Part (b) for 12 marks required an explanation of six ethical threats from the scenario and a method for reducing each of these threats. This was very well answered with many candidates scoring full marks. Ethics questions are often answered well by candidates and the scenario provided contained many possible threats.

Where candidates did not score well this was usually because they only identified rather than explained the ethical threat. In addition some candidates identified the threat but when explaining them they came up with incorrect examples of the type of threat; such as attending the weekend away at a luxury hotel gave rise to a familiarity threat rather than a self-interest threat.

The threat which candidates struggled with the most was the intimidation threat caused by management requesting the audit team ask minimal questions. The response given by many candidates was to decline the assurance engagement; this does not address the intimidation threat. Instead candidates needed to stress that this issue needed to be discussed with the finance director and that appropriate audit procedures would be undertaken to ensure the quality of the audit was not compromised.

In addition when explaining issues some candidates listed many examples of ethical threats; such as “the assistant finance director being the review partner gives rise to a familiarity, self-review and self-interest threat.”

This scatter gun approach to questions is not recommended as it wastes time.