Examiner's Report
As a whole, the Performance of the candidates is at a fairly satisfactory level. Question wise performance is as follows:
General observations of Examiners are as follows:
01
(Marks Allotted 18)
This question tested theoretical knowledge of the candidates. Almost all the candidates had answered this question and few had earned full marks and most of the others earned more than 50% of the marks allotted for this question.
(a) From this part of the question, examiner tested the theoretical knowledge of the candidates on two reasons as to why audit of financial statements is necessary.
Almost all the candidates had answered this part and given the correct answer to earn marks.
Few candidates have given the answers like; express an opinion on the financial statements, identify weaknesses of internal control system etc as the primary and secondary objectives of an audit.
Performance : Satisfactory
(b) The examiner has expected to test what is understand by the internal audit and how it is different from a statutory audit.
Almost all the candidates have given the correct answer on what they understand on the internal audit, and also how it differs from statutory audit, and satisfactorily earned the marks allocated.
This is also an area which tested the theoretical knowledge of the candidates.
Few candidates have written wrong answers like; the internal audit is done inside the company and the statutory audit is done outside the company.
Performance : Satisfactory
(c) Here the examiner aimed to test the knowledge of the candidates on differences between ‘fraud’
& ‘error’ with two examples of each.
Most of the candidates have given the correct answer to this part.
Performance : Satisfactory

(d) From this part, the examiner expected the candidates to explain two inherent limitations of an audit in detecting all material misstatements in financial statements arising from fraud and error.
Most of the candidates have given the correct answer and had earned marks allotted.
Few answers were found, where candidates have defined three elements of audit risks (i.e. control risk, detection risk, inherent risk) as the inherent limitations of an audit in detecting all material misstatements in financial statements arising from fraud and error.
Few candidates have written the regulatory requirements/compliance as inherent limitations. For an example, requirements of LKAS & SLAuS, requirements of Companies Act, which were incorrect.
Further inadequate resources and time limitation, inadequate knowledge and experience of the audit assistants were some of the examples given by the candidates, which were incorrect.
Performance : Satisfactory
(e) Here the examiner tested the knowledge of the candidates on the Code of Professional Conduct and Ethics applicable to the members of AATSL. Though this was a straight forward question, candidates had not given the correct answer to earn marks.
Few candidates had given the correct answer, but majority of the candidates had not given the correct answer for ‘objectivity’.
Most of the candidates had explained this as an objective of audit and have not mentioned that all the members should be fair and should not allow prejudice or bias or the influence of others to overide objectivity, which was the correct answer. Some candidates have written the general meaning of the principle of ‘objectivity’ referring to the word itself.
Performance : Fairly satisfactory
Question No.
02
(Marks Allotted 17)
The overall performance of this question is very low. Some candidates have not answered for some parts of this question. These are theoretical questions and could be found in the study pack.
As a whole this question was the worst answered question by the candidates. About 75% of the candidates has earned below 5 marks out of the total marks allocated. Only few candidates were able to earn more than 10 marks out of the marks allocated.
(a) Here the examiner tested on 3 ways that could be used for fraudulent financial reporting by the management of a business organization.
Majority of the candidates had not given the correct answer for this part of the question.
Most of the candidates have given answers on the solutions for fraudulent financial reporting instead of the methods that can be used for fraudulent financial reporting. Examples have been given for this part.
Performance : Not satisfactory
(b) This part of the question tested the theory knowledge about factors influencing the sample size for test of controls. Most of the candidates have given wrong answers for this question such as materiality level, knowledge of the business, effectiveness of internal control etc.
Performance : Poor
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(c) From this part of the question, the examiner expected to list 3 factors that would affect the sufficiency of audit evidence gathered by an auditor.
From the answers given for this part, it was observed that candidates were lack with knowledge relating to this area.
Performance : Not satisfactory
(d) Here candidates are required to list two preliminary activities an auditor should perform at the beginning of an audit for an existing audit client. Candidates have not understood this part too.
Here question is related to existing client. Most candidates have given incorrect answers such as sign an audit engagement letter, understanding of internal control environment etc. It is noted from the answers that candidates were not aware of the area tested from the question.
Performance: Poor
(e) Here the examiner tested the knowledge of the candidates in applying theoretical knowledge in a given scenario/observation on debtor collection period and stock turnover ratio and the audit risk arising from each observation. This was a practical question.
Most of the candidates have not given the correct answers for this part of the question.
The expected answer was; for increase in debtor collection period – risk of bad and doubtful debts, for reduced stock turnover – risk of obsolete and slow moving inventory.
But most of the candidates have not identified this audit risks properly.
Candidates had tried to relate it with auditors control risks and detection risks, instead of writing answers to the question directly in a simple way.
The term used in the question ‘audit risk’ has been misunderstood by them to think about it in a deep way and because of that most of the candidates had written the definition of control risk and detection risk.
Few candidates were unable to understand the meaning of the terms ‘debt collection’ and ‘stock turnover’.
Performance : Poor
Question No.
03
(Marks Allotted 22)
Overall marks earned for this part is less than 50% of the marks allocated.
(a) Here the examiner tested the knowledge of the candidates on the importance of obtaining an understanding of the internal controls relevant to the audit client’s business organization.
Most of the candidates had failed to answer this part. The question has not been properly understood by most of the candidates.
Candidates have written answers such as to inform the management about the internal control weaknesses, to identify fraud and inform the management about those findings.
Performance : Fairly satisfactory
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(b) The examiner expected candidates to give explanations on limitations of internal controls.
Few candidates has answered this part correctly and earned marks. But some of them has written the inherent limitations/weaknesses of internal audit instead of internal controls of which the examiner expected them to answer.
Candidates have written the use of judgment, evidence persuasive rather than conclusive etc as the answers for this question which were incorrect.
Performance: Fairly satisfactory
(c) (i) From this part of the question, examiner tested the benefits that a company could obtain from a IT system with regards to efficiency and effectiveness of the internal controls.
There were many candidates who misunderstood the benefits of an IT system. Those candidates have mentioned the purpose of CIS application controls such as ensure that all transactions are approved and recorded, completely processed, accurately processed and timely processed and further mentioned about CIS application controls such as input controls, processing controls and output controls, instead of writing the benefits to internal controls.
(ii) From this part of the question, examiner tested the risks arising from IT system to the internal controls. This part was also misunderstood by most of the candidates by writing the characteristics of a CIS environment such as absence of input documents, lack of visible transaction trail, lack of visible output, easy access to the computer data and programs etc.
Performance : Poor
(d) This part of the question examiner tested to ascertain the knowledge of candidates on internal control weaknesses and remedies for a given scenario. Fair number of candidates have identified weaknesses and answered on how to overcome those weaknesses. Some candidates have given incorrect and irrelevant answers such as given below:

Payments to be done to suppliers through IOU’s by keeping a petty cash float

Store keeper to continue making payments to supplier, but to obtain acknowledgement of the payment from the supplier

Ordering goods to be done by the store keeper before reaching Re-Order-Level.

Also, few candidates has repeated the segregation of duties in several points; such as, store functions should be segregated among few people, finance function should be segregated among few people and authority to be given, purchasing function to be segregated among few people.

As few candidates have failed to identify the weaknesses of the given scenario, they have failed to give the correct recommendations to the second part of this question.
Performance: Fairly satisfactory
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Question No.
04
(Marks Allotted 13)
This question was tested the theoretical knowledge and the practical knowledge of the candidates.
It was observed that for part (c) of this question, candidates have given very weak answers. Reason for this may be due to candidates has not read and understood the question before giving the answer.
(a) From this part of the question, examiner tested the importance of auditor agreeing with the client on the terms of the audit engagement.
As this was tested in previous exams, most of the candidates have answered this part well.
However, some candidates have given incorrect answers such as, to know the duration of the audit, to understand the client responsibility, to know about third parties to access the business information etc.
Performance: Fairly satisfactory
(b) The examiner tested the knowledge of the candidates on the factors that should be considered when reviewing the audit work performed by assistants.
Here most of the candidates had not given the correct answer / factors, for an example they have written the code of ethics, the knowledge of the assistants etc.
Some other candidates have given highly irrelevant answers such as, whether internal controls were checked, assistants qualifications and experience, whether bribes were taken from client’s staff, mistakes and omissions, scope of the audit, accuracy of accounting, business environment, etc. Thereby, those candidates were unable to score marks for this part.
Performance: Not satisfactory
(c) (i) From this part of the question, examiner tested internal controls in relation to Property
Plant and Equipment. However considerable number of candidates have not understood the question.
Some candidates have given audit procedures as the answer. For an example, check whether PPE has been purchased in the name of the company.
Some candidates have mentioned about mistakes done by the client such as errors in depreciation, errors in accounting relating to PPE etc.
Performance : Fairly satisfactory
(ii) From this part of the question, examiner tested audit procedures to verify existence, valuation and ownership of PPE.
Most common mistake done by the candidates was that they have mentioned many audit procedures without specifically identifying the relevant assertion. Thereby they have not given correct answer for any of the assertion. Some candidates have given wrong answers such as depreciate the PPE on time etc. Some candidates have mentioned check relevant documents as the answer for all parts. (Without mentioning as to what documents to check)
Performance : Poor
5

Question No.
05
(Marks Allotted 15)
From this question examiner tested the IT knowledge of the candidates and also the practical knowledge relevant to performance of audit procedures.
(a) From this part of the question, examiner tested the factors to be considered by an auditor, when the said auditor acts as the principal auditor of a group of companies.
Most of the candidates have not understood the question and the performances were very poor.
Candidates have given irrelevant answers such as engagement letter, requirements of the code of ethics, qualifications of the auditor etc.
Performance: Poor
(b) This is related to information technology and it has been tested in many times in the past. Here the candidates were required to explain ‘Auditing around the computer and Auditing across the computer’. Common mistake made in answering this question was candidates have mixed up the answer [for the part (i), candidates have given answer for part (ii) and vice versa]. Further most of the answers were incomplete. For example, most of the candidates have just mentioned that auditor uses first approach when he is lack with IT knowledge and uses second approach when the auditor has thorough knowledge regarding IT.
Performance : Poor
(C) From this part of the question examiner tested candidate’s knowledge about audit procedures.
Here candidates are required to state reasons for performing given audit procedures. Further the examiner expected answers which refer to the assertions in obtaining audit evidence. Compared to (a) and (b) sections of this question, candidates have scored relatively well for this part.
However most candidates have not clearly mentioned the relevant assertions in their answers.
Performance : Fairly satisfactory.
Question No.
06
(Marks Allotted 15)
(a) (i) From this part of the question, examiner tested who can appoint the Auditor General of Sri
Lanka. This too has been tested in past exams and majority have given correct answer.
However some candidates have mentioned wrong answers such as “parliament committee members” etc.
(ii) From this part of the question, examiner tested the rights of the Auditor General of Sri
Lanka. Most candidates have answered well for this part.
Performance : Satisfactory
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(b) From this part of the question examiner tested the circumstances in which an auditor would express Disclaimer of opinion and Adverse of opinion.
Candidates have answered well for this part. However some have mixed up the answers and thereby unable to obtained the full marks. Few candidates have answered only one part, either disclaimer of opinion or adverse opinion.
Performance : Satisfactory
(c) This part of the question tested the important matters included in the “opening or introductory paragraph” and “scope paragraph” of the auditor’s report.
Some candidates have given wrong answers such as auditor’s signature, date etc
Very few candidates have given correct answers such as reference to the SLAuS, description of the work done by the auditor.
Performance : Poor
(d) This part of the question tested how the appointment of the auditor of a company should take place after the first year as per the Companies Act No. 7 of 2007.
Most of the candidates have not answered this part. Candidates who answered have not understood the question. Most of them have just mentioned the fact that directors or shareholders can appoint the auditor.
Performance : Poor
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