Candidates were required to explain the effect of two different situations on an auditors’ report.

The short scenario presented two situations, with key terms embedded in the scenario, with the requirement to state the effect on the audit report. The marking scheme was therefore clear; four marks for two requirements gave two marks per requirement.

For part (i), candidates were expected to recognise that lack of depreciation, turning a profit into a significant loss, had a significant impact on the audit report. An adverse report was expected for a pervasive situation.