Part b in part b a most candidates projected the

Part B
In Part B (a) most candidates projected the error from the sample of other payables correctly
and concluded that this was immaterial. However, many candidates did not identify that the
unrecorded invoice of $678,000 had been adjusted for by management and was therefore not an
error in the financial statements. Many candidates correctly identified some, but not all, of the
further implications for the audit report in Part B (b).
Most candidates identified that the audit work in relation to the recoverable amounts of
property, plant and equipment (PPE) would be disclosed as a key audit matter. However, few
candidates identified that ‘Note 31 Events after the reporting period’ would be referred to in an
Emphasis of Matter (EOM) paragraph. In addition, only a few candidates noted that an ‘Other
information’ section would be required, as Tameli is a listed entity and the other information
was received before the date the auditor’s report was signed.
Key learning points
• Candidates should ensure they follow the specific instructions in the required. For example,
where a question asks to identify four (4) factors, they should provide only four factors in
the answer – any additional answers will not be marked.
• Candidates should always apply their knowledge to the scenario provided. It is highly
unlikely that an exam question will just require them to copy content directly from an
Auditing Standard.
• Where candidates are required to establish whether an error is material, remember that if
the error breaches even just one of the thresholds (e.g. in this question, overall materiality of
$590,000 or 10% of the relevant line item) then it is material.
• If a question asks to ‘determine whether financial statements are materially misstated’
ensure a conclusion as to whether or not they are misstated is also provided.
• Candidates should always provide a justification for their answer when required.

Audit & Assurance Chartered Accountants Program
Page 10 Main exam suggested solutions and examiner’s feedback
• Prepare a checklist of reporting requirements to establish when additional disclosures
should be made in the audit report and for what situations would they be required.
• Note that the auditors' requirement to report on other information in the annual report is
included in a separate section with a heading ‘Other information’, not ‘Other matters’.
Suggested solutions
Part A (8 marks)
(a)
Reason for non-compliance with ISA 600 Recommendation
Materiality level for the Chilean subsidiary is not
appropriate. Component materiality must be lower
than group materiality
Lower the component materiality below the level of
group materiality of $590.000
The Brazilian subsidiary is a significant component
due to its individual financial significance to the
group. Review of the component is not appropriate
The subsidiary must be audited using component
materiality
(b) Any four (4) of the following were acceptable:
• Classification of components to ‘significant’ and ‘non-significant’ appears appropriate.
•