AA Crocus 2021 mock

exam
Accessing your mock exam
This document contains your mock exam in the CBE practice software and you should read the
following instructions carefully before you start.
Note: As the practice software is new to the March exam, we will temporarily for March only, include
the PDF at the end of this document to support any students with technical difficulties on the mock day.

Using an Apple device?

If you are accessing the practice software on an Apple device, please contact ICAEW’s Student
Services Team as you will need an alternative process to accessing the software.

Access to the learning materials.

Some modules will have access to a clean PDF of the permitted texts, and open book exams will have a link
to a student’s personal ICAEW bookshelf. To view another window side-by-side use the following shortcut:

• Hold windows key and down arrow

Important information
• Visit www.icaew.com/cbe to access the more guidance about the exam software including the
blank software and frequently asked questions.
• Students must save their zip file in a folder that is outside of their One Drive and is not synched with
their One Drive.
• Read through all instructions before downloading the practice software.
• Some security settings may identify the download and/or extracting of the .zip file as a security risk. If
you do have a security message, you may need to contact your IT department to resolve this.
• Unzipping/Extracting the files from the .zip file can take time, please be patient.
• The spreadsheet area of both the practice and exam software does not get marked. Therefore, any
relevant information should be copied over from the spreadsheet area into the word processing area
before completing.
• The practice software will not save students’ progress. Once students have finished their question
practice, they can export the answers to all the exam questions on the final page

Guidance for offline access

Please note that these are general instructions; the specific steps may vary depending on the operating
system being usedi. These instructions can be sent to your students when you choose to set the mock
exams.

1. Download .zip file

a. Click ‘save’ and select ‘save as’. Make a note of where you have saved the .zip file, i.e. which drive (do
note save in your One Drive folder).

Offline Link Mock Username Password

http://elearning.icaew.com/training/aacrocusoffline.zip Crocus aacrocusoffline z8grxy

2. Unzip file contents

a. Navigate to the location of the saved .zip file
b. Open .zip file
c. Click ‘Extract all’, as below

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 When prompted, choose, or create a folder where the extracted files will be saved.

It is important that the folder name does not have any spaces in it, as this can affect the export function
later.

For example, the folder should be ‘ICAEWpracticesoftware’ and not ‘ICAEW practice software’.

3. Access test
a. Within the extracted folder, double click on ‘AssessmentMaster’ to launch the test:

When prompted, enter the username and password (found in the above table)

4. Exporting your answers

Once you have finished any question practice using the practice software, you can export your answers.

Note that only content within the word processing area will be exported.

Click through to the ‘exam summary’ page, as shown below

Read all the instructions on this page before pressing Export.

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When you do export your answers, all the word processing areas for each of the questions will be exported
within one PDF, and you will see the following message.

The PDF (titled PracticeTestResponse_xxx.pdf) will be saved within the folder where you originally extracted
the practice software to. The title of this folder should not contain any spaces, as this can interrupt the export
process.

For example, the folder should be ‘ICAEWpracticesoftware’ and not ‘ICAEW practice software’.
Once you click OK, you will be taken back to the log in screen.

You can exit the software in two ways:

1. Alt Tab out of the browser window, and then close Firefox down; or
2. Alt F4. This will open the pop up below. Click OK without entering anything and software will close.

5. Finally, please rename or move the exported PDF file that has just been exported. This will ensure
that the process correctly works the next time you wish to export your answers, otherwise your new
exported answers will be lost.

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PROFESSIONAL LEVEL EXAMINATION
2021
Crocus
(2.5 HOURS)

AUDIT AND ASSURANCE

This exam consists of four questions (100 marks).
Marks breakdown
Question 1 20 marks
Question 2 40 marks
Question 3 20 marks
Question 4 20 marks

1. Please read the instructions on this page carefully before you begin your exam. If
you have any questions, raise your hand and speak with the invigilator before you
begin.
2. Please alert the invigilator immediately if you encounter any issues during the
delivery of the exam. The invigilator cannot advise you on how to use the software.
If you believe that your performance has been affected by any issues which
occurred, you must request and complete a candidate incident report form at the
end of the exam. This form must be submitted as part of any subsequent special
consideration application.
3. Click on the right arrow in the header to begin the exam. The exam timer will
begin to count down.
4. A warning is given five minutes before the exam ends. When the exam timer
reaches zero, the exam will end. To end the exam earlier, navigate to the last
question and click the right arrow button. Click the Submit button to close the
exam.
5. Answer question one, consisting of six short-form questions, in note form only.
Complete sentences are not required.
6. You may use a pen and paper for draft workings. Any information you write on
paper will not be read or marked.
7. You must make sure your answers and workings are clearly visible in the word
processing area when you submit your exam. Only your answer in the word
processing area will be marked. You must copy over any data from the
spreadsheet area to the word processing area for marking. The examiner will
not be able to expand rows or columns where content is not visible.
8. The examiner will take account of the way in which answers are structured.
Respond directly to the exam question requirements. Do not include any content
or opinion of a personal nature, this includes your name or any other identifying
content. A student survey is provided post-exam for feedback purposes.

Copyright  ICAEW 2021. All rights reserved.

One question in this exam will require you to use data analytics software to help
you to answer the question.
Data analytics software link
In the real exam, the data analytics software will be accessible via a similar link
at the top of the screen.

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1.1 The audit fee in respect of the financial statements for the year ended 31 March
2019 of Jasper plc (Jasper), an external audit client of Blake Lowe LLP (Blake
Lowe), is eight months overdue.

Explain why this matter should be considered by Blake Lowe in deciding whether
or not it is appropriate to continue to act as external auditor to Jasper. (2 marks)
1.2 Able Cole LLP (Able Cole) is the external auditor of both Ash Ltd (Ash) and Oak
Ltd (Oak). Oak is a customer of Ash. During the planning meeting for the external
audit of Oak for the year ended 31 March 2019 the engagement partner
discovered, from a conversation with the finance director, that Oak's bank was
likely to withdraw the overdraft facility. Oak owed a substantial amount to Ash at
31 March 2019 and the whole of this amount is still outstanding. Able Cole is
finalising the audit of Ash for the year ended 31 March 2019 because the
company's bankers require the audited financial statements by
30 June 2019 in accordance with the terms of the overdraft facility.

Explain the professional and ethical issues facing Able Cole in respect of the
audits of Ash and Oak and outline the safeguards that should already be in place
to address these issues. (4 marks)
1.3 During the external audit of Athenza Ltd (Athenza), which operates a chain of
beauty salons, the audit senior discovered that the managing director, who owns
all the shares, regularly collects cash from customers and does not include any
details relating to these transactions in the accounting records of Athenza.

Explain the audit senior's and the audit firm's responsibilities in respect of this
matter. (4 marks)
1.4 Set out the purposes of exercising quality control procedures in the conduct of an
assurance engagement. (3 marks)

1.5 Your firm has been invited by John Vector, the managing director and majority
shareholder of Vector Ltd (Vector), to accept appointment as external auditor. The
client acceptance procedures have identified a recent newspaper article which
provides details of court proceedings relating to an alleged fraud committed by
John Vector.

Explain why this matter should be considered when deciding whether or not to
accept the appointment as external auditor of Vector. (3 marks)

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1.6 You are the auditor of Jottings Ltd, a manufacturer of calendars, diaries and
notebooks. As part of planning the forthcoming audit, you have obtained the
following dashboards:

Inventory dashboard as at 30 April 2019

Number of Items Held in Inventory

1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
<30 days 30-59 days 60-89 days >90 days Total
Age of Inventory

Balance outstanding 28 February Inventory Issued March-April Balance outstanding 30 April

Inventory held January to March 2019

Number of items held as inventory

300,000
250,000
200,000
150,000
100,000
50,000
0
December January February March

Notebooks for resale Raw material: paper Raw material: leather

Justify whether inventory is a key audit risk and describe the procedures that
should be included in the audit plan in order to address that risk. (4 marks)
Total: 20 marks
QUESTION 1.6 COMPLETES THE SHORT-FORM QUESTIONS
LONG FORM QUESTIONS (2–4) FOLLOW

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2 You are assigned as audit senior to the audit of the financial statements of
Elephant Company Ltd (Elephant) for the year ended 31 December 2018.
Assume it is 28 February 2019.

Elephant is a digital marketing company based in the UK. Elephant’s customers

sign a contract for a specific marketing project for the delivery of marketing
services. Each project Elephant undertakes is typically short term, up to six
months. In order to monitor and control costs incurred in relation to each project,
the direct costs incurred for each project are recorded in individual memorandum
accounts within the accounting system.
Audit materiality for the financial statements of Elephant has been assessed at
£30,000.
At the interim audit, discussions with management identified that Elephant was
facing weaker UK economic conditions and increased competition which were
making trading conditions more challenging for Elephant in 2018. Management
informed you prior to the final audit that Elephant is seeking to raise further private
equity funding in 2019 and that the audited 2018 financial statements will be used
by the potential investor for the process of establishing a valuation for the
company. As a consequence, management insist that the audit must be completed
and the audit report signed by 31 March 2019.
At the planning meeting for the final audit, the engagement partner identified
income as a key audit risk. She also mentioned the shorter time available for the
audit than usual and that Elephant’s management had made it very clear that it is
important that the 2018 audit goes as smoothly as possible without any
unexpected problems.
A member of the audit team, Maureen Ho, has already performed a review to
identify large transactions after the year end. She has prepared audit working
papers highlighting the following four entries:
Account Effective Document Journal Entered
code Amount date type description User ID date
51010 38,000 31/1/2019 SIN–Sales
Reversal – FWRIGHT 15/2/2019
InvoiceDec18 sales
21010 –38,000 31/1/2019 SIN–Sales
SIN001008 FWRIGHT 15/2/2019
Invoice– Posting
Run Control
51010 24,320 31/1/2019 SCR–Sales Hilditch TPOTTS 09/2/2019
Credit Mobile
refund for
October inv
error
21010 –24,320 31/1/2019 SCR–Sales SCR000231 TPOTTS 09/2/2019
Credit – Posting
Run Control
72000 21,342 1/1/2019 PIN – Rent – JSMITH 09/2/2019
Purchase Newcastle
Invoice 1/10/18 –
31/12/18

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Account Effective Document Journal Entered
code Amount date type description User ID date
31010 –21,342 1/1/2019 PIN – PIN002349 – JSMITH 09/2/2019
Purchase Posting Run
Invoice Control
71080 18,982 22/2/2019 PIN – Invoice JSMITH 13/1/2019
Purchase 23910 –
Invoice Executive
Search Ltd
31010 –18,982 22/2/2019 PIN – PIN004889 – JSMITH 13/1/2019
Purchase Posting Run
Invoice Control
Navan Patel, the finance director of Elephant, has informed your firm of the
following developments related to Elephant’s management team:
Changes have been made during 2018 to strengthen the management team. In
August 2018, Elephant employed an external consultant to carry out an executive
search for a marketing director. This resulted in an appointment being made in
November 2018.
Navan intends to retire in May 2019. The board of Elephant would like your firm to
assist with the recruitment of a suitable candidate to replace him and also advise
on structuring an appropriate remuneration package.
The following list of relevant account codes has been identified from Elephant’s
accounting system:
Account name Account code
Receivables control account 21010
Payables control account 31010
Domestic Sales 51010
Overseas Sales 52010
Other income 54800
Recruitment and selection 71080
Rent 72000
Suspense Account 990
Requirement
2.1 Justify why the engagement partner has identified income as a key audit risk.
You may use the Explore module in your firm’s data analytics software to
support your answer. (4 marks)
2.2 (a) Using the Heat Map, identify transactions related to income that give rise
to a high risk of material misstatement.
(b) Justify why you have identified the transactions in (a) as high risk.
(c) Describe the audit procedures that should be applied to address the risks
of the transactions identified in (a). (17 marks)

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2.3 Identify and explain the key audit risks arising from the four post year end
transactions identified in Maureen’s working papers. You may use the Explore
module to support your answer. (10 marks)
2.4 From the information provided, identify and explain any threats to objectivity
and state how your firm should respond to those threats. (9 marks)
Total: 40 marks

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3 Awns Ltd (Awns) manufactures awnings which are attached to buildings and
free-standing canopies to provide protection from the sun, wind and rain.
Historically the company produced awnings and canopies for domestic use such
as patio and door shelters. Three years ago, Awns launched a commercial range
of awnings and canopies which include outdoor shelters for schools, retail outlets
and, more recently, restaurants and bars that provide outside smoking areas.

Awns has recently experienced an increase in demand for its products and has
outgrown its current premises which are owned by the company. The
management plans to sell these premises and move to larger premises which will
be rented under an agreement which requires a rent review after two years. The
directors have signed an agreement to take possession on 1 July 2019. The new
premises will require modifications and the company will also need to acquire
additional plant and equipment. The proceeds from the sale of the existing
premises will be used to repay some of the company's existing borrowings.
In order to cope with the increase in demand, the company is currently using
subcontractors to supplement its own workforce. However, following the move to
the new premises, the directors plan to recruit additional employees and to use
subcontractors only in periods of high demand. The increase in demand has also
resulted in the company carrying higher inventory, in particular the steel for the
awning and canopy frameworks which is sourced from a supplier in India.
The directors of Awns have been negotiating with the company's bankers in order
to increase borrowings. In support of the request for funding, the directors have
prepared profit forecasts, on the basis of assumptions they have made about the
future operations of the business, for the three years ending 30 June 2022. The
company's bankers require this information to be reviewed and reported on by
independent accountants. The directors have requested that your firm undertakes
this review.
Requirements
3.1 In respect of the review of the forecasts, identify the matters to be included in
your firm's letter of engagement relating to:
(a) your firm's responsibilities
(b) the level of assurance provided
(c) limiting your firm's liability (7 marks)
3.2 From the information provided above, identify the specific matters you would
consider when reviewing the assumptions underlying the income and
expenditure included in the profit forecasts for the three years ending
30 June 2022. (13 marks)
Total: 20 marks

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4 Described below are situations which have arisen in four unrelated external audit
clients of your firm. The year end in each case is 31 March 2019.

Milford plc (Milford)

Milford builds and operates underground pipelines which transport oil and gas.
During the year ended 31 March 2019 the company incurred costs of £4.1 million
in respect of repairs and maintenance to its pipelines. These costs have been
capitalised and included in non-current assets. The directors refuse to make any
adjustments in respect of this matter.
The total assets of Milford at 31 March 2019 are £1,380 million and the profit
before tax for the year ended 31 March 2019 is £148.9 million.
Button Ltd (Button)
On 20 April 2019, a liquidator was appointed at Hook Ltd (Hook), a customer of
Button. The balance due from Hook on 31 March 2019 was £241,000. In addition,
work in progress included £520,000, the cost of customised work relating to Hook.
The directors of Button refuse to make provision for the debt on the grounds that
the liquidator was appointed after the date of the financial statements. They also
refuse to make any provision in respect of work in progress because they are
planning to convert it into finished goods at an estimated cost of completion of
£300,000 as another customer has agreed to buy it for £700,000.
The total assets of Button at 31 March 2019 are £17.9 million and the profit before
tax for the year ended 31 March 2019 is £5.2 million.
Zep Ltd (Zep)
The statement of financial position for Zep for the year ended 31 March 2019
includes £1.2 million under cash and cash equivalents, which is held on deposit in
the Caribbean Islands. Hurricanes have severely disrupted the commercial and
banking systems on the islands, and you have been unable to obtain direct
confirmation of the balance at 31 March 20X9.
The total assets of Zep at 31 March 20X9 are £10.9 million and the profit before
tax for the year ended 31 March 20X9 is £5.2 million.
Freystrop Ltd (Freystrop)
The directors' report contains a statement without amplification that 'the company's
trading for the period resulted in a 10% increase in profit compared to the previous
period.' However, the statement of profit or loss shows that the company's profit
for the period includes a profit of £35,000 which did not arise from trading but from
the disposal of non-current assets of a discontinued operation. Without this profit
on the disposal of non-current assets, the company would have reported a profit
for the year of £75,000 representing a reduction in profit of 25% compared to the
previous period on a like-for-like basis. The directors are unwilling to change the
wording of the directors' report.
Requirement
In each of the circumstances outlined above, reach a conclusion as to whether or
not you would modify the auditor’s report. Give reasons for your conclusions and
outline the modifications, if any, to each auditor’s report.
Total: 20 marks

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