Question 3 - Set up

In this lesson

1. 0:00 Understanding the completion phase question
2. 1:53 Identifying the three unresolved issues
3. 2:01 Materiality criteria and profit targets context
4. 3:34 Breaking down the 16 marks strategy
5. 5:04 Accounting standards knowledge requirement
6. 7:31 Part B: Audit opinion with remaining issues
7. 9:03 Evaluating material versus pervasive matters
8. 10:35 Professional scepticism and marking criteria

About this lesson

You'll discover how to evaluate matters for discussion with management, break down the 16 marks strategically, and justify your audit opinion when clients refuse to correct errors. The question centres on three unresolved misstatements at Sunningdale: investment property valuation, specialist equipment useful lives, and undisclosed related party transactions involving gifts of cars. You'll learn how to demonstrate professional scepticism by identifying potential management bias—in this case, pressure to meet profit targets tied to bank loan covenants—and how this context shapes your discussion with management. The lesson shows you how to structure your answer by allocating marks: roughly three marks for explaining each accounting issue and its breach of standards, then five to six marks for recommending specific actions before issuing the audit report. Part B moves forward to September when the investment property has been corrected but the other two misstatements remain. You'll understand how to evaluate the aggregate impact of both uncorrected issues on your audit opinion, determining whether the matter is material or pervasive, and justifying a single audit opinion that reflects both errors together. The lesson emphasises that depth of accounting knowledge is essential—lack of standard knowledge will eliminate most of your marks—and shows how to earn the five professional marks available through careful judgement, scepticism, and evaluation throughout your answer.

Duration: 12m