Part (d) for 4 marks required substantive procedures the auditor should perform on Chuck Industries’ redundancy provision. This requirement was answered unsatisfactorily by many candidates.

Candidates who did not score well tended to focus on whether the redundancy was legal or not; therefore wanted the auditor to focus on reviewing redundancy law and contacting the company lawyer. Others wanted to focus on the outsourcing of the sales ledger, which was irrelevant in confirming the provision.

Some candidates wanted to undertake a proof in total of the redundancy provision; however with only 14 employees this procedure would not have been practical. In addition some candidates wanted to compare this provision to an industry average, which was impractical and demonstrated that candidates seem to learn generic lists of procedures. Candidates must tailor their knowledge to the scenario in order to pick up application marks.

Those candidates who performed well were able to produce detailed procedures which related to the scenario. In addition sufficient breadth was given including recalculation of the provision, discussion with management with regards to the basis of the provision, reviewing disclosures, reviewing post year-end period for payment of the provision and obtaining written representations.

In relation to the popular answer of obtaining written representations this procedure needs to be phrased with sufficient detail to obtain credit. Therefore if we consider the following candidates answers:

• “Obtain a written representation from management” - this would not have scored any marks as it does not specify what the representation is for. 
• “Obtain a written representation from management in relation to the provision” - this would have scored ½ marks as it did not specify which assertion we wanted confirmation over. 
• “Obtain a written representation from management confirming the completeness of the provision”- this would have scored 1 mark as it clearly states what is required from management, and in relation to which balance and for which assertion