The second part of Question Two was generally not well answered. This part of the question dealt with a client which had suffered an environmental accident resulting in the closure of a factory. The audit engagement partner had asked for briefing notes to be prepared in which the principal audit procedures to be performed in respect of the cost of closure of the factory were recommended. This first part of the briefing notes, requirement (bi), was for 6 marks.

Answers were often lacking in focus. Sound d answers recommended a range of procedures specific to the types of cost that would normally be included in a cost of closure provision, such as redundancy costs. Very few candidates recognised that the date at which an obligation arose in relation to the closure of the factory was crucial, and many could recommend little more than asking for management representations.

There was often discussion of the recognition criteria for provisions contained in IAS 37 Provisions, Contingent Liabilities and Contingent Assets, but little on the specific accounting requirements in relation to a restructuring, which could have prompted some specific procedures.