Are you wondering what are the audit procedures? If so, then this blog is just for you. Further, we are going to discuss everything about the audit procedures in detail. Audit procedures are the methods, techniques, and procedures that auditors execute to obtain the evidence of audits.
This enables them to come to an end of the set audits objective and show their opinions. Once in a while, we call the audit procedures audit programs. Both of these terms refer to the same thing!
The auditors generally formulate the audit procedures at the planning stages. They do this after identifying the objectives, scope, risk, and approach of the audits. In addition to this, the auditors also design the procedures of audit to detect all the types of risks.
Also, they ensure that all the necessary evidence of audits is obtained appropriately and sufficiently. Generally, the audit partners need to approve the plans and procedures of the audit before the testing by the audit team.
They do this to ensure that all the risks and concerns get addressed. The audit methods can be different from person to person and from time to time. Because the internal control over the financial reporting is unlike from one customer to the other.
The auditor also needs to update the procedures of audits from time to time although its team or firm has already audited the latest financial statements.
The five kinds of audit procedures are generally used by the auditors to get the audit evidence. These five audit methods consist of inquiry, analytical review, inspection, observation and recalculation.
It isn’t the method that is used by the auditor to get the audit evidence. But still, the method is used to evaluate unexpected events or transactions. For instance, when the auditor finds out that there are unexpected events or transactions as the outcome of the analytical review.
The auditor then uses other methods to get the evidence. Moreover, the analytical method can also be used for the kinds of events or transactions that are routine.
For instance, you can use analytical methods to evaluate the rationality of depreciation that’s registered in the financial statements. The key reason is that the expenses of depreciation occur and are calculated regularly.
The auditors investigate the related management and accountant to get information and to explain the issue found by the auditors. Sometimes, the auditors also enquire about the process of business and how the transactions are recorded.
Moreover, an enquiry is the most significant audit method and it can be used at several stages.
This is one of the audit methods that the auditors use to gather and understand the evidence of the audit. This type of audit method typically confirms the actions that the customer told. Also, it confirms the physical confirmation and time used to get the evidence of audit to make their projection.
For instance, the auditor connects with the client stock at the end of the year and defects whether their way of counting is correct or not.
Inspection means vouching or verifying the documents. This is the most significant part and more than half of the audit work requires the inspection of documents. For instance, the auditor checks the invoice that is kept in the record of financial reports.
The auditor can check whether the invoice issued is right or not. The auditor can also check the supporting documents that have the inventory movement of the whole year. This includes documents related to the purchase of raw materials.
It is the kind of audit method generally done by re-doing the work performed by the client. It is done to check if there’s any distinction between the client’s and audit’s work. For instance, the auditor can also re-execute the calculation of depreciation and evaluate the difference between the calculation of client and auditor.
Moreover, the auditor can also perform the calculation of the company’s monthly expenses and salary which are prepared by the finance department and payroll to assure that total salaries paid to the employees are right.
Also, we can say that it’s the process that is generally used to be sure of the accuracy of transactions.
So, this is it! We hope, now you are well aware of audit and audit procedures. In case of any query, feel free to read other articles online.