This 20-mark question was based on Sunflower Stores Co (Sunflower) which operated 25 food stores. The question tested the areas of understanding an entity, audit risks and responses and internal audit.

Part (a) for 5 marks required a list of five sources of information for gaining an understanding of Sunflower and what each source would be used for. Candidates’ performance on this question was unsatisfactory.

A significant proportion of candidates did not seem to understand what was required from them for this question.

They did not seem to understand what a “source of information” was and so failed to list where they would obtain information from such as prior year financial statements or last year’s audit file. Some were able to explain what they would want to gain knowledge on e.g. audit risks or accounting policies but did not tie this into the source of information.

In addition the question requirement related to gaining an understanding of Sunflower, this is part of the planning process, however a significant proportion of candidates gave sources of information relevant to carrying out the audit fieldwork, such as bank letters, written representations or receivables circularisation.

Most candidates’ confused requirements 3a and 3b and so gave sources of information relevant to auditing the risks from requirement 3b. These points were not relevant to gaining an understanding of Sunflower and hence scored no marks.