Part (a)’s scenario described a cash-based business whose owner manager was acting suspiciously in relation to the accounting for cash sales. A large sum of cash had been transferred to an overseas bank account and the transaction had no supporting evidence. The first requirement, (ai) for 6 marks, was to discuss the implications of these circumstances.

This open requirement allowed for discussion of many different implications for the audit firm, included suspected fraud and / or money laundering, a poor control environment, the ethical implications of the owners intimidating behaviour, and problems for the audit firm in obtaining evidence. Most candidates covered a range of points and the majority correctly discussed fraud and / or money laundering.

Weaker answers tended to focus on the materiality of the cash transferred to overseas, and seemed not to notice the client’s suspicious behaviour. Candidates are reminded that they will often be expected to identify a key issue in a question scenario and that in a question of this type it is important to stop and think about what is happening in the scenario before rushing to start to write an answer. This question is a good example of one where a relatively short answer could generate a lot of marks – if the scenario has been properly thought through before writing the answer.