CAP2 AA exams: examiners’ comments
May 03, 2023
What better way to prepare for your exams than guidance from the examiners themselves? Garrett Mulvin outlines the examiners' comments for your CAP2 Auditing and Assurance exam
CAP2 Auditing and Assurance (AA) candidates will take their summer examination on 27 June.
It is well signposted that this paper will consist of a compulsory case study and three further parts, of which students should complete two.
A review of the CAP2 competency statement, recent CAP2 Professional Examination Committee (PEC) reports and the four AA sample papers provides candidates with a roadmap as to what is required to achieve a passing score.
This article offers a reminder of the examinable topic areas and some helpful examiner comments.
Risk
Risk is a keystone of the audit process and will feature in the AA exam.
At the very least, students must
be prepared to identify business and audit risks specific to the available exam background information. Simply copying generic risks from a textbook will score very few marks.
Candidates are frequently asked to identify reasons as to why audit risk may exist regarding a particular financial statement line item, or they may be presented with a set of current-year financial statements and prior-year comparatives. When assessing risk in such cases, the examiner states that a good starting point would be “considering the key movements in the financial statements provided”.
Audit evidence and procedures
Substantive testing, analytical testing and controls testing are central to the auditing and assurance process and the AA exam. Knowledge of the applicable International Standards on Auditing (ISA) is important.
It is also not possible to audit a financial statement line item if you do not understand the appropriate accounting treatment (IAS and IFRS) for the item in question.
The examiner's comments state that “students need to be confident in their understanding of basic accounting concepts”. As an insight into improving recent candidate performance, the examiner says that when evaluating an accounting treatment, students must look to “provide a better-rounded answer” as to their rationale rather than “going straight to a conclusion”.
Corresponding adjusting journal entries will also be required of candidates.
The exam will contain questions set in a very practical context, and it should be expected that audit evidence provided will come in the form of supporting client documentation, for example.
Candidates should be prepared to “demonstrate an appropriate sufficient level of professional scepticism”, says the examiner, when assessing client documentation.
Similarly, candidates may be required to review the audit work performed by a junior member of the audit team. Candidates should be prepared to scrutinise the quality of the audit evidence used by the audit junior and to suggest more appropriate audit evidence to be obtained.
Audit reporting
Candidates need to understand the principles underpinning audit reports and be able to distinguish between unqualified, modified and qualified audit reports.
It is important that students use the background information provided to support their conclusion regarding the required audit report type.
Recent examiner reports have confirmed that students who “successfully applied the tabular approach to audit report questions” tended to perform well in this area.
Ethics
Ethics is a recurring topic in the AA examination and a hugely important part of the life of a professional accountant.
Candidates must be able to demonstrate an understanding of how ethical issues can occur when preparing and auditing financial statements.
It’s important to be familiar with the ethical principles and the risks involved, and candidates need to be prepared to offer safeguards or actions that can counteract such issues.
In recent sittings of this exam, the AA examiner has been pleased to note that students who had appropriately prepared for the ethical requirement performed well.