Requirement (b) was for six marks and asked candidates to comment on the matters that should be considered and the evidence they should expect to find when reviewing the audit file in respect of a consignment stock arrangement, which was described in the scenario.

This was generally well attempted, with most candidates discussing that the accounting treatment adopted for the consignment stock arrangement was not compliant with IAS 18 Revenue, and correctly determining the impact on profit, and the overall materiality of the transactions to the financial statements.

It is perhaps odd that while this requirement did not ask for risks of material misstatement, most answers were competent at explaining exactly what the risk of misstatement was and also quantifying its impact, in contrast with Q1(aii) and Q2(aii), when risks of material misstatement was asked for, but not answered well.

Candidates were less competent at explaining the audit evidence they would expect to find, and the answers here were usually limited to a review of the terms of the consignment stock arrangement, and evidence of an inventory count.