So the assertions need testing to see if they're true
This is done by
This means a physical examination
Things to inspect include: documentation, contracts, records and minutes.
It also includes physical examination of the assets.
This enables the auditor to verify the existence (though not ownership) of them
This means watching others perform a procedure
Examples include observation of
Payment of wages
It gives assurance that official procedures are followed
This means getting information from people inside or outside the entity.
It can be a formal written or an oral inquiry
This means corroborating evidence from third parties with the internal evidence
For example, confirming accounts receivables by circularising the debtors
This can be recalculating figures or re-counting stock etc
This is the analysis of ratios and trends
It includes investigating fluctuations between current and previous performance and check whether other information is consistent with such relationship.
For example, comparing the rent charge from one period to the next and see if other evidence such as number of rental properties corroborates the increase or decrease