Part (b) was for 7 marks and involved the critique of an extract from an audit report. The report contained an adverse opinion, which most candidates spotted, in relation to the non-recognition of a defined benefit pension deficit on the company’s statement of financial position. There were some sound answers here, and candidates’ performance in questions of this type has shown a definite improvement.

Some answers not only identified but also provided an explanation of the problems with the audit report. The majority of answers suggested that an “except for” qualification may be more suitable than an adverse opinion, and correctly calculated the materiality of the pension plan deficit to support their discussion.

A significant proportion of answers picked up on the incorrect order of the paragraphs in the report and on the incorrect wording used in the headings, and on the lack of explanation that had been provided in the report regarding the material misstatement. Fewer answers discussed the inappropriate use of the phrase “deliberate omission”.

The weaker answers tended to just list out bullet points with no explanation, limiting the amount of marks that could be awarded. Other weaker answers attempted to discuss the appropriate accounting treatment for the pension, often incorrectly.