This 20-mark question was based on Kangaroo Construction Co (Kangaroo) a building company. The question tested the areas of materiality, ratios and audit risks and auditors responses.

Part (a) for 5 marks required an explanation of the concepts of materiality and performance materiality.

Candidates’ performed well on this question.

The vast majority of candidates were able to score marks on the definition of materiality, provision of some benchmarks for the calculations and a reference to performance materiality being at a lower level.

These points would have achieved a pass for this part of the question. An adequate level of detail was provided for this “explain” requirement by the majority of candidates. Some candidates just gave a definition of materiality and nothing else; this would have gained a maximum of 1 mark.