Requirement (b) asked candidates to discuss any ethical issues raised and recommend actions to be taken by the audit firm. This was for 8 marks. Clearly many candidates were comfortable, producing satisfactory answers covering a range of ethical matters relevant to the audit firm. The ethical issues most commonly dealt with were conflict of interest, confidentiality and the self-review and advocacy threats, all associated with the planned acquisition by Parker Co of one of the audit firm’s existing audit clients.

It was satisfactory to see that in general terms answers on ethics have improved somewhat compared to previous sittings in that they tend to discuss ethical threats rather than just identify them, and many answers used an appropriate framework to identify and explain threats, evaluate their significance, and recommend appropriate safeguards.

The ethical issues in respect of confidentiality and conflicts of interest were particularly well discussed, as was the self-review threat associated with providing a non-audit service to Parker Co. 
However, there were still many answers, which often failed to recommend actions to be taken by the audit firm.

Also, some answers tended to identify almost every possible threat without really explaining their relevance to the scenario. There also is an increasing trend for answers to consider ethical matters that have little, if anything, to do with the audit, and sometimes make little sense, for example whether it is “ethical” for Parker Co’s management to develop a new organic product range, or whether the company’s management “lacks integrity” for the company’s going concern problems. Candidates are strongly advised to focus their answer on ethical threats directly related to the planning and performance of the audit.

Finally there were 4 professional marks available for Question 1, which were awarded for the structure of the answer, and for the clarity of explanations given and evaluation performed. Almost all candidates used a reasonable structure, with appropriate use of headings, and having an introduction. Fewer candidates provided a conclusion to their briefing notes. Though not essential, it is recommended that the calculations provided as part of analytical review are given in a separate section of the briefing notes, and then referred to in the main text, as this creates a well-structured answer.

Again, not essential, but as part of exam technique candidates may want to consider having their requests for additional information as a separate part of the answer, presented in a clear list. Generally the presentation of answers was satisfactory, though as mentioned earlier in this report, a significant number of candidates have such illegible handwriting that it is very difficult to award many marks to the answer they have provided.