What is Audit Procedure for Obtaining Audit Evidences?
Answer : generally in case of big audits or in case of
Company Audits, the following steps are followed to obtain Audit Procedures.
1.
Risk Assessment Procedured (Discussed in SA 315)
A)
Inquiries of the management & others within
the entity. This is “whichever department or area the auditor consider risky,
he should make an inquiry of the concern department head.”
B)
Analytical Procedure – it helps identify the
existances of unusual transactions, ratios, events, amounts & trends.
C)
Observation & Inspection – these may support
the inquiry of the management & may also provide information about the
entity & its environment.
2.
Test of Controls – these are tests, designed to
obtain assurance that those internal controls on which the auditor is going to
place reliance are
A)
In existence;
B)
Operating effectively; &
C)
Throughout the period of intended reliance.
3.
Substantive procedures – this is nothing but
vouching & verification.
Note - After completing 1 above, auditor identifies
vulnerable areas.
Then he decides to evaluate the relavent internal controls.
After evaluating the internal controls, he comes to a
conclusion whether to rely on internal controls or not.
If he concludes to rely, the degree of reliance.
The degree of substantive procedures depends upon outcome of
2. Above.
If the controls are good enough, then degree of substantive
procedure may be low & vice – versa.
In short it suggest 3 tests or checks
1. Risk Assessment Procedures & Related Activities – It Identify
weak areas,
2.TOC - It evaluate the
relavent internal control system of the department the auditor has listed as
riskier in 1 above ; &
3. Substantive Procedures – Finally he carry out vouching
& Verification in much of those areas which has been identified as MORE
riskier even after 2nd check above (TOC).