Audit Procedures

• Previously, we covered the 8 types/categories evidence.

Physical examination, Confirmation, Inspection, Analytical procedures,
Inquiries of the client, Recalculation, Reperformance, Observation
• Audit procedures refer to specific steps typically documented as instructions
designed to gather support the eight categories of audit evidence.
• Need to be clear enough for all members of the audit team to comprehend the required
tasks.
• This session: Explain the 12 terms plus an accompanying audit procedure and
its corresponding category of evidence.
 The 12 Audit Procedures

1. Examine 7. Trace
2. Scan 8. Compare
3. Read 9. Count
4. Compute 10.Observe
5. Recompute 11. Inquire
6. Foot 12. Vouch
 Read
• Definition:
Analyze written content to extract relevant facts
for the audit.
• Example:
Review the minutes from a board of directors
meeting and compile a summary of all pertinent
information for the financial statements within
the audit documentation.
• Type of Evidence:
Inspection
 Examine (of document)
• Definition:
Conduct a thorough analysis of a document or
record to ascertain specific details related to it.
• Example:
Conduct an examination of a subset of vendors'
invoices to ascertain the reasonableness and
alignment with the usual products or services
utilized by the client's business.
• Type of Evidence:
Inspection (not examination!)
 Scan
• Definition:
Perform a brief review of a document or record to
identify any anomalies that might necessitate
additional inquiry.
• Example:
Perform a scan of the sales journal, seeking out
significant and uncommon transactions. Conducting
analytical procedures
• Type of Evidence:
Analytical procedure
 Compute
• Definition:
Perform a calculation that is carried out by the
auditor independently of the client.
• Example:
Calculate inventory turnover ratios and juxtapose
them with previous years' figures as a means of
testing for potential inventory obsolescence.
• Type of Evidence:
Analytical Procedures
 Recompute
• Definition:
Conduct a calculation to verify the accuracy of a client's
computation.
• Example:
Verify the total by recalculating the product of unit sales
price and the quantity of units for a selection of
duplicate sales invoices, and subsequently, compare the
resultant totals with the client's calculations.
• Type of Evidence:
Recalculation
 Trace
• Definition:
"Trace" involves tracking information as it moves between
sources, such as following financial data from one
document to another. For instance, auditors might trace
amounts from sales invoices to the sales journal to confirm
accuracy.
Example:
Validate the transfer of entries from the sales journal to
the corresponding accounts in the general ledger.
• Type of Evidence:
Inspection and reperformance
 Foot
• Definition:
Summing a column of numbers to ascertain if the
sum matches the client's total.
• Example:
Calculate the total of the sales journal for a one-
month duration and cross-reference all sums with
the entries in the general ledger.
• Type of Evidence:
Recalculation
 Compare
• Definition:
A comparison of data from two distinct sources. The
instruction should explicitly outline the specific information
being compared in as comprehensive a manner as possible.
• Example:
Choose a subset of sales invoices and examine the unit
selling price recorded on each invoice, subsequently
contrasting it with the roster of unit selling prices endorsed
by management.
• Type of Evidence:
Inspection
 Count
• Definition:
An assessment of existing assets at a specific point in
time. This designation should solely pertain to the
category of evidence categorized as physical
examination.
• Example:
Conduct a count of a subset of 100 inventory items,
then cross-reference the quantity and description
against the counts provided by the client.
• Type of Evidence:
Physical Examination
 Observe
• Definition:
The act of watching should exclusively relate to the
classification of evidence characterized as observation.
• Example:
Monitor whether the two separate inventory count
teams individually perform and document the
inventory counting process.
• Type of Evidence:
Observation
 Inquire
• Definition:
The process of seeking information should be linked
with the category of evidence delineated as inquiry.
• Example:
Engage with management to ascertain whether there
exists any obsolete inventory on hand as of the
balance sheet date.
• Type of Evidence:
Inquiries
 Vouch
• Definition:
Use documents to authenticate documented
transactions or quantities.
• Example:
Authenticate a subset of recorded acquisition
transactions by referencing vendors' invoices and
receiving reports.
• Type of Evidence:
Inspection