(i) Critical appraisal of audit report
Up to 1½ marks per comment applied to the scenario
– ½ mark ref ISA 705
– No explanation of imposed limitation
– Development costs not specifically referred to
– No quantification of the asset
– No reference to potential impact on profit
– ½ mark calculation materiality
– Disclaimer or qualification more appropriate (2 marks max)
– Incorrect headings used
– Incorrect wording of opinion
– Unprofessional to refer to management integrity
– ‘We are worried’ not professional
Max marks 10
(ii) Further consequences
Generally 1 mark per comment
– ½ mark ref ISA 260
– Communicate limitation imposed to those charged with governance
– Communicate proposed modification to those charged with governance
– Consider alternative procedures for development costs
– Consider integrity of management
– Consider withdrawal from audit/resignation
– Audit pre-condition (ISA 210)