Inspection of Records and Documents

This involves examining documents to verify their accuracy and authenticity.

- Vouching: Tracing from accounting records to supporting documentation to confirm occurrence or existence.

- Tracing: Following transactions from their origin to accounting records to ensure completeness.

- Scanning: Reviewing records to identify unusual or significant items.

Inspection of Tangible Assets

Auditors physically inspect tangible assets to confirm their existence. This procedure is especially relevant for inventory and fixed assets.

Observation

Observation involves watching processes or procedures performed by others. For example, auditors may observe inventory counts or control activities.

Inquiry

Inquiry gathers information from management, employees, or other stakeholders through structured or informal questions. While inquiry alone provides limited evidence, it is often corroborated with other procedures.

Confirmation

This entails obtaining direct verification of information from third parties. For example:

- Confirming accounts receivable balances with customers.

- Verifying bank balances with financial institutions.

Recalculation

Auditors independently verify the mathematical accuracy of financial data, such as depreciation schedules or interest computations. This provides strong evidence for valuation and allocation.

Reperformance

Reperformance involves independently executing client control activities, such as rechecking reconciliations. This ensures the operating effectiveness of controls.

Analytical Procedures

These procedures evaluate financial information by studying relationships among financial and non-financial data. Common techniques include:

- Comparing current and prior period data.

- Evaluating budget-to-actual variances.

- Analyzing ratios and trends.