Audit Procedures
Mohamed Azadkhan
azadkhan4u@gmail.com
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Procedures Types Description Remarks
Inquiry Engaging with management or ▪ Linked to ISA 315 for understanding
staff to understand how internal entity controls.
controls are implemented and ▪ Requires proper documentation of
followed. inquiries and conclusions.
Observation Monitoring a control or process ▪ Best suited for controls with no
in real-time, such as watching documentary evidence (e.g., segregation
inventory counts or cash of duties).
handling procedures ▪ Should be paired with inspection for
Test of stronger evidence.
Controls Inspection Reviewing documents, records, ▪ Focus on key controls mitigating
or control logs to verify the significant risks.
effectiveness of controls (e.g.,
▪ Ensure consistency in application across
authorization signatures on
invoices). different transactions.
Reperformance Re-executing a control ▪ Primarily used for high-risk areas.
procedure to verify its ▪ Provides the strongest level of assurance
effectiveness, such as redoing a regarding control effectiveness..
bank reconciliation.
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Procedures Types Description Remarks
Trend Analysis Examining financial data over time ▪ Used during planning and final review
to detect patterns or unusual stages.
fluctuations. ▪ Helps investigate unexpected variances.
Ratio Analysis Using financial ratios (e.g., gross ▪ Compare with prior years or industry
profit margin, liquidity ratios) to benchmarks.
assess reasonableness and ▪ Useful in detecting potential
Analytical consistency. misstatements, such as declining
margins indicating misstated costs
Procedures
Reasonableness Assessing whether financial data ▪ Essential for testing predictable
Testing aligns logically with other relationships.
information (e.g., payroll expenses ▪ Investigates deviations from expected
compared to staff count). financial results.
Comparison Analyzing financial performance ▪ Helps assess financial data reliability.
with Industry relative to industry averages or ▪ Detects inconsistencies between entities
Benchmarks competitors.
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Procedure Types Description Remarks
Tests of Details Examining specific ▪ Used for high-risk accounts or when
(Transactions transactions or balances to internal controls are weak.
& Balances) verify accuracy (e.g., ▪ Linked to audit assertions such as
vouching sales invoices, existence, completeness, and accuracy.
confirming receivables). ▪ Sampling techniques help select
Substantive relevant items for testing.
Procedures Substantive Using data analytics to ▪ Best for predictable relationships or
Analytical detect material low-risk areas.
Procedures misstatements, such as ▪ Helps to detect unexpected deviations.
comparing revenue trends
with prior years.
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Procedure Types Description Remarks
Risk Assessment Identifying and evaluating ▪ Used for high-risk accounts or
Procedures risks of material when internal controls are weak.
misstatement by analyzing ▪ Linked to audit assertions such as
internal and external factors. existence, completeness, and
accuracy.
▪ Sampling techniques help select
Other Audit relevant items for testing.
Procedures
Other Audit Includes general procedures ▪ Inquiry helps obtain audit evidence
Procedures such as inquiry, observation, but should be corroborated with
and inspection used other procedures.
throughout the audit. ▪ Observation verifies operational
effectiveness.
▪ Inspection ensures documentation-
based reliability.
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