Syllabus D. Audit of Historical Financial Information D2. Evidence

D2ac. Using Assertions 3 / 9

Syllabus D2ac)

D2a) Identify and describe audit procedures (including substantive procedures and tests of control) to obtain sufficient, appropriate audit evidence from identified sources.

D2c) Recommend additional information which may be required to effectively carry out a planned engagement or a specific aspect of an engagement.

So the assertions need testing to see if they're true

This is done by

  1. Inspection

    • 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

  2. Observation

    • This means watching others perform a procedure

    • Examples include observation of 

      Payment of wages
      Inventory counts
      Opening mail

    • It gives assurance that official procedures are followed

  3. Inquiry

    • This means getting information from people inside or outside the entity.

    • It can be a formal written or an oral inquiry

  4. Confirmation

    • This means corroborating evidence from third parties with the internal evidence

    • For example, confirming accounts receivables by circularising the debtors

  5. Re-Performance

    • This can be recalculating figures or re-counting stock etc

  6. Analytical Procedures

    • 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