Part (c) for 3 marks required the impact on the audit report should the issue for event 2, the explosion, remain unresolved. Performance on this question was unsatisfactory.
Candidates still continue to recommend an emphasis of matter paragraph for all audit report questions, this is not the case and it was not relevant for this issue. Candidates need to understand what an emphasis of matter paragraph is and why it is used. In addition some candidates are confused with regards to audit report terms and used phrases such as “qualify the report” rather than modify the report and “modified opinion” rather than qualified opinion.
A significant minority misread the question and rather than just providing the audit report implications for event 2, gave event 1 as well; this would not have gained any marks. Candidates must read the question requirements carefully.
A significant number of candidates were unable to identify the correct audit report modification, giving multiple options and some candidates seemed to believe that the opinion did not require qualification as it was only the disclosure, as opposed to any numbers that were incorrect.
Also some answers contradicted themselves such as “the issue is material therefore an unqualified opinion can be given”. Additionally many candidates ignored the question requirement to only consider the audit report impact if the issue was unresolved. Lots of answers started with “if resolved the audit report …..” this was not required.
Once again future candidates are reminded that audit reports are the only output of a statutory audit and hence an understanding of how an audit report can be modified and in which circumstances, is considered very important for this exam.