Procedure of Audit - Audit Process, Auditing & Secretarial practice | Auditing and Secretarial Practice - B Com PDF Download

Procedure of Audit: -

The way in which the audit work should be conducted by the auditor.

1. Routine checking
2. Test checking
3. Surprise checking.
4. Audit in depth.
5. Adoption of distinctive tick mark, check mark etc…

1. Routine checking.

It is the checking and casting common books of accounts by the auditor. It involves following activities.

a) Checking, casting and sub casting of such books.

b) Checking of posting into ledger book.

c) Checking the balances transferred from one book to another

Common Books.

Sales ledger, private ledger, wage sheet , general ledger, debit note, credit note, all subsidiary books like cash book, purchase book, journal proper etc..

Advantages of routine checking

1. It facilitate through checking of books of original entry.
2. Posting under routine checking, posting are completely checked.
3. Thorough checking of casting and posting are involved.
4. Verifying the arithmetical accuracy in the entries.
5. Clerical errors and ordinary frauds are located through routine checking.
6. It constitutes the basis of entire audit.
7. It ensures there is no alteration of figures.

Limitations of routine checking

1. It is purely a mechanical checking.
2. It is not important in an organization where self balancing system is in operation.
3. Simple type of errors and frauds can be located

2. Test Checking. 

Testing of test checking means to select and examine a representative sample from large number of similar items. The main objective of test checking is to select representative item and examining it and conclusion is drawn from all of the items.

Essentials of Test Checking

1. The success of test checking depends upon the system of internal check in operation.
2. The sample should be selected at random.
3. Transaction should be selected only representative of the whole of the group.
4. Homogeneous transactions are taken into account.
5. Selection of sample should be made without bias.
6. Test checking is not applicable in cash book transactions.
7. No indication should be given to small organization.
8. It is not applicable to first month and last month transactions.
9. It is not applicable to checking of opening and closing balance.
10. If the transactions are non-recurring in nature it is not applicable.

Advantages.

1. Complete the audit work in a short time.
2. The volume of work of the auditor is reduced to certain extent.
3. It ensures better accuracy of the book of account if selection is made on properly.
4. It ensures examination of efficiency of the internal check system of the organization.

Limitations

1. All of the errors and frauds cannot be detected.
2. Test checking increase the responsibility of the auditor.
3. The staff of the client may become careless.
4. The current financial position cannot be revealed.

3. Surprise checking. 

A system under which the auditor make surprise visit to the organization and check the important items i.e. the verification of the cash book, investment, examination of entries related to stock and stock items and examine the book of original entry.

4. Auditing in depth: - Examination of selected item in depth or to the origin to conclusion. Generally it is adopted where internal control is not effective.

5. Adoption of distinctive tick mark, check mark etc: -

For the purpose of audit the auditor can use the ticks, tick marks, check marks etc to indicate the work done by the auditor.

1. Different type of tick should be used in different type of audit work.
2. It is better to use ballpoint pen instead of pencil.
3. Tick of different colours for different audit.
4. Tick should be too small.
5. Tick should be clear and simple.
6. Tick should not be mixed up with the figures shown in the book of account.
7. Clear instructions must be provided to the client for the use of tick mark.
8. Tick of client staff and audit staff should be distinctive.