Auditors use various audit procedures and techniques to obtain audit evidence needed to form an opinion on the financial statements. Some key procedures mentioned in the document include substantive procedures that test accuracy and validity, analytical procedures that analyze relationships in financial data, and common techniques like inspection of documents, observation, confirmation, recalculation, reperformance, and analytical procedures. The reliability of audit evidence depends on its source and nature, with internally generated evidence deemed more reliable when internal controls are effective, and evidence directly obtained by auditors seen as more reliable than indirect evidence.

1. Auditing
Name: Haris Shahid
Sap ID : 7355

3. Audit Procedure
• Steps performed by auditors to get all the information regarding
the quality of the financials provided by the company, which
enable them to form an opinion on financial statement whether
they reflect the true and fair view of organization financial
position.
• They are identified and applied at the planning stage of the audit
after determining audit objective, scope, approach, and risk
involved.

4. Audit Procedure Methods
Substantive Audit Procedures:
• Substantive procedures are processes, steps, tests performed
by auditors
• Creates conclusive evidence regarding accuracy,
completeness, existence, disclosure, rights, or valuation of
assets/ liability, books of accounts or on financial statement.

5. Analytical Audit Procedures:
• Analytical procedures can be defined as tests/ study/
evaluations of financial information through analysis of
plausible relationships among both financial and non-
financial data.
• In simple language, certain checks/tests conducted by
auditor based on study/ knowledge/ previous year figures to
check and form an opinion on financial statements.
Depending on the audit area, the analytical audit procedure
may differ.

6. Types of Audit Procedures
• Inspection: Inspection is the most commonly used method. Under this
auditor checks every transaction/ document as against written steps,
procedures so as to ensure accuracy.
• Observation: Under this technique of audit, the auditor usually tries to
inspect others doing performing a particular process. For e.g. an
auditor may observe steps followed in processing GRN against goods
purchased.
• Confirmation: This type is applied to ensure the correctness of
financial statement either from internal sources within auditee
organization or from external sources.
• Recalculation: Under this audit method, the auditor usually crosses
checks information presented by the client. This is generally used in
case of checking mathematical accuracy.
• Re-performance: Using this procedure, the auditor re-perform entire
process is performed by the client so as to find out gaps, audit findings,
etc.

7. Reliabilityon audit evidence standard500
• A31. The reliability of information to be used as audit
evidence, and therefore of the audit evidence itself, is
influenced by its source and its nature, and the circumstances
under which it is obtained, including the controls over its
preparation and maintenance where relevant.
• Therefore, generalizations about the reliability of various kinds
of audit evidence are subject to important exceptions.
• Even when information to be used as audit evidence is
obtained from sources external to the entity, circumstances
may exist that could affect its reliability.

8. While recognizing that exceptions may exist, the following
generalizations about the reliability of audit evidence may be useful:
• The reliability of audit evidence is increased when it is obtained from
independent sources outside the entity.
• The reliability of audit evidence that is generated internally is
increased when the related controls, including those over its
preparation and maintenance, imposed by the entity are effective.
• Audit evidence obtained directly by the auditor (for example,
observation of the application of a control) is more reliable than
audit evidence obtained indirectly or by inference (for example,
inquiry about the application of a control).
• Audit evidence in documentary form, whether paper, electronic, or
other medium, is more reliable than evidence obtained orally (for
example, a contemporaneously written record of a meeting is more
reliable than a subsequent oral representation of the matters
discussed).

9. AUDIT TECHNIQUES---SA 500
• Audit techniques stand for the methods that are adopted by
an auditor to obtain evidence.
• Audit evidence – Information used by the auditor in arriving at
the conclusions on which the auditor’s opinion is based.
• Audit evidence includes both information contained in the
accounting records Underlying the financial statements and
other information.
• Appropriateness (of audit evidence) – The measure of the
quality of audit evidence; that is, its relevance and its
reliability in providing support for the conclusions on which
the auditor’s opinion is based.

10. Inspection of Records
• Internal or external documents in paper form, electronic
• form, or other media forms
• Two issues:
• Reliability of records or documents
• Internal & external documents
• Relationship to specific assertions
o Occurrence and completeness assertions
o Direction of testing

11. Observation
• Procedures performed by others
• Processes that do not leave an audit trial
• Ex: entities personnel & control activities
• Limitations:
• Point in time
• Unreliable

12. Inquiry
• Consists of seeking information of knowledgeable
persons throughout the entity or outside the entity Helps
to identify the outside environment
• An inquiry alone does not provide sufficient audit
evidence
• Can be very informal

13. Confirmation
• The process of obtaining information directly from a third party
• Must be written requests from the third party
• Helps provide reliable evidence of existing assets
• Example: an auditor can send a confirmation to a consignee to
verify that a client’s inventory has been cosigned

14. Recalculation
• Checking the mathematical accuracy of documents or records
• May use electronic file forms
• Includes reconciling subsidiary ledgers and testing postings from the
journal ledgers
• Since the auditor calculates this evidence it is viewed as reliable

15. Reperformance
Definition in AU 326.39: “Reperformance is the auditor's
independent execution of procedures or controls that
were originally performed as part of the entity's internal
control, either manually or through the use of CAATs*, …”
• Example: Re-performing the aging of accounts receivable
• Highly reliable audit procedure since the independent auditor creates the evidence

16. Analytical procedure
• Definition in SAS No. 56: “For the purposes of generally
accepted auditing standards, the term analytical procedures
means evaluations of financial information through analysis of
plausible relationships among both financial and nonfinancial
data.”
•  Auditor compares special data with the financial data and
attempts to gather evidence by examining the plausibility of
the results
Examples:
• Comparing revenue and costs of materials of different
financial years
• Comparing personnel costs and the number of employees of
different financial years

17. Relevance and Reliability
• Relevance deals with the logical connection with, or bearing
upon, the purpose of the audit procedure and, where
appropriate, the assertion under consideration. The relevance
of information to be used as audit evidence may be affected
by the direction of testing.
• The reliability of information to be used as audit evidence, and
therefore of the audit evidence itself, is influenced by its
source and its nature, and the circumstances under which it is
obtained, including the controls over its preparation and
maintenance where relevant.