Audit techniques are tools and methods used by auditors to collect evidence to support their opinions on a client's financial assertions. The document outlines various audit techniques including posting and extension verification, vouching, confirmations, physical examination, reconciliation, testing, analysis of financial statements, sampling techniques, compliance testing, and substantive testing. Specific techniques are described like vouching of transactions, confirmation with third parties, testing of representative samples, and analytical review of financial statements. Obtaining management representations and using audit sampling are also discussed.

1. Audit Techniques
BY
Atta-ur-Rahman Arif

2. INTRODUCTION
Audit techniques are tools, methods
or processes by means of which an
auditor collects necessary evidence
to support his opinion in respect of
the propositions or assertions
submitted by the client to him for his
examination.

3. AUDIT PROCEDURES
• Audit procedures are ways of
applying techniques to particular
phase of an audit.
• Generally, the attainment of the audit
objectives required the collection of
the evidence to support a decision.

4. Kinds of audit techniques
• Posting verification
• Extension verification
• Vouching
• Confirmations
• Physical examination
• Reconciliation
• Testing

5. Kinds of audit techniques
• Analysis of financial statements
• Scanning
• Documentary examination
• Flow charting
• Electronic data processing
• Inspection
• Observation

6. Kinds of audit techniques
• Enquiry
• Computations
• Management representations
• Sampling techniques
• Compliance test
• Substantive tests
• Analytical review
• Use of computer- assisted audit techniques

7. KINDS
• Posting Verification
– Verification of items by one source to
another source
– To establish the authencity and
consistency of recording process
• Extension Verification
– Multiplying two or more accounts to
prove the accuracy of the total

8. KINDS
• Vouching
– An examination of all original evidences
– To proving the accuracy of the entries in
the books of accounts
• Confirmation
– To ascertain the correctness of the figures
and validity of the client’s record
– With the third party

9. KINDS
• Testing
– Selection of representative items from
the records and examining them for
reaching on conclusion about the
trend
• Analysis of Financial Statement
– Uses various Financial Ratios
horizontally and vertically

10. KINDS• Physical Examination
– Includes inspection, counting,
identification and measurement of
quantity
– May observe the process of
stocktaking
• Reconciliation
– Reconcile two or more related items if
they are not agree or match with each
other

11. KINDS
• TESTING
– Selection of representative items from
the records and examining them for
reaching a conclusion about trend of
activity.
– Items must be sufficiently
representative of whole data.
• Analysis of Financial Statements
– Financial ratios
– Horizontal and Vertical comparison
– Relationship with Industry averages

12. KINDS
• Documentary Examination
– Same as Vouching in nature
– To examine the adequacy and
reliability
• Scanning
– Make a wide search to find out which
of the entries are regular, consistent
and logical

13. KINDS
• Observation
– Observe the various policies and
procedures or plans followed by the
client
• Flow Charting
– To describe graphically the issue of
transactions through different stages

14. KINDS
• Inspection
– Arrange an inspection of the client’s
office, plant, branches etc.
– To obtain the understanding of plant
layout, manufacturing processes,
product, control and safeguard of
inventories etc.
– Should inspect before examination and
review

15. OTHERS
• Enquiry
• Computation
• Management Representation
• Sampling Techniques
• Compliance Techniques
• Substantive Testing
• Analytical Review
• Computer Assisted Accounting Techniques

16. Obtaining Management
Representation
• Important evidence in form of
– summary of oral discussions with
management
– Written representation from management
• Should be addressed to the auditor
contain Specified information
• Its procedure must be agreed with client
in early stage of audit.

17. Audit sampling techniques
• Audit sampling technique is the application
of a compliance or substantive procedure
to less than 100% of the items within an
account or class of transaction to enable
the auditor to obtain and evaluate
evidence of some characteristics of the
entire class and enable the auditor to form
a conclusion concerning the whole class.

18. Design of the sample
• Audit objectives
• Population
• Risk and assurance
• Tolerable errors
• Expecting errors in the population
• Sratification

19. Evaluation of the sample
• Analyse any errors detected in the sample
• Project the errors found in the sample to
the population
• Assess the sampling

20. Compliance test
• Compliance tests are the proceduers
desugned to obtain reasonable assurance
of the internal control, that it is effective
and reliable
• These tests include procedures requiring
inspections of documents suporting
transactions to gain evidence that control
have operated properly.

21. Substantive test
• Substantive tests are those tests of
transactions and balances and other
procedures which privides audit evidence
as to the completeness, accuracy and
validity of the information contain in the
accounting records or in the financial
statements., like analytical review

22. Methods of substantive test:
1. Inspection of the documents
2. Inspection of assets
3. Direct confirmations
4. Reperformance of
computations