This 20-mark question was based on the audit firm NAB & Co (NAB) and its clients Goofy Co and Mickey Co and tested candidates’ knowledge of managing conflicts of interest, outsourcing internal audit and ethical threats.

Part (a) for 4 marks required an explanation of the safeguards NAB should implement to manage the potential conflict of interest between their two competing clients. Candidates performed satisfactorily on this part of the question. Most candidates were able to identify safeguards such as separate audit teams and informing both parties and therefore scored half of the available marks.

However, many candidates then provided procedures which were a repeat of separate teams, such as separate engagement partners. In addition some candidates’ listed general ethical safeguards rather than focusing on the specific requirement of conflicts of interest.