The second part of the question focussed on money laundering, and in contrast to previous sittings where this subject has been examined, the answers were generally of a reasonable standard. #

Requirement (bi) for five marks asked candidates to explain the stages used in money laundering and to comment on why Waters Co had been identified as high risk; and requirement (bii) for six marks asked for four recommendations in respect of an anti-money laundering programme that audit firms should have in place.

Most answers were reasonably well attempted, and most candidates demonstrated knowledge of both the stages of money laundering, and the elements of an anti-money laundering programme. The weaker answers tended to simply be too short, limiting the marks that could be awarded. Some answers failed to comment on why Waters Co had been assessed as having a high risk of money laundering, even though the reasons were fairly obvious from the information provided.

The UK and IRL adapted paper had a different requirement (b) which asked candidates to provide advice to Coxon Ltd, an existing non-audit services client of the firm that had been placed into compulsory liquidation after several years of making losses and a worsening cash position. The company’s directors had continued to trade in the knowledge that the company was insolvent and that loan covenants had been breached.

Candidates were asked to discuss whether the directors would be liable for the company’s debt, and also to explain the impact of the liquidation for the company’s employees and creditors. This requirement was for 13 marks.

Answers to this requirement were mixed. Many candidates provided good answers, showing that they understood this syllabus area and could apply their knowledge to the scenario. The best answers discussed fraudulent and wrongful trading, and commented on whether the directors could be found guilty of either, including the implications for the directors in each case.

Weaker answers were too vague, and some clearly did know this syllabus area well enough to provide any reasonable advice. On the issue of implications for employees and creditors answers were generally better, and most could discuss in some detail the order of payment of creditors on the winding up of a company.