Applied Skills · Free Study Guide

AA Audit and Assurance

Understand audit procedures, risk assessment and assurance engagements.

Paper Overview

Audit and Assurance (AA) introduces the audit framework, professional ethics, risk assessment, internal controls, audit evidence and reporting. It tests your ability to apply professional judgement in practical scenarios — not just recall theory.

AA is a written and objective test paper. Section C requires extended written answers. Quality of explanation, not just identification, earns marks.

Exam Format

Format Computer-Based Exam (CBE)
Duration 3 hours + 10 minutes reading time
Total Marks 100
Pass Mark 50%
Section A Three case scenarios, objective test questions — 30 marks
Section B One case scenario, objective test questions — 30 marks
Section C Two constructed response questions — 40 marks
Specimen Exam practice.iassess.accaglobal.com (MyACCA login required — AA Int. specimen)
Section C commonly examines: audit risk identification, internal control weaknesses and recommendations, audit procedures for a specific balance, and audit reports. Always explain WHY a risk exists, not just WHAT it is.

Syllabus Structure

1. Audit Framework and Regulation

Assurance engagements (reasonable vs limited assurance), why companies are audited — stewardship, information gap, statutory requirement.

2. Professional Ethics and Quality Management

The five ACCA fundamental principles (Integrity, Objectivity, Professional Competence and Due Care, Confidentiality, Professional Behaviour) and the five threats to independence: Self-Interest, Self-Review, Familiarity, Intimidation, Advocacy.

3. Audit Planning and Risk Assessment

Audit Risk = Inherent Risk × Control Risk × Detection Risk. The auditor cannot control inherent or control risk, but controls detection risk via the nature, timing and extent of procedures. Materiality: quantitative (~5% PBT, 0.5–1% revenue, 1–2% net assets) and qualitative (nature of the item, e.g. director remuneration, related-party transactions).

4. Internal Control

Control environment components: control environment, risk assessment, information & communication, control activities, monitoring. Control activities: authorisation, segregation of duties, reconciliations, physical controls, IT controls. In Section C, always (1) identify the weakness, (2) explain the risk it creates, (3) recommend a practical control.

5. Audit Evidence

ISA 500 — sufficiency (quantity) and appropriateness (quality). Reliability hierarchy: external evidence obtained directly by auditor > external evidence obtained from client > client-generated evidence with strong controls > client-generated evidence with weak controls. Procedure types: inspection, observation, confirmation, recalculation, reperformance, analytical procedures, inquiry (weakest alone).

6. Audit Procedures by Area

Revenue (occurrence), Receivables (existence, valuation — circularisation), Inventory (existence, valuation — attend count, test NRV), Payables (completeness — supplier statement reconciliations), Non-Current Assets (existence, rights), Payroll (occurrence, accuracy).

7. Completion, Review and Reporting

Four opinion types — Unmodified (clean), Qualified ("except for" — material but not pervasive), Adverse (material and pervasive misstatement), Disclaimer (material and pervasive scope limitation). Emphasis of Matter paragraph does NOT modify the opinion — it draws attention to a properly disclosed matter (e.g. going concern uncertainty).

Most Tested Topics

Very High Audit risk identification and response, internal control weaknesses and recommendations, audit procedures for specific balances, audit reports — all four opinion types.
High Ethics threats to independence, materiality, analytical procedures, going concern.
Medium Quality management, assurance framework, sampling.

Common Exam Pitfalls

  • Identifying risks without explaining WHY they are risks in the specific scenario — always link to the scenario details.
  • Vague audit procedures — "inspect invoices" scores less than "select a sample of sales invoices and agree to dispatch notes and customer orders to confirm occurrence."
  • Confusing disclaimer and adverse opinion — disclaimer = cannot obtain evidence; adverse = obtained evidence showing material misstatement.
  • Emphasis of Matter vs modified opinion — EOM does not change the opinion; a modification does.
  • Weaknesses without recommendations — always pair each weakness with a practical, actionable control.

14-Day Revision Plan

Days 1–2 Audit framework — assurance, stewardship, statutory audit
Day 3 Professional ethics — five principles, five threats, safeguards
Days 4–5 Audit risk — inherent risk, control risk, detection risk, materiality
Days 6–7 Internal controls — control environment, control activities, identifying weaknesses
Day 8 Audit evidence — sufficiency, appropriateness, reliability hierarchy, procedure types
Days 9–10 Audit procedures by area — revenue, receivables, inventory, payables, payroll
Day 11 Going concern, subsequent events
Day 12 Audit reports — all four opinions, emphasis of matter
Day 13 Section C past-question practice — risk identification and control weakness questions
Day 14 Full AA CBE mock exam — under timed conditions

Quick Revision Checklist

  • Assurance engagement framework — reasonable vs limited assurance
  • Five ethical threats to independence — with audit-specific examples
  • Audit Risk Model — inherent, control, detection risk
  • Materiality — quantitative and qualitative
  • Control environment components
  • Five control activity types with examples
  • Procedure for reporting control deficiencies — weakness, risk, recommendation
  • Audit evidence — sufficiency vs appropriateness
  • Seven procedure types — know the difference between each
  • Audit assertions — for key balance sheet and P&L areas
  • Specific procedures for: revenue, receivables, inventory, payables, payroll
  • Going concern — indicators and audit procedures
  • Four audit opinion types
  • Emphasis of Matter — when and why

Prerequisites: This guide builds a foundation for AAA (Advanced Audit and Assurance) and SBL (Strategic Business Leader).

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