An auditing standard is a measurement of performance set up by professional authority and consent. A standard is a measuring device of applied procedures resulting in general acceptability of the result of the performance.
Auditing procedures are acts to be performed during the course of an examination. By applying perfect technique, procedure lead to proof of accuracy of the accounts and financial statements. Audit procedures constitute the course of acting available in determining the validity of standards and principles. In every audit, there must be review and observation, inspection and count, evidence, proof, accuracy of proof and reconciliation.
Inspection is concerned with review or examination of records, documents or tangible assets. The auditors can check many documents in order to examine the business transactions. Vouchers support every entry. Inspection of record is made note recording, authority and validity of data. The auditors commonly use this technique.
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 stock taking by management. He can that accounting principles are applied in preparing accounting recorded. The audit staff commonly uses observation.
Inquiry means obtaining relevant information either written or oral from resource persons within or outside the enterprise through formal or informal manner. The auditor can collect data from management through representation letter. He can inquire from debtors, creditors, bankers and other experts in the field to form an opinion.
Confirmation is a reasonable to an inquiry to prove certain data recorded in the books of business concern. The auditor can ask the management to inform the debtors for confirmation of their accounts balance. The auditor can collect information from debtors to ensure the accuracy of data. He can write letters to bank for supply of account balance kept by the bank.
Computation is concerned with checking the arithmetical accuracy of accounting records or doing independent calculations. An auditor may follow the accounting procedure to check the accuracy of data. The journal entry, position and balancing accounts can be compared with the vouchers to test the reliability of data.
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 the items within an account balance or class of transactions to enable the auditor to obtain and evaluate evidence of some characteristics of the balance or class and to from or assist informing a conclusion concerning that characteristics.
7. Compliance Test
Compliance tests are designed to obtain reasonable assurance that those internal controls on which audit reliance is being placed are in affect. 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 the completeness accuracy and validity of the data procedure by accounting system. They are of two types
- test of details of transaction and balance
- Analysis of significant ratio and trends including the resulting investing of unusual fluctuation and items.
9. Analytical Review
The analytical review consists of studying significant ratios and trends and investigation unusual fluctuations and items. The application of analytical review procedures is based on the expectation that relationship among data exists and continues 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, teaching, flow charting and mapping. These techniques show how the 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 his own audit.
12. Reliance on Experts
Reliance on experts is an audit technique. The auditor is no expert in every field. Basically he knows accounting and audit work. He is not an engineer, architect, lawyer and values. He has relied on auditors for seeking their expert opinion about business matters.