Part (d) for 9 marks required substantive procedures the auditor should perform on three areas; the treatment of $5 million spent on improving the production process, the release of the opening allowance for receivables and the damaged inventory. Performance on this question was disappointing.

Candidates were unable to tailor their knowledge of general substantive procedures to the specific issues in the scenario. Many identified the account balances being audited of PPE and repairs expense, receivables and inventory and proceeded to list all possible tests for these areas. This is not what was required and hence did not score well. The scenario was provided so that candidates could apply their knowledge; however it seems that many did not take any notice of the scenario at all.

As addressed in other examiners reports candidates must strive to understand substantive procedures. Learning a generic list of tests will not translate to exam success as they must be applied to the scenario. For example in 1dii on the release of the allowance for receivables, the scenario clearly stated that there was no longer an allowance, yet many candidates provided tests on “recalculating the allowance”, or “comparing it to last year” these scored no marks.

In addition the damaged inventory in 1diii had a different taste due to an error in the mixing process; many candidates suggested “inspecting the damaged inventory to assess the level of damage” this is impossible as the problem was the taste of the cola not the physical condition.

Common mistakes made by candidates were:

• Giving objectives rather than procedures “ensure that inventory is valued at the lower of cost and NRV”, this is not a substantive procedure and so would not score any marks. 
• Lack of detail in tests such as “agree the expenditure on the production to invoices”, this would score few marks as it does not address what we should be looking to agree on the invoice. 
• Believing that “obtaining a management representation” is a valid answer for all substantive procedure questions. 
• Providing controls tests rather than substantive procedures. 
• Not providing enough tests, candidates should assume 1 mark per valid procedure.

The requirement verb was to “describe” therefore sufficient detail was required to score the 1 mark available per test. Candidates are reminded yet again that substantive procedures are a core topic area and they must be able to produce relevant detailed procedures.