🔵 PART 1: MASTER LIST – SUBSTANTIVE PROCEDURES

Organized by financial statement area.

1️⃣ REVENUE

Key Assertions:

  • Occurrence

  • Completeness

  • Cut-off

  • Accuracy

Core Procedures:

  • Agree sales invoices to:

    • Customer orders

    • Despatch notes

    • Proof of delivery

  • Trace despatch notes → sales ledger (completeness)

  • Review sales before/after year end (cut-off)

  • Recalculate invoices

  • Agree prices to authorised price list

  • Perform analytical procedures:

    • Revenue vs prior year

    • Revenue vs occupancy (hotels)

    • Revenue vs production

    • Revenue vs membership numbers

  • Review credit notes issued after year end

2️⃣ RECEIVABLES

Key Assertions:

  • Existence

  • Valuation

  • Rights

Core Procedures:

  • Receivables circularisation (positive confirmation)

  • Review post year-end cash receipts

  • Inspect sales documentation

  • Review aged receivables listing

  • Recalculate allowance for expected credit losses

  • Compare receivable days to prior year

  • Review customer correspondence

  • Confirm receivables not factored/assigned

3️⃣ INVENTORY

Key Assertions:

  • Existence

  • Completeness

  • Valuation

  • Cut-off

Inventory Count Procedures:

Before count:

  • Review count instructions

  • Plan attendance

  • Assess risks

During count:

  • Observe count procedures

  • Perform test counts:

    • Floor → sheet (completeness)

    • Sheet → floor (existence)

  • Inspect damaged/obsolete items

  • Record cut-off details

Valuation:

  • Confirm lower of cost and NRV

  • Review post year-end sales

  • Recalculate cost

  • Assess WIP stage of completion

  • Review gross profit margins

4️⃣ PAYABLES

Key Assertion:

  • Completeness (most important)

Core Procedures:

  • Review post year-end payments

  • Reconcile supplier statements

  • Inspect GRNs before year end

  • Review invoices around year end

  • Perform payables days analytical review

  • Confirm no unrecorded liabilities

5️⃣ BANK & CASH

Core Procedures:

  • Obtain bank confirmation

  • Re-perform bank reconciliation

  • Verify outstanding cheques

  • Verify outstanding lodgements

  • Inspect post year-end bank statements

  • Review cut-off around year end

6️⃣ PPE & REVALUATION

Core Procedures:

  • Inspect purchase invoices

  • Physically inspect assets

  • Review valuation report

  • Assess valuer competence & independence

  • Review valuation method

  • Recalculate depreciation

  • Review accounting treatment & disclosures

7️⃣ INTANGIBLES (R&D – IAS 38)

Core Procedures:

  • Obtain breakdown of projects

  • Assess capitalisation criteria:

    • Technical feasibility

    • Intention to complete

    • Ability to use/sell

    • Future economic benefits

  • Verify costs to invoices/payroll

  • Recalculate amortisation

8️⃣ PROVISIONS (IAS 37)

Core Procedures:

  • Inspect legal correspondence

  • Obtain lawyer’s confirmation

  • Assess whether:

    • Probable → provision

    • Possible → contingent liability

  • Review board minutes

  • Assess disclosures

9️⃣ SHARE CAPITAL / RIGHTS ISSUE

Core Procedures:

  • Inspect board minutes

  • Recalculate proceeds

  • Agree cash received to bank

  • Check share capital & premium entries

  • Review disclosures

🔵 PART 2: COMPLETION PROCEDURES (END OF AUDIT)

These are tested repeatedly across the kit.

1️⃣ Going Concern

Auditor must:

  • Review management’s forecast (12 months)

  • Assess assumptions

  • Review loan agreements

  • Review post year-end results

  • Assess financing options

  • Review disclosures

If material uncertainty → separate paragraph in report.

2️⃣ Subsequent Events

Procedures:

  • Review post year-end management accounts

  • Inspect board minutes

  • Inquire of management

  • Review legal correspondence

  • Review post year-end cash receipts/payments

3️⃣ Written Representations

Required to:

  • Confirm management responsibility

  • Confirm completeness of information

  • Confirm judgement areas

If refused → limitation of scope.

4️⃣ Overall Review

  • Analytical review of final financial statements

  • Review disclosures

  • Ensure consistency

  • Assess misstatements

🔵 PART 3: REPORTING MASTER SUMMARY

This is where students lose easy marks.

1️⃣ Types of Audit Opinions

✅ Unmodified opinion

Financial statements are true and fair.

⚠ Qualified opinion

Used when:

  • Material misstatement (not pervasive)
    OR

  • Limitation of scope (not pervasive)

Wording:

“Except for…”

❌ Adverse opinion

Used when:

  • Material AND pervasive misstatement

🚫 Disclaimer of opinion

Used when:

  • Material AND pervasive limitation of scope

2️⃣ Materiality Thinking in Exam

Always:

  • Compare misstatement to profit

  • Compare to assets/liabilities

  • Decide if material

  • Decide if pervasive

3️⃣ Key Audit Matters (Listed Companies)

KAM = matters of most significance in audit.

Auditor:

  • Determines from significant risks

  • Describes why matter was significant

  • Describes how addressed

KAM does NOT modify opinion.

4️⃣ Limitation vs Misstatement

SituationType
Refusal to adjustMisstatement
Refusal to sign rep letterLimitation
Unable to obtain evidenceLimitation
Incorrect accounting treatmentMisstatement

🔵 EXAM STRUCTURE FORMULA

When answering reporting questions:

1️⃣ State what is wrong
2️⃣ State financial statement impact
3️⃣ Assess materiality
4️⃣ State type of opinion
5️⃣ Explain why

🎯 FINAL EXAM STRATEGY

In Section B:

  • Identify risk from case

  • Identify assertion

  • State clear procedure

  • Say WHY

Always use phrases like:

  • “To ensure completeness…”

  • “To confirm existence…”

  • “To assess valuation…”

  • “This will provide sufficient appropriate audit evidence…”