What is Audit Techniques? As we know that according to Hermanson that auditing standards refer to measures of the quality of performance of the procedures used by the auditor during his or her examination. Let’s discuss various Audit techniques in detail are as under.
BASIC AUDIT TECHNIQUES
The basic audit techniques for conducting auditing are as below;
1. INSPECTION: Inspection is concerned with review or examination of records, documents or tangible assets. Inspection of record is made to note recording, authority and validity of data. Auditors commonly use this technique.
2. OBSERVATION: Observation means looking at an operation or procedure being performed by others in order to determine the manner of its performance. The auditor can observe the physical stocktaking by management.
3. INQUIRY: Inquiry means obtaining relevant information either written or oral from resource persons within or outside the enterprise through formal and informal manner. He can inquire from debtors, creditors, bankers, and other experts in the field to form an opinion.
4. CONFIRMATION: Confirmation is a response to an inquiry to prove certain data recorded in the books of business concern. The auditor can ask management to inform debtors for confirmation of account balances. The auditor can collect information from debtors to ensure the accuracy of data,
5. COMPUTATION: Computation is concerned with checking . the arithmetical accuracy of accounting records or doing independent calculations. The journal entry, posting and balancing accounts can be compared with the vouchers to test the reliability of data.
6. SAMPLING: Sampling is concerned with selecting few items from whole accounting information. Audit sampling is the application of a compliance or substantive procedure to less than 100 percent of items within an account balance or class of transactions to enable the auditor to get hold of and assess evidence of some characteristics of the balance or class and to form or help out in forming a close concerning that characteristic.
7. COMPLIANCE TEST: Compliance tests are designed ‘to obtain reasonable assurance that those internal controls on which the audit reliance is to be placed are in effect. In obtaining audit evidence auditor is concerned with existence of internal control, effectiveness and continuity of internal control.
8. SUBSTANTIVE TEST: Substantive test are designed to obtain evidence as to completeness, accuracy and validity of the data produced by accounting system. They are of two types (a) Test of details of transactions and balances; and (b) Analysis of significant ratios and trends including the resulting investigation of unusual fluctuation and items.
9. ANALYTICAL REVIEW: The analytical review consists of studying significant ratios and trends and investigating unusual fluctuations and items. The submission of analytical review procedures are stand on the hope of relationship in the middle of data and exist and continue in the absence of known conditions to the contrary.
10. COMPUTER ASSISTED AUDIT: Computer-assisted audit techniques include audit software, test packs, embedded audit facilities, system software, data analysis, application programme, examination, tracing, flowcharting and mapping. These techniques show how computer has various uses in accounting.
11. RELIANCE ON AUDITORS: Reliance on auditors is an audit technique. The independent auditor can rely on internal auditors or other auditors for completing the work of work of his own audit.
12. RELIANCE ON EXPERTS: Reliance on experts is an audit technique. The auditor is not expert in every field. Basically he knows accounting and audit work. He is not an engineer, architect, lawyer and values. He has to rely on others for seeking their expert opinion about business matters.