Part (b) for 10 marks required an explanation of the ethical threats for LV Fones Co along with an explanation of how the threats might be avoided.

This question was well answered by most candidates; they were able to clearly identify from the scenario the ethical issues impacting the audit of LV Fones. Some candidates did not explain the threats in sufficient detail, sometimes just identifying the issue and not explaining how this was an ethical threat.

For example, many identified that the offer of a staff discount of 10% was an issue, however if they did not then go onto explain that this was a self-interest threat they would have only gained ½ rather than 1 mark.

The second part of this question required methods for avoiding the threats, candidates performance here was generally satisfactory. Some answers tended to be quite brief and to include unrealistic steps, such as resigning as auditors to reduce the risk of fee dependence, not allowing the finance director and partner to be friends or suggesting the finance director should resign.

In addition many candidates demonstrated that they had not read the scenario properly, as a common suggestion was to not allow the audit senior to undertake the secondment, this was despite the scenario clearly stating that the secondment had already occurred.