Part (c) for 12 marks required a discussion of two issues; an assessment of the materiality of each; procedures to resolve each issue and the impact on the audit report if each issue remained unresolved. Performance was mixed on this question. There were a significant minority of candidates who did not devote sufficient time and effort to this question bearing in mind it was worth 12 marks.

The requirement to discuss the two issues of Daisy’s corrupted sales ledger and Fuchsia’s going concern problem was on whole, answered well by most candidates. In addition many candidates correctly identified that each issue was clearly material. A significant minority seemed to believe the corruption of the sales ledger was an adjusting event and so incorrectly proceeded to focus on subsequent events.

With regards to procedures to undertake at the completion stage, candidates seemed to struggle with Daisy.

Given that the sales ledger had been corrupted procedures such as “agree goods despatch notes to sales invoices to the sales ledger” or “reconcile the sales ledger to the general ledger” were unlikely to be possible.

Most candidates correctly identified relevant analytical review procedures and a receivables circularisation. Candidates performed better on auditing the going concern of Fuchsia, however some candidates wasted time by providing a long list of going concern tests when only two or three were needed.

Performance on the impact on the audit report if each issue remained unresolved was unsatisfactory. Candidates still continue to recommend an emphasis of matter paragraph for all audit report questions, this is not the case and it was not relevant for either issue. Candidates need to understand what an emphasis of matter paragraph is and why it is used.

A significant number of candidates were unable to identify the correct audit report modification, suggesting that Daisy’s should be qualified or adverse, as opposed to disclaimer of opinion. Also some answers contradicted themselves with answers of “the issue is not material therefore qualify the opinion”. Additionally many candidates ignored the question requirement to only consider the audit report impact if the issue was unresolved.

Lots of answers started with “if resolved the audit report …..” this was not required. In relation to the impact on the audit report, many candidates were unable to describe how the opinion paragraph would change and so failed to maximise their marks.

Once again future candidates are reminded that audit reports are the only output of a statutory audit and hence an understanding of how an audit report can be modified and in which circumstances, is considered very important for this exam.