Substantive

There aren’t really alternative names to ‘substantive’. There are two types of substantive tests;

1 Analytical procedures (but these can also be used at the planning stage).

2 Tests of detail. For example inspecting lots of invoices to ensure they are correctly coded; tracing lots of payments form the cash book to the Dr of receivables accounts. Note, you are not testing controls here. You are testing a high volume of transactions to ensure they are correct.

Yes: an audit procedure = audit test = a way to collect evidence either about the operation of a control or directly about the amount in the financial statements

The materiality level is the $-value above which you become concerned as an autitor that a material misstatement might be made.

If you set materiality at $1,000, you are not going to be concerned with amounts or errors <$1,000. If you set materiality at $5,000 you will not do much work on amounts or errors <$5,000.

The $1,000 is a lower level than $5,000 and means you would do more work ef looking at all invoices over $1,000 in a substantive test. If you think invoices have a high risk of being incorrect, you should look at more and would therefore set a lower materiality level.

You could get questions on these subjects, and internal audit comes up regularly.

I wouldn’t speculate on how many marks.

An engagement letter is sent at the very start of appointment as auditor. Essentially it sets out the terms of the contract: management prepares FS, auditors seek sufficient appropriate evidence that FS have no material misstatements, management will give auditors all information and explanations they need, involvement if internal audit, timetable, fees etc etc. This will be updated from time to time.

A management letter is sent out every audit, usually after the interim audit where most of the testing on controls is performed. It sets out internal control weaknesses, the likely effect of those and how to fix them. There might be another management letter at the end of the audit setting out audit problems eg if the inventory count hadn’t gone well.

No. Both are sent by the auditor to the client. In respect of the engagement letter the client might have to sign a copy and return it as evidence that the terms of the engagement have been agreed.

Your other points are correct.