Issue (b) focussed on outsourcing, and asked candidates to consider, in the context of a manufacturing company that outsourced payroll, how the outsourcing would affect audit planning. This was also worth four marks and there were some good attempts, with most answers identifying issues in relation to access to information, assessment of the internal controls at the service organisation, and the competence of the service organisation.

Disappointingly, few answers mentioned type 1 and type 2 reports that are typically obtained in this situation, and many tried to focus on ethical matters such as independence, and therefore didn’t specifically address the requirement.