The Masters 2013: Latest report from day three at Augusta

Tiger Woods teed off mired in a rules controversy after taking an incorrect drop on Friday (AFP/Getty Images)

Tiger Woods was today attempting to repair the damage caused by a two-shot penalty as an incident-packed Masters continued at Augusta National.

Woods was penalised for taking an incorrect drop on the 15th hole of his second round on Friday, taking him from three under par to one under and five shots behind leader Jason Day.

The world number one, seeking a fifth Green Jacket and a first since 2005 - when he was six shots behind at halfway - began his third round with a birdie at the first to quickly cut the deficit.

But the 37-year-old then bogeyed the fourth and, after a birdie at the seventh, saw another birdie putt from three feet on the eighth horseshoe around the hole and stay out.

To rub salt into the wound, another dropped shot at the next took Woods to the turn in 36 at one under - still five shots behind Day, who had started with five straight pars.

The 25-year-old, looking to become the first Australian winner at Augusta, led by one from 2009 champion Angel Cabrera and 1992 champion Fred Couples, with Matt Kuchar and Spain's Gonzalo Fernandez-Castano a shot further back.

Tournament officials had earlier insisted Woods had not received preferential treatment and the ruling on his two-shot penalty was a "good decision".

"I can't really control what the perception might or might not be," Fred Ridley, chairman of the competition committees said. "All I can say is that unequivocally this tournament is about integrity.

"Our founder Bobby Jones was about integrity, and if this had been John Smith from wherever he would have gotten the same ruling, because again, it is the right ruling under these circumstances."

Woods' approach to the 15th hole hit the pin and bounced back into the water. He opted to play from the same place again and under rule 26-1a was obliged to drop "as nearly as possible at the spot from which the original ball was last played," but said in a post-round interview that he opted to go "two yards further back".

That should have incurred a two-shot penalty for playing from the wrong place, but crucially rules officials reviewed footage of the incident - after being alerted by a television viewer - decided Woods had done nothing wrong and did not inform him of the situation.

"There's not a day that goes by that there are not some things I wish I would have done differently," Ridley added.

Woods therefore signed a round of 71, only for his post-round comments to prompt further review and an 8am meeting with the world number one on Saturday morning.

Ridley felt from Woods' "candid" comments that he had "fully intended" to comply with rule 26-1a and he was given a two-shot penalty, meaning he had signed for an incorrect score - 71 not 73.

Until recently that would have resulted in disqualification, but under a revision to rule 33-7, the committee can waive disqualification if "satisfied that the competitor could not reasonably have known or discovered the facts resulting in his breach of the rules."

The penalty for Woods came the day after Chinese schoolboy Guan Tianlang was penalised one shot for slow play, meaning he only made the halfway cut on the mark at four over.

The 14-year-old, the youngest competitor in Masters history, carded a third round of 77 to finish nine over par, just one shot worse than three-time winner Phil Mickelson who had back-to-back double bogeys on the 11th and 12th in his 77.

Defending champion Bubba Watson, out first with a club member acting as his marker, was four under par for the first 10 holes of his round but eventually signed for a 70 to finish two over.