Part (e) for 4 marks required candidates to explain the impact on the external auditor’s work at the interim and final audits if Pear was to establish an internal audit department. Performance on this question was unsatisfactory.

Where the question was attempted, many candidates failed to score more than 1 mark. What was required was an explanation of tasks that internal audit might perform that the external auditor might then look to rely on in either the interim or final audit.

For example, they could utilise systems documentation produced by internal audit during the interim audit. Or they could rely on year-end inventory counts undertaken by internal audit as part of their inventory testing at the final audit.

Where candidates achieved 1 mark this was usually for a general comment about relying on the work of internal audit and so reducing substantive procedures.

Mistakes made by candidates were: 
• Focusing on the role of internal audit in general. 
• Giving lengthy answers on factors to consider when placing reliance on internal audit. 
• Providing details of what an external auditor does at the interim and final audit stages.