This question was in the style of a typical paper P7 question, set in the completion stage of an audit, and asking candidates to comment on the matters to be considered, and he audit evidence that should be expected to be found during the review of the audit files by the audit manager.

Candidates were well prepared for this type of question, and it was quite well attempted by many of the candidates that chose to attempt it. The scenario involved a coal mining company operating in a highly regulated environment. An accident had caused significant damage to one of the coal mines, and to residential properties located in its vicinity.

Management had agreed to meet some expenses relating to the relocation of the residents of these properties, which may need to be demolished in the future. Management had not reported the accident to the relevant regulatory body.

Requirement (a) contained standard wording for a P7 requirement, asking candidates to comment on the matters to consider and the evidence that should be found in undertaking a review of the audit file and financial statements of the company.

This was for 14 marks. There were some sound answers, and most candidates correctly identified impairment, provisions or contingent liabilities and going concern as the main financial reporting issues that would need to be considered, and in many cases a range of appropriate evidence was described.

The impairment issue tended to be the best dealt with, and as usual in this type of question, many candidates demonstrated a sound understanding of the financial reporting matter and linked this to its audit implication.

Where candidates performed less well on this requirement, it tended to be due to focussing on just one issue, and dealing only very briefly with other matters. For example, in some scripts almost all of the answer discussed the impairment issue, and only touched on provisions in a couple of sentences at the end. In other scripts the answer focussed on going concern, almost to the exclusion of any other matters.

Some answers displayed a lack of basic financial accounting knowledge, suggesting that lost revenue should be provided for. Audit evidence points were often not well described, sometimes too vague to be awarded any credit, for example “discuss with management” or “check properly disclosed” – these comments are pretty meaningless as they have no context.