audit procedures

When a home inspector checks a house, they do not do one vague 'inspection' — they run specific tests: turn on every tap, flip every switch, knock on walls, read the meter. Audit procedures are the specific tests an auditor performs to gather evidence. Each procedure is a defined action aimed at confirming a particular fact about the financial statements.

Auditors draw from a standard toolkit. Inspection means examining a document or asset (reading a contract, looking at a machine). Observation means watching a process happen (standing in the warehouse during the inventory count). Confirmation means getting written verification from an outside party (a bank confirming a balance, a customer confirming what they owe). Recalculation means re-doing the math (checking that depreciation was computed correctly). Reperformance means independently carrying out a control the company is supposed to run. Inquiry means asking people questions — useful but weak on its own. Analytical procedures mean studying relationships and trends to spot oddities (if sales rose 5 percent but shipping costs jumped 60 percent, something needs explaining). Procedures fall into two broad jobs: tests of controls (do the controls work?) and substantive procedures (are the actual dollar amounts right?).

Procedures matter because they are how an abstract goal — 'verify revenue' — becomes concrete daily audit work. The mix and depth are driven by the risk assessment: high-risk areas get more, stronger procedures. The honest point to remember: no single procedure proves a figure on its own. Inquiry, especially, must be corroborated — an auditor who only asks management and writes down the answer has not really audited anything.