Part (c) for 4 marks required an explanation of the responsibilities of management and auditors in relation to compliance with law and regulations under ISA 250 Consideration of Laws and Regulations in an Audit of Financial Statements. This question, where it was attempted, was answered unsatisfactorily by most candidates.

The scenario provided details of a situation where the company had been visited by the tax authorities and they had discovered problems with the tax being deducted.

Many candidates did not attempt this question at all, and for those who did it seemed clear that most had little knowledge of responsibilities under law and regulations. If candidates had applied their knowledge of responsibilities under fraud and error to law and regulations, then they would have scored at least 2 marks.

Management are responsible for ensuring compliance with law and regulations, whilst auditors are not responsible for preventing or detecting non-compliance with law and regulations. These points would have scored a pass for this part of the question.

Unfortunately, most candidates focused on management’s responsibility for preparing financial statements and implementing controls and auditors’ responsibility to provide a true and fair opinion. These points are not related to law and regulations. Many candidates’ answers did not even mention law and regulations. A significant minority only focused on the tax issues arising from the visit by the authorities rather than on law and regulation responsibilities.