Question 5a
Marking Guide

(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)

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