Acing Audit and Assurance

Updated: Jan 20

As a student I always preferred the numerical papers, numbers made sense to me. When it came to the discursive/narrative type exams I felt a part of my brain sigh in despair.


Allow me to enlighten you in how you can make the Audit and Assurance (AA) exam…….endurable.


There is a misconception that AA can be mundane and particularly difficult if you don’t work in Audit. This is not entirely true. Admittedly AA is ‘wordier’ than FAR, and it may help (a tiny bit) if you do work in an audit department. In fact, as an ACA trainee I worked mainly in accounts preparation, personally I didn’t feel particularly disadvantaged simply because I wasn’t working as an ‘auditor’.




Application

Much of the content in AA is common sense and easily understood. The key to passing the exam is not in regurgitating what you have learnt from your notes, rather it is the application of what you have learnt that will see you do well.


Take for instance the ICAEW code of ethics, you may be able to define each one exceptionally well but if you can’t spot an ethical issue in an exam question and explain it in the context of the case study provided, you won’t be answering the question set.


The examiner knows you have the open book text (OBT) to take with you into the exam room, simply copying a definition from your OBT will not merit many marks. Rather than spending endless hours reading and re-reading your notes on AA, focus your efforts on attempting questions and thoroughly reviewing the marking scheme. Word of caution, don’t feel overwhelmed by the comprehensive marking schemes. They are for revision purposes and illustrate every possible point you can score marks for, as opposed to a representation of what you should produce in the exam.


Using the OBT


If your long term memory is not particularly adept at holding the vast volume of information you learn in AA, rest assured it is all in the OBT (woohoo, I hear you say). Hold fire, I wouldn’t celebrate just yet. For starters I have just mentioned that the AA exam is largely testing application of knowledge, and secondly the OBT has over 1,700 pages (say what!). Unless you have spent some time carefully highlighting/tabbing the relevant paragraphs, navigating your way around the OBT under exam conditions can be unnerving.


That said, the OBT can prove a very useful contingency, especially if you blank out in the exam and can’t remember say, the threats to independence (ES Para 1.29 to the rescue!). However, don’t be overly dependent on it. It is so easy to waste away valuable time trying to locate an answer in the OBT, to the detriment of completing the remainder of the exam.


Short form vs. long form questions


The AA exam is sectioned into 6 short form questions (SFQs) ranging from 2-4 marks and contributing to 20% of the overall marks, with the remainder 80% attributed to 3 long form questions (LFQs). Short form means short form (duh), it’s okay to write short bullet point answers for these requirements, in fact this is specifically requested and encouraged by the examiner.


LFQs will also be broken down into sub-requirements, even for these requirements it’s okay to write in bullet points as long as you explain yourself. Students sometimes neglect the SFQs in preference of focusing on the LFQs as they make up more marks. However, I would advise committing some of your revision efforts to attempting SFQs, this will ensure you hone the technique of answering this requirement style, hence maximising your chances of picking up marks in the real exam.


Prepare to plan


Planning makes up 40% of the syllabus. Typically tested in the context of an audit engagement, the most common requirement will expect students to justify audit risks and suggest appropriate audit procedures. That said, other assurance engagements can also be tested, such as the review of forecasts or interim financial statements.


To do well in a planning question you must be skilful at extracting and interpreting the information provided. For instance, the best way to justify an audit risk is to link it to potential misstatements in the financial statements.


Let’s assume you are given information about a company where customers pay in advance for a service. If revenue is identified as an area of audit risk, the justification can be explained as follows: ‘Receiving revenue in advance from customers increases the likelihood of revenue being overstated, as it may not be deferred to the correct period’. To explain the audit risk I have simply extended my answer beyond saying it can be a misstatement, by stating how that misstatement may arise. You’ll see that this technique lends itself nicely to justifying the audit risks well.


Structure

There are simple things that you can do to make your answer an appealing read for the marker. For instance, consider using subheadings. As mentioned, planning questions typically require justification of audit risks and audit procedures, why not set these up as your headings. It immediately acknowledges to the examiner that you have answered all parts of the requirement.


Avoid writing lengthy paragraphs which lack ‘white space’. My advice is to use a bullet point for each separate point you are making (this applies to SFQs and LFQs, although as mentioned LFQs will warrant more detail). Keep your sentences clear, concise and avoid ‘waffling’, by that I also mean writing everything (and anything) you can think of in the hope you’ll get some marks! Unfortunately this strategy does not work (doh!).

Admittedly there is no secret formula to guarantee sure success for your AA exam, but if there is one thing that might make your chances of success less likely, it’s when you start to neglect this module in favour of revision for other modules you deem ‘more technical’ (Yes, I was guilty of this too). Don’t be fooled, students who do not commit sufficient time to AA often find they struggle in the real exam not because it’s ‘hard’, but simply because they did not expose themselves to practicing enough questions.

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