The final question was in two parts. Requirement (a) for 12 marks was based on a scenario which described matters arising as an audit was drawing to a close. There were essentially three matters to deal with – a potentially incorrect accounting treatment, a going concern issue, and an inconsistency in the chairman’s statement (director’s report for UK and IRL adapted papers).

The requirement was to consider the implications of these issues on the completion of the audit and for the auditor’s report, and to recommend any further actions to be taken by the auditor. Answers on the whole were satisfactory. Most answers successfully identified and explained the three issues, with most answers focussing more on the accounting treatment of research and development costs, which potentially needed an adjustment.

In answering this requirement candidates tended to be more comfortable with the audit report implications than in Q2, usually correctly identifying the use of an Other Matter paragraph regarding the inconsistency, and an Emphasis of Matter paragraph regarding the going concern issue. The only area which many answers failed to deal with was the further audit procedures needed regarding the development costs and the going concern issues.