This 20-mark question was based on a chain of food wholesalers, Humphries Co and tested candidates’ knowledge of subsequent events and audit reports.

Part (a) for 5 marks required a description of the auditor’s responsibility in relation to subsequent events occurring between the year-end and the date the audit report is signed, and then from this point to the date the financial statements are issued. This question was unrelated to the scenario, and performance was on the whole unsatisfactory.

The question focused on responsibilities as opposed to audit procedures; however a significant proportion of candidates provided a list of audit procedures to be performed during a subsequent events review. This suggests that these candidates did not read the question carefully, saw the words subsequent events and proceeded to just list any procedures they had knowledge of.

The other common mistake made was for candidates to focus on what adjusting and non-adjusting events are.

Whilst candidates need to bring their F3 Financial Accounting knowledge to this paper, they should only give this knowledge if it is asked for. Answers which focused on the impact on financial statements if events were adjusting or non-adjusting would not have scored any marks; as this was not what was required from the question.

It was also clear to see that many candidates had learnt standard phrases such as “active duty” and “passive duty”; however they did not understand what these meant and hence were unable to elaborate on these points.

A minority of candidates failed to appreciate that in the second situation, from the date the auditors’ report was signed to the financial statements being issued, the auditors are unable to modify their report as it has already been issued.

Subsequent events are an important element of the completion stage of an audit, and future candidates should ensure that they have sufficient technical knowledge of this area.