Question 1d
Examiners Report

Part (d) for 4 marks required two inherent risks in relation to inventory and one control to mitigate each risk.

Answers to this question were mixed. A significant proportion of candidates were able to provide inherent risks such as damaged goods, theft and slow moving books. However it was unsatisfactory to see the level of general risks given such as ‘inventory may be overstated’ with no explanation as to how it might be overstated such as it is ‘overvalued due to the goods being damaged’.

Candidates were then required to suggest controls to mitigate each risk. There was a significant minority who misread the question and thought that substantive procedures were required as opposed to controls that management might adopt. Their answers took the stance of the auditor testing inventory rather than management looking to reduce risk. This misunderstanding can only have arisen due to a failure to read the question properly.

In addition a reasonable number of candidates started their answer with a definition of inherent risk, this was not required and hence did not generate any marks at all. Candidates must read the question carefully to make sure that they give an answer to the question actually asked and not the question they would have liked to have seen asked.

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