560 para 17).

It is important that Candidates identify the subsequent event period and apply the
necessary procedures in accordance with SSA 560.

Common verbs used by the Examiner

Use the list of commonly used verbs (‘action’ words) attached to the back of the
examination paper to identify what the Examiner expects from your answer.

Practice and preparation are important

The duration of the forthcoming exam is 3 hours and 15 minutes, so time management
is critical to ensure that you can attempt all questions fully. As part of your exam
preparation, you should attempt the past papers under simulated exam conditions.

You should follow the presentation formats stipulated in the December 2023
examination paper when attempting past examination papers. The stipulated
presentation formats improve the ease of entering your answers in the e-Exam
platform. Also, it is essential to read the past Examiner’s Guides, including the
section on suggested solutions, to gain a good understanding of what is expected
by the Examiner. Read the Examiner’s Report section to ensure that you avoid
common mistakes made by previous Candidates.

We wish you every success in your learning journey!

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