In my opinion, a good candidate would have their ears to the ground in terms of what is going on at Google. Not every single update carries the same importance, so I definitely do not need a running commentary of everything that is written on Google webmaster blog.

However, whenever a major algo changes is announced, its effect on the web and your site should be taken notice of. Like I've mentioned before, I honestly don't expect to hear every tweak since Florida, but I want a detail idea of the current state of play. Recently it has been Penguin, Panda and EMDs and any good SEO should know these like they know their alphabet.

Panda - What does it do, what cause you to get hit by it, how do you mitigate against its effect, how do you recover?

Penguin - Why was it rolled out, what do you need to do, how do you recover?

EMDs downgrade - What is the history behind it, how would you future proof your client's site?

Personally, I expect details answers to such questions as the candidate will be in charge of handing down instructions to their team and also making recommendations to clients.