Q.1

There were four cases given in the question. The examinees were  required to evaluate them and identify an appropriate method of sampling or describe as to whether sampling would not be appropriate and some other approach needs to be applied in each cases separately.

Generally, candidates gave proper answers in each case.

Q.2

There are two issues given in this question. One was related to the change in accounting estimate i.e. change in depreciation rate and other was related to contingent tax liability.  Candidates were required to give their comments on above issues in part (a) and list the audit evidence that should be obtained in case of above issues in part (b)

(a)

Some candidates did not know that change in depreciation rate is considered as change in accounting estimates. Therefore, they were agreed with the wrong accounting treatments given in the question. However, those who knew this, attempted the question properly.

Majority of candidates gave correct answer in case of contingent tax liability. 

(b)

This part was attempted satisfactorily by almost all students.

Q.3

(a)

This part was poorly attempted. Majority of the candidates listed down the audit procedures carried out in an interim audit and drafted review report on interim financial statements instead of describing the audit work that will need to be performed at the end of the period and how this work will be useful to provide a reasonable basis for extending conclusion from the interim audit to the period end and what additional procedures would be required to be followed at that time..

(b)

This part required to state audit procedure in case of unusual high sales at year end to ensure that the financial statements are free from material misstatement. This part was attempted properly by most candidates.

Q.4

Two accounting issues relating to lease accounting and deferred tax were discussed in the question by giving notes to the financial statements and draft auditor’s report on such financial statements.

The students were required to evaluate the issues and to identify what further information is required to evaluate them. Further, if the management does not agree with the contention of the auditors then its impact on the audit opinion was required to be discussed.

Except in case of few candidates, this question was not attempted properly. Generally, candidates were able to identify the issues in the question but were not able to identify what further information is required to form appropriate audit opinion and did not discuss the situation if management does not agree to make adjustments in the financial statements and its effect on the audit opinion.

Q.5

(a)

This part was attempted properly. However, some candidates did not mention the risk addressed by each audit procedure. For example while mentioning that creditors shall be verified by obtaining confirmation (specially in respect of old creditors) and checking subsequent payments, they did not mention that it will reduce the risk of hidden reserves and the risk that no revenues are hidden as liabilities.

(b)

Generally, candidates did not understand the situation given in the question termed it as disagreement with management instead of scope limitation.

(c)

Candidates were not able to state proper modification paragraph. They drafted it in a very general language.

Most candidates considered it a situation where there is  disagreement with management and stated that its impact is not so material. Therefore, they drafted qualification paragraph “except for” accordingly. Whereas the situation given in the question was related to scope limitation.

Q.6

Majority of the candidates were able to produce reasonable answers by referring to ISA 220 – Quality Control for Audit Work. 

Q.7

The question was related to the Code of Corporate Governance. It was required to identify which services are permissible under the provisions of Code of Corporate Governance in case of auditors of listed company. It was a  very simple question and candidates attempted properly and gained good marks.

Q.8

It was required to explain the definition and components of internal control in light of International Standard on Auditing – 315 Understanding The Entity and Its Environment And Assessing The Risk of Material Misstatement.

The question was not attempted properly by most of the students. They just stated definition of internal controls and explained control procedures instead of components of internal controls.

Q.9

This question was also related to the Code of Corporate Governance. Largely, candidates stated the answers in general manner which showed that they were not fully aware about the specific requirements of the Code of Corporate Governance.

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