In this tutor interview series, we chat with ACCA Audit and Assurance tutor Erin Morton and get her expert tips on what you need to do to pass the Audit and Assurance exam.
ACCA Audit and Assurance (formerly F8) often feels very alien to students, but it’s not as difficult as you think. A lot of students don’t pass Audit and Assurance the first time, but that’s because they approach the paper in the wrong way. There are some questions that catch people out every single year and some key exam techniques students need to know to pass.
We sat down with expert tutor Erin Morton to find out everything about ACCA Audit and Assurance, so you can increase your chances of a first-time pass. In particular, Erin shares a number of examples and tells us how you might approach those questions in the exam, as well as sharing her top tips on the ACCA Audit and Assurance exam technique. Read on if you want to know how to pass.
Introducing How to Pass ACCA Audit and Assurance
Learnsignal: Hi Erin! Thanks for taking the time to chat this morning. So, ACCA Audit and Assurance. Not a paper most students love…
Erin: No, it’s not! It has some of the lowest pass rates, and it definitely has a reputation for being boring and difficult. Students walk into my classroom convinced that it’s difficult to pass ACCA Audit and Assurance – but that doesn’t have to be the case. The reputation a paper has is often about the tutor.
If you have someone passionate, knowledgeable and approachable teaching you, you might just find you enjoy it. It’s really important to start with the basics on this paper. I’m famous for always starting my lectures with stick men – explaining the terms in a really simple way. It’s a bit silly, but the point is to make the course approachable. Start at the beginning and build up – then it isn’t nearly as complex as students think.
Learnsignal: Let’s start at the beginning then. What’s ACCA Audit and Assurance about?
Erin: Audit and Assurance is predominantly focused on teaching the skills students need to be an external auditors. Then there’s a smaller chunk on internal audit, and a smaller chunk again on corporate governance in how it relates to audit. The ACCA are really hot on corporate governance, so it pops up on a lot of papers.
…ACCA Audit and Assurance is testing whether you have the skills and the mentality to be an external auditor…
In that sense it’s a really practical paper – it’s about the skills you’d need, the mentality you’d have and the tasks you’d do as an external auditor.
A lot of students get worried and think you need audit experience to pass ACCA Audit and Assurance but that’s a bit of a misnomer. In fact, I’ve seen plenty of actual auditors fail Audit and Assurance because they were complacent about studying for it. You often find students without much audit experience do better actually, just because they really focus on learning the material and the exam techniques. Complacency fails exams!
…I’ve seen plenty of actual auditors fail Audit and Assurance because they were complacent about studying. Often students without audit experience are more likely to pass.
Learnsignal: What’s the ACCA Audit and Assurance exam structure?
Erin: Section A is worth 20 marks and is made up of multiple-choice questions (MCQs), and Section B has four 10-mark questions and two 15-mark questions. MCQs are much quicker and more factual – simple knowledge-based questions – but the bulk of the paper is based on scenarios. It’s about putting yourself in the auditor’s shoes and explaining what you’d do and how you’d do it.
To pass ACCA Audit and Assurance you must put yourself in the auditor’s shoes.
As of September 2016, the format is changing slightly though although the principle is the same as above. To pass ACCA Audit and Assurance you have to demonstrate the ability to think and act like an auditor.
Learnsignal: How do the scenario questions work?
Erin: A typical scenario that comes up quite regularly is where an external auditor has gone to visit a client and has been reviewing the accounting systems the client uses. You might be asked, for instance, to identify any deficiencies in their control systems and make recommendations to improve those systems.
For example, you might be looking at the purchase cycle and be told the client selects their suppliers on an ad hoc basis.
You’d highlight something like that and suggest that they might not be getting the best quality or price because the process lacks rigour. Then you might recommend they establish a list of preferred suppliers.
… A typical scenario asks you to review an element of the client’s accounting systems, identify deficiencies and recommend improvements…
It’s like that. You’ll be given some pertinent facts and you’re expected to interpret the situation wearing your auditor hat. At root, your role is about looking for calculation errors, discrepancies, fraud and so on; checking balances are fairly presented.
The end result is to confirm that everything a company is doing from a financial perspective is “free from material misstatements”, in the official language.
To pass ACCA Audit and Assurance, you need to know the process you’d go through to reach that end goal. You’re expected to identify, interpret, analyse and make recommendations based on your knowledge of the syllabus. There might be some simple ‘stating’ of knowledge-based facts as well, but mostly it’s about how you apply your understanding.
Learnsignal: What questions or topics come up most often in the ACCA Audit and Assurance exam?
Erin: Ethics comes up regularly. As an auditor, the first thing you have to do is decide whether you could actually work for a client without putting yourself in an ethically compromised position.
…Ethics almost always comes up in ACCA Audit and Assurance…
A scenario might drop in a few ethical issues and you’d have to identify them and recommend what you should do. For instance, you might be told that your client still hasn’t paid their previous auditors. You’d be expected to identify that as a potential ethical threat or risk because you might be encouraged to do something unethical to guarantee your own payment.
Audit Risk is about identifying potential pitfalls for you, as an auditor.
Audit Risk is a big one that comes up in every ACCA Audit and Assurance exam – and it’s a question that so many students do badly on. Audit Risk is about the audit plan you’d do after signing an Engagement Letter – it’s the first step once you and the client have agreed to work together. Basically, it’s about looking critically for potential pitfalls for you, as the auditor.
… Audit Risk is a question that comes up every year, and every year many students make the same mistake and misinterpret the question. You’re more likely to pass ACCA Audit and Assurance if you get your head around Audit Risk…
That’s really important. It’s picking up on potential risks that you, the auditor, might not be able to complete your job properly.
For example, a typical audit risk might be that the client has asked you to complete the audit within two months of year-end. This might mean that you have to rush to meet deadlines, resulting in you cutting corners or working such long hours that your concentration suffers and you miss important details.
… Many students go wrong because they write the answer from the perspective of the business, not of the auditor…
Where so many students go wrong is that they write the answer from the perspective of the business. ‘This is a business risk because…’ rather than ‘this is a problem for the auditor because…’.
So much of the paper is about identifying problems the clients might have, but this question is the opposite.
Audit Risk has been in every paper in the last six years except one. In June 2012, they left an Audit Risk question out of the paper and the pass rates jumped right up to 56%. Mostly, you’re more likely to pass ACCA Audit and Assurance if you get your head around Audit Risk. It’s that important.
…Internal Audit is another question that comes up frequently on the ACCA Audit and Assurance paper…
Then there’s Internal Audit. It pops up in every couple of ACCA Audit and Assurance papers, probably as a 10-mark question. An internal auditor is fundamentally a different job to an external auditor – it’s not just an external auditor who sits internally! The role is focused on assessing controls and systems and identifying business risk. So that’s a key thing students need to know.
You’re most likely to be tested on what an internal auditor does and be asked to identify and discuss the differences between an internal and external auditor. You should also be able to discuss the advantages and disadvantages of hiring an internal auditor through an external audit firm.
Finally, there’s corporate governance. This comes up in every few exams, so if you want to pass ACCA Audit and Assurance it’s worth studying. You should have a strong overview of corporate governance, and the big focus will be on the audit committee. What an audit committee is, what it does, why you should have one; that sort of thing.
Learnsignal: You mentioned Audit Risk. Are there any other topics students tend to do badly in?
Erin: A lot of ACCA Audit and Assurance students really dislike audit procedures and in particular, substantive testing. These are the actual methods the auditor would use to identify material misstatements in the financial statements. So you might be given a scenario and asked to describe the appropriate substantive audit procedure for a particular balance in the financial statement.
…Audit Procedures are another area students struggle with. Students should design the test as a clear instruction, so someone external could pick it up and implement the advice…
For example, if you were looking at a receivables balance, one substantive test you’d want to do is to send out a circularisation letter to a sample of customers.
You’d be asking them to confirm what their balance was at the year-end, so you could compare it to the company accounts and highlight any potential discrepancies.
Many students struggle with this aspect of ACCA Audit and Assurance because it is so practical. With limited practical experience, you’re unlikely to answer well without enough practice. The best advice I can give students is to design the test as a clear instruction, so someone external could pick it up and implement your advice.
Clear communication is critical if you want to pass ACCA Audit and Assurance, not just to this type of question.
Learnsignal: How can students demonstrate clear communication?
Erin: Make sure you plan carefully. This paper is narrative, so there’s a lot of writing. Look at the requirements and mark availability and work out how much time you have for the question. Then structure your answer properly. You should write a point, leave a space; write a point, leave a space. Don’t worry about the ACCA’s budget for paper!
(Source) The ACCA have an endless budget for paper… Use it!
Making the marker’s life easier makes your life easier. It’s all about that first impression: the marker can generally tell if it’s going to be a good paper or not immediately. Use the terminology you’ve been taught, be as clear as possible, be structured, and use headings.
For example, if I was asked to identify ethical risks and make appropriate recommendations, I’d set up two columns, with the ethical risk on one side and the corresponding recommendation on the other.
You have to remember, that the ACCA is designed to train you to become the best accountant possible. To be a really good accountant, it’s not just about numbers.
It’s really important to be able to communicate complex ideas in a simple way. In your career, you’ll constantly be translating numbers into meaningful commercial insight for people who aren’t numbers-minded.
Learnsignal: Planning is critical, then!
Erin: Exactly! For time management too – if you plan your answers well you’re less likely to overrun specific questions. Make sure you use the 15-minutes reading time wisely. Although you can’t open your answer booklet during that time, you can make notes and plan your answers on your question booklet with a pencil.
…In your reading time, you could look through Section A and start answering some of the questions in pencil on your question book, so you have more actual exam time for the long questions…
I tell my students, to flick through section B and see which areas are covered up so it starts to process, but look through section A and start answering the MCQs.
You could get a lot of that done and planned before the exam starts because it will likely be easier. This then gives you more time for section B which takes longer and is worth more marks. Technically you have 36 minutes for section A but you could get them done well within that time and move on.
Learnsignal: That makes sense, thanks, Erin. Are there any other study tips you’d recommend to help students pass ACCA Audit and Assurance?
Erin: When you’re preparing for an exam, study in bitesize chunks rather than saying ‘I’m getting up and studying from 7am until 6pm’. Only a small proportion of what you do will ever go if you work like that.
… Study in bitesize chunks because you won’t take in information for long periods of time, even if you think you are. Focus on learning actively, not passively…
Set a two-hour session and focus on one topic. Do some reading, then maybe have a go at a question and see what you can write down. Review the suggested answer, review the notes again, and then try some MCQs on that area as well.
In the space of two hours, you’ve then been really quite productive, instead of wasting hours reading notes that don’t sink in. It’s about learning actively, not passively.
That’s what Learnsignal do really well. The way people are studying has changed a lot, because of the way people are working – flexible hours, longer hours and so on. A classroom environment doesn’t work for everyone anymore. Having a fun, online bitesize tool like Learnsignal is amazing.
It gives you the flexibility to jump in and learn at your own pace, in a way that fits around your life. Plus Learnsignal has some amazing tutors, who bring all the expertise you’d expect from a classroom. It’s a more convenient, flexible, efficient way of learning, with the same standard of knowledge you’d get from traditional learning.
Learnsignal: Erin, thank you so much. You’ve been amazingly helpful!
Erin Morton joined an audit firm straight out of school and started her AAT before moving on to study the ACCA and qualifying in 2003.
Erin worked with Mazars as an Auditor for nearly 8 years. She then went on to become a professional tutor with some of the most prestigious training providers in the world. Erin has 15 years of lecturing to date.