This question focussed on two issues – prospective financial information and money laundering. It was well attempted by many candidates, indicating that these syllabus areas had been studied and understood. There was however, a lack of application to the scenario, especially in relation to the first requirement.

The scenario centred on Waters Co, an audit client, that had approached your firm to provide a report on prospective financial information which would be used by the company’s bank in making a significant lending decision. The amount advanced would be used to upgrade the cinemas operated by Waters Co and a forecast statement of profit or loss was provided in the scenario, along with some of the assumptions used in its preparation by management.

Requirement (ai) was for six marks, and asked candidates to explain the matters to be considered by the audit firm before accepting the engagement to review and report on the prospective financial information. The quality of answers here was quite good, with almost all candidates making a reasonable attempt to discuss relevant matters including ethical issues, resource availability, the scope of the engagement and the nature of the assumptions used in the forecast.

Where candidates scored less well on this requirement it was often due to lack of application to the scenario. A minority of answers amounted to little more than a bullet point list, often posed as questions (e.g. “are there any ethical matters to consider”, “who is the report for”, “why is the report needed”), and while these are matters to consider the lack of any application to the scenario limits the amount of credit that can be awarded.