How to Pass the ACA Assurance Certificate Level Module: Mastering Substantive Procedures

Understanding substantive procedures for key financial statement figures is a vital skill for any aspiring accountant preparing for the ACA Assurance Certificate Level paper. This topic not only plays a major role in exam success but also prepares you for practical audit work. In this guide, we break down the key areas, risks of misstatements, and the audit procedures needed to address them.

Non-Current Assets

Tangible Non-Current Assets

Examples include land, buildings, plant, and equipment.

Key Risks of Misstatement:

• Ownership disputes (rights and obligations)
• Assets not existing or already sold (existence)
• Omission of assets (completeness)
• Incorrect valuations (over/undercharging depreciation)
• Incorrect presentation in financial statements

Audit Procedures:

• Review the non-current asset register.
• Inspect purchase and sales invoices.
• Verify registration documents or property title deeds.
• Check third-party valuations and lease agreements.
• Perform physical inspections and verify depreciation calculations.

Intangible Non-Current Assets

Examples include licences and development costs.

Key Risks of Misstatement:

• Incorrect capitalisation of expenses (existence)
• Inaccurate cost or valuation (valuation)
• Faulty amortisation or impairment reviews (valuation)

Audit Procedures:

• Review purchase documentation and client schedules.
• Consult accounting standards and use expert valuations if needed.
• Assess impairment indicators using the auditor’s understanding of the entity.

Inventory

Key Risks of Misstatement:

• Non-existent inventory being included (existence)
• Omission of inventory (completeness)
• Incorrect valuation due to damage or obsolescence (valuation)
• Incorrect cut-off or third-party ownership inclusion (rights and obligations)

Audit Procedures:

• Attend and observe the company’s inventory count.
• Confirm third-party inventory.
• Inspect purchase and post-year-end sales invoices.
• Perform analytical review based on inventory, revenue, and purchase relationships.

Inventory Count

Important for confirming inventory existence.

Key Controls:

• Supervised counting with systematic procedures.
• Proper recording and reconciliation of count records.
• Use of perpetual inventory systems for comprehensive year-round accuracy.

Receivables

Key Risks of Misstatement:

• Uncollectable debts (valuation)
• Contested debts (existence, rights and obligations)

Audit Procedures:

• Review receivables ledger and obtain customer confirmations.
• Verify cash receipts after the year-end.
• Conduct analytical procedures, especially for recurring sales.

Customer Confirmations

Positive method preferred for reliability.

Key Points:

• Ensure confirmations cover year-end balances.
• Follow up on non-replies and disputes with additional procedures.
• Reconcile customer replies to year-end balances.

Bank Balances

Key Risks of Misstatement:

• Omission of balances (rights and obligations)
• Misstated reconciliations (valuation)

Audit Procedures:

• Obtain direct confirmation from banks.
• Inspect bank statements and reconciliations.
• Verify cash floats and year-end cut-off.

Next Steps

Mastering substantive procedures is a critical part of learning how to pass the ACA Assurance Certificate Level paper. For in-depth resources and comprehensive guidance, explore our subscription plan and take your preparation to the next level. Equip yourself with the skills and confidence to excel in your exams and future audit career.