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Microlesson · 5-min read

Types of Audit Procedures

## Audit Procedures

The auditor applies audit procedures to collect evidence and form conclusions that support the audit opinion.

### The Audit Evidence Flow

```

Auditor applies Audit Procedures

Obtains Audit Evidence

Forms Conclusions

Expresses Audit Opinion (Unmodified or Modified)

```

### Six Core Audit Procedures

ProcedureWhat the Auditor Does
InquiryAsks questions of management, staff, or third parties
InspectionExamines records, documents, or physical assets
RecalculationRe-checks arithmetic in documents or records
ReperformanceIndependently re-executes a control or procedure
External ConfirmationRequests a direct written response from a third party (e.g., bank, debtor)
Analytical ProceduresEvaluates data by studying plausible relationships, trends, and comparisons

### Why Multiple Procedures?

No single procedure provides sufficient appropriate evidence on its own. The auditor combines procedures to address different assertions (existence, completeness, valuation, ownership, presentation).

Worked example

### Example 1

Ownership of PPE (₹50 lakhs): The auditor wants to verify the entity owns the machinery. He performs Inspection by obtaining: (1) the machine invoice, and (2) the sale deed for land/building. Different documents address different aspects of the ownership assertion.

### Example 2

Debtor Balance Confirmation: The auditor sends a letter directly to a debtor asking them to confirm ₹2 lakhs is outstanding. The debtor's written reply is External Confirmation — more reliable than simply asking management, because it comes from an independent third party.

### Example 3

Internal Control Re-execution: The company's purchase policy requires three-way matching (PO + GRN + invoice) before payment. The auditor independently selects 20 payments and re-performs the three-way match herself. This is Reperformance — she is re-executing the control, not just inspecting that it was done.

⚠️ Common exam mistakes

  • Confusing Recalculation (re-checking existing arithmetic on a document) with Reperformance (independently executing the full control or procedure from scratch)
  • Assuming Inquiry alone is sufficient evidence — it must always be corroborated by documentary or other procedures
  • Treating Analytical Procedures as only ratio analysis; they include trend analysis, reasonableness testing, and benchmarking against industry data
  • Forgetting External Confirmation is distinct from Inspection — Confirmation gets a response from the third party; Inspection examines documents already in hand
Reference:
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