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Read more →An audit procedure is anything the auditor does to get evidence. The standards (AU-C 500 for private companies, ISA 500 and CAS 500 internationally and in Canada, AS 1105 for public companies) name seven types. Every test in an audit program is one of them or a mix.
The seven types
| Procedure | What you do | Example |
|---|---|---|
| Inspection | Examine records or documents, or look at a physical asset | Read a lease; check an invoice behind a GL entry; look at a new machine |
| Observation | Watch a process as it happens | Attend the inventory count; watch cheques being signed |
| External confirmation | Get a written answer directly from a third party | Bank confirmation; customer balance confirmation |
| Recalculation | Check the math | Re-add the AR aging; recompute depreciation |
| Reperformance | Run a control or procedure yourself | Redo the bank reconciliation; rerun the three-way match |
| Analytical procedures | Compare recorded amounts with an expectation | Payroll vs headcount × average pay |
| Inquiry | Ask people inside or outside the entity | Ask the controller how accruals are estimated |
Inquiry is the one procedure that is never enough on its own. Pair it with something that produces evidence you can see.
Two purposes
The same procedure types serve two different jobs.
Risk assessment procedures help you understand the entity and find the risks: inquiry, analytical procedures at the planning stage, observation and inspection of how the business works. These are required on every audit (AU-C 315, ISA 315).
Further audit procedures respond to the risks you found. They come in two kinds:
- Tests of controls, which check that a control worked all year.
- Substantive procedures, which look for misstatements directly: tests of details and substantive analytical procedures.
Which procedure for which assertion
| Assertion | Procedures that usually fit |
|---|---|
| Existence / occurrence | Inspection of support, confirmation, observation |
| Completeness | Inspection of documents outside the records, tracing, analytics |
| Accuracy and valuation | Recalculation, inspection of pricing, analytics |
| Cut-off | Inspection of documents either side of year end |
| Rights and obligations | Inspection of contracts and title documents, confirmation |
Our guide to audit assertions covers each assertion in full, and vouching vs tracing explains why direction matters for completeness.
How strong is the evidence?
The type of procedure affects how much the evidence is worth. Evidence from an outside party (a confirmation, a bank statement) is usually stronger than evidence the client produced. Evidence the auditor gets directly, by recalculating or reperforming, is stronger than evidence from inquiry. Our guide to audit evidence goes through the rules.
Where Warp Accounting fits
Much of the fieldwork in an audit is inspection, recalculation and reperformance on samples: matching invoices to GL entries, checking amounts and dates, testing control attributes. Warp Accounting runs those procedures and returns working papers where each result links to the page in the source document. See test of details and controls testing.
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