This 30-mark question was based on a manufacturing company, Fox Industries Co (Fox), and tested candidates’ knowledge of communicating to those charged with governance (TCWG), internal controls, application controls and substantive procedures for bank and cash.

Part (ai) for 2 marks required candidates to explain why it’s important for auditors to communicate with TCWG and part (aii) for 3 marks required three matters that may be communicated by auditors to TCWG.

Most candidates performed unsatisfactorily on part (ai). They needed to focus on WHY it was important to communicate rather than WHAT needed to be reported as this was the requirement of part (aii).

Answers that focused on what was to be communicated would not have gained credit as this was not the question requirement for (ai). In addition some candidates simply restated the requirement, explaining that it was important to communicate, but without answering why.

Part (aii) was answered better, with most candidates focusing on the areas of fraud, material misstatement and internal control deficiencies. Some candidates focused on providing details of specific audit issues that would be discussed during the audit as opposed to areas which would be formally reported to TCWG.