Tests of details which consist of studying unificant ratios trends is called 1. Extemal confirmation 2 .Observation 3. Analytical Procedures 4.Inspection
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Techniques of Auditing
Audit techniques stand for the methods that are adopted by an auditor to obtain evidence. SAP5 describes various techniques of auditing to be applied by the auditor under different circumstances.
. Inspection
a. Documents and records:
While verifying various transactions, the auditor examines the supporting documents and records. This technique is otherwise called vouching. The purpose of examining the documents and records is to
confirm the authenticity (genuineness) of the transaction.
to find whether the transactions and the supporting document are appropriate.
to ensure whether the transactions are authorized (approved).
to ensure whether the classification of the transaction is proper.
The auditor goes through the accounting records and documents and if he comes across any unusual transactions, he verifies the same thoroughly. This is called scanning of records, which requires experience and expertise.
How for an auditor can rely on the documents depends on the origin (source) of the documents and the efficiency of the internal control system in operation.
b. Physical Verification
If an item can be measured in physical term, the same may be verified for quantity and quality (if possible). By physical examination, the auditor ensures the availability of the item. However, the ownership of the items cannot be verified through this method.