Last Updated on February 6, 2023 by Ossian Muscad
Auditing is a critical process that helps organizations ensure the accuracy and completeness of their financial records. It involves an audit team assessing the various financial documents, processes, and controls a company uses to produce reliable financial statements. Then, the audit team performs audit procedures to test whether the information contained in these documents is true and accurate.
This guide will discuss what audit procedures are, their methods and types, and which type of audit procedure is the most reliable source of audit evidence.
What are Audit Procedures?
Audit procedures are the processes, techniques, and methods that auditors and professionals use to get accurate and reliable audit evidence. These insights enable them to gain a sound judgment of an organization’s financial statement. Audit procedures help audit teams assess whether an organization’s financial statements are a fair, accurate, and complete representation of its operations in accordance with Generally Accepted Accounting Principles (GAAP).
Regular implementation of audit procedures help establish a business’s financial reputation and boost its trustworthiness in the eyes of investors, customers, and other stakeholders. It also allows audit teams to identify inaccuracies or discrepancies in the organization’s financial reports.
Two Methods of Audit Procedures
Auditing doesn’t have a definitive structure, as it would depend on the auditor, the company that will undergo auditing, and the purpose of the audit. However, all of the audit procedures fall under two main categories: substantive audit process and analytical audit process.
Substantive Audit Process
Substantive methods are audit procedures that audit and review documents, records, and transactions. This audit procedure method provides actual physical evidence, including paper trails such as books of accounts, transaction records, or financial statements. It also includes other essential documents, such as a building rent agreement or registry documents.
The substantive audit process is designed to ensure the company’s financial statements are correctly prepared and accurately presented and detect errors and fraud. The audit procedure for this process generally involves the following:
- Assessing internal control systems
- Documenting audit procedures
- Verifying existing documents
- Investigating inconsistencies
- Making audit adjustments and corrections
Analytical Audit Process
While substantive methods provide tangible evidence to evaluate the audit, analytical methods take this analysis to a whole new level. The analytical audit method pairs financial and nonfinancial data to understand the audit at a deeper level. This audit procedure involves researching and comparing trends, financial ratios, and other related information.
An analytical audit process is conducted to identify any anomalies and irregularities in the audit. This audit procedure generally involves the following:
- Examining audit ratios
- Analyzing audit trends
- Modeling audit scenarios
- Identifying audit discrepancies
- Investigating audit issues
Different Types of Audit Procedures
Auditors use audit procedures to obtain sufficient audit evidence. Depending on the audit objective and scope, different audit procedures are available. Audit procedures can be divided into the following:
Inquiry
The simplest form of auditing, the inquiry audit procedure, involves questioning company members to audit. This audit procedure is used to verify information and documents and understand internal control systems.
Inspection
The audit procedure involves examining documents and records to audit. This audit procedure is used to review major transactions, such as purchases, sales, and payroll. It might also involve a physical inspection of assets and inventory so that the audit is complete.
Observation
Observation audit procedure involves monitoring the audit process in person. This audit procedure is used to audit processes that cannot be adequately verified through documents and records.
Testing of controls
This audit procedure involves testing the audit control systems. This audit procedure is done to check whether the company has implemented audit controls that are effective and working properly. At the same time, it also helps to identify audit risks.
Conduct Audit Procedures Using a Low-Code Platform
Audit procedures require different assessment methods that will require you to audit data from multiple sources. Low-code audit platforms are designed to streamline the entire process, ensuring that audit procedures are easily automated. Utilizing a low-code platform like DATAMYTE allows you to audit data quickly, accurately, and efficiently without the need for complicated coding.
DATAMYTE is a quality management platform with low-code capabilities. The DataMyte Digital Clipboard, in particular, is a low-code workflow automation software that lets you create a comprehensive workflow tailored to executing audit procedures. For example, using low-code features such as a drag-and-drop interface, you can easily audit data, automatically audit documents, and quickly analyze audit results to identify audit discrepancies.
With DATAMYTE, you have an all-in-one solution to conducting audit procedures that is fast, accurate, and efficient. Book a demo with us today to learn more about DATAMYTE and how it can help you audit more effectively.
Conclusion
Understanding audit procedures is essential for audit teams to accurately audit financial statements. Knowing the different audit procedures available and which audit procedure is most reliable can help audit teams audit more efficiently. Use this article to guide your audit team in conducting audit procedures. And if you’re looking to streamline audit procedures, consider using a low-code audit platform such as DATAMYTE. Get started today!
Related Articles:
- What Is Production Control, And Why Is It Important? A Comprehensive Guide
- A Comprehensive Guide To Wind Turbine Maintenance: How To Keep Your Wind Turbine Systems Running Efficiently
