Page 106 - CA Inter Audit PARAM

CA Ravi Taori
Inspection involves examining records or documents, whether internal or external, in paper form,
electronic form, or other media, or a physical examination of an asset.

• Degree of Reliability
Inspection of records and documents provides audit evidence of varying degrees of reliability,
depending on their nature (Original Vs Duplicate) and

source (Internal Vs External) and, in the case of internal records and documents, on the
effectiveness of the controls over their production (Software/Register used).

• Example of use in Test of Control
An example of inspection used as a test of controls is inspection of records for evidence of
authorization.

• Example of use in Substantive testing (Test of Detail)
• Existence Some documents represent direct audit evidence of the existence of an asset,
for example, a document constituting a financial instrument such as a share
certificate or bond. Inspection of such documents may not necessarily provide audit
evidence about ownership or value.
• Occurrence & Classification In addition, inspecting an executed contract may provide audit
evidence relevant to the entity’s application of accounting policies, such as revenue
recognition.
• Not for Valuation & Rights & Obligation Inspection of tangible assets may provide reliable
audit evidence with respect to their existence, but not necessarily about the entity’s rights
and obligations or the valuation of the assets. Inspection of individual inventory items may
accompany the observation of inventory counting.
➢ Inquiry
• Definition
Inquiry consists of seeking information of knowledgeable persons, both financial and non-
financial, within the entity or outside the entity.

• Written or Oral
Inquiry is used extensively throughout the audit in addition to other audit procedures. Inquiries
may range from formal written inquiries to informal oral inquiries.

• Responses
Evaluating responses to inquiries is an integral part of the inquiry process. Responses to inquiries
may provide the auditor with information not previously possessed or with corroborative audit
evidence. Alternatively, responses might provide information that differs significantly from
other information that the auditor has obtained, for example, information regarding the
possibility of management override of controls. In some cases, responses to inquiries provide a
basis for the auditor to modify or perform additional audit procedures.

• Evidence about Management’s Intent
Although corroboration of evidence obtained through inquiry is often of particular importance,
in the case of inquiries about management intent, the information available to support
management’s intent may be limited. In these cases, understanding management’s past history
of carrying out its stated intentions, management’s stated reasons for choosing a particular
course of action, and management’s ability to pursue a specific course of action may provide
relevant information to corroborate the evidence obtained through inquiry. In respect of some
matters, the auditor may consider it necessary to obtain written representations from
management and, where appropriate, those charged with governance to confirm responses to
oral inquiries.

➢ Recalculation
Recalculation consists of checking the mathematical accuracy of documents or records. Recalculation
may be performed manually or electronically.

➢ Re-performance
Re-performance involves the auditor’s independent execution of procedures or controls that were
originally performed as part of the entity’s internal control.

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