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Sorry, in the second paragraph I meant “describe each by one sentence”, which will gain one mark
When answering any question you should keep in mind two things – give a relevant and elaborative answer AND make marking as easy as possible. Another important rule is that 1 mark is a good sentence of approximately 15 words (no bullet points as they will prompt you to be two short).
So, for a 6 marker question on substantive procedures you will need to identify 6 procedures and describe each by two sentences. For example:
Substantive procedures for testing sales occurrence.
Select a sample of sales transactions recorded in the sales day book; agree the details back to a goods despatched note (GDN) and customer order (1 mark).
Review the monthly breakdown of sales per key product, compare to the prior year and budget and investigate any significant differences (1 mark).
Audit risk is the risk that an auditor may issue an unqualified (clean) report while the financial statements are actually subject to misstatements. Those misstatement are due to fraud or error.
Substantive tests or the “tests of detail” are examining particular accounting transactions (entries) – for example checking sales invoice to the supporting evidence in order to prove that the sale has actually taken place or checking the fixed asset records for the evidence of fixed assets. The purpose of substantive tests is to assess that financial records are valid, accurate and complete.