This 10-mark question covered the topics of internal control components and tests of control.

Part (a) for five marks asked candidates to identify and briefly explain the components of an entity’s internal control as per ISA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment.

Candidates’ performance was mixed on this question with many not even attempting it.

This was a knowledge based question focusing on this important area of ISA 315. There were some candidates who had clearly revised this area and were able to confidently identify the five components and explain what they related to.

Some candidates were confused by “information systems” and incorrectly related this solely to a computer environment. Many candidates were only able to identify
the components and either did not provide an explanation or it was incorrect.

Also a significant minority of candidates explained the components from the perspective of what this meant for the audit firm rather than the company.

In addition a significant minority of candidates did not understand the question requirement, or did not have sufficient technical knowledge of this area and so instead of providing components, such as, control environment and control activities, focused on providing a list of internal controls such as authorisation or segregation of duties controls.