2 Generally up to 1½ marks for each relevant point identified and explained. Allow maximum 1½ marks for
comments on the competence of the Group audit manager and the need for additional training. These marks can
be awarded in any section of the question.
(a) Internal controls
(i) Quality of audit work
– Performing tests of controls not an appropriate response where controls are deficient
– Intra-group balances and transactions should be audited even if cancelled on consolidation
– If not performed then the cancellation and determination of provisions for unrealised profit may
not be correct
– Inappropriate assumption on the strength of group-wide controls. The work of component auditors
on capex controls should have been evaluated
– Audit evidence may be lacking on capex and property, plant and equipment
(ii) Further actions or procedures
– Communicate with those charged with governance on the control deficiency
– Review working papers on components for evidence on intra-group balances
– Perform additional audit procedures on intra-group balances (max 3 marks for specific procedures)
– Perform additional procedures on capex (max 2 marks for specific procedures)
Maximum 9