Part (b) for 12 marks required for two events; an explanation of whether the financial statements should be amended and audit procedures that should be performed by the auditor to form a conclusion on any required amendment. Performance was mixed on this question.

Many candidates were able to correctly identify whether the events were adjusting or non-adjusting. However the justification for this was not always correct; for example stating that “the explosion was non-adjusting as it occurred after the year end”.

Many candidates were able to calculate the materiality of the potential error, using the numbers provided, although some incorrectly calculated the materiality for event 1 using the total cost of inventory of $0.85m rather than the write down of $0.75m.

The decision as to whether the financial statements required amendment was answered well for event 1, but less so for event 2 as many candidates did not seem to realise that adding a disclosure note is an amendment.

With regards to procedures to undertake to form a conclusion on any required amendment, candidates seemed to struggle with this. Many procedures lacked sufficient detail to score the available 1 mark per test. This commonly occurred with tests such as; “reviewing board minutes” and “obtain written representation”.

These procedures need to be phrased with sufficient detail to obtain credit and must be tailored to the scenario. In addition a significant minority of candidates wanted to contact Panda’s insurance company; this is not a realistic procedure.

In addition some candidates wasted time by discussing the impact on the audit report for each event; this was not part of the question requirement for part (b) and so would not have generated any marks. Candidates once again are reminded to only answer the question set.