Part (c) for 5 marks required the steps the auditor should now undertake and the impact on the audit report in relation to the warranty provision. Candidates’ performance was satisfactory with many scoring well for the audit report impact. However many candidates provided a scatter gun approach of suggesting every possible audit report implication.

Many used terms such as “except for”, “modified” or “qualified” but the accompanying sentences demonstrated that candidates did not actually understand what these terms meant. Also an emphasis of matter paragraph was suggested by a significant proportion of candidates, this demonstrates a fundamental lack of understanding of emphasis of matter paragraphs and audit reports.

Future candidates are reminded that audit reports are the only output of a statutory audit and hence an understanding of how an audit report can be modified and in which circumstances, is considered important for this exam.