In this knowledge question, candidates were required to explain the actions that the auditor could take following errors found in control testing. Most candidates recognised that control testing by itself is not sufficient to support the audit opinion and therefore mentioned extending substantive procedures as an action that could be taken. Substantive procedures were not explicitly mentioned in the question to avoid giving away what should be a basic point regarding obtaining audit evidence.

The question was worth 3 marks. The requirement verb was explained with the question also stating that three actions were required. There was therefore one mark for each action. A sentence giving that action would therefore attract the mark. Most candidates did provide up to three actions, showing that the question had been understood.

Example comments provided and reasons why those comments did not obtain a pass standard are noted below:

Answer comment
“Perform substantive procedures”

Examiners assessment of comment
While correct as an action, this comment did not explain why those procedures were necessary. Mentioning that additional audit procedures were necessary to alleviate the control breakdown would show that the candidate understood the need to extend substantive procedures.

Answer comment
“Extend audit testing to use analytical procedures to identify the control weakness”.

Examiners assessment of comment
The idea of extending audit testing is correct. However, the use of analytical procedures is inappropriate because this form of testing will not provide the detail necessary to show control weaknesses or indeed the extent of monetary error, if any in this case, that substantive procedures will provide.

Other common errors included:

• Not mentioning the need to discuss matters with management or the audit committee. A significant minority of answers simply extended audit testing and then suggested a qualification in the audit report.
• Suggesting actions that were probably inappropriate at the time. The most common action suggested in this sense was immediate resignation. This was inappropriate because many other actions (discussion with management etc) would be taken prior to this.
• Explaining every type of audit report modification, rather than providing a systematic approach of extending testing, reporting to management, etc. prior to mentioning some form of modification could be required depending on results from substantive procedures.

Again with this knowledge question, the overall standard was satisfactory.