Page 107 - CA Inter Audit PARAM

CA Ravi Taori
➢ Analytical Procedures
Analytical procedures consist of evaluations of financial information made by a study of plausible
relationships among both financial and non-financial data.

Analytical procedures also encompass the investigation of identified fluctuations and relationships
that are inconsistent with other relevant information or deviate significantly from predicted amounts.

➢ External Confirmation
An external confirmation represents audit evidence obtained by the auditor as a direct written
response to the auditor from a third party (the confirming party), in paper form, or by electronic or
other medium.

➢ Written Representation
Written Statement by Management to confirm certain matters or to support other evidence.

Author’s Note
This is a master answer. Students are required to write the appropriate part as per the requirements of the
question.

QNO-- Identify Audit Procedure Case Study - Documents Checked in Detail New Course – (M24R)
500.05.20 Bhaskar CNO – SA 500.100

CA Kanika audited books of accounts of Engineering Ltd. for the financial year 2022-2023. The auditor used
an audit procedure according to which all the documents and records maintained by the company were

checked in detail to obtain audit evidence. Explain the audit procedure used by the auditor. Comment on
reliability of audit evidence obtained by performing such an audit procedure in some situations.
Answer Audit Procedure:
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. In view of above, it can be concluded
that CA Kanika used Inspection as an audit procedure.

Inspection of records and documents provides audit evidence of varying degrees of reliability, depending
on their nature and source and, in the case of internal records and documents, on the effectiveness of the
controls over their production.

Example of inspection used as a test of controls is inspection of records for evidence of authorisation.

Some documents represent direct audit evidence of the existence of an asset, for example, a document
constituting a financial instrument such as a inventory or bond. Inspection of such documents may not
necessarily provide audit evidence about ownership or value. In addition, inspecting an executed contract
may provide audit evidence relevant to the entity’s application of accounting policies, such as revenue
recognition. 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.

QNO— Identify Method of Collecting Audit Evidence New Course – (SM25)
500.05.50 Bhaskar CNO - SA500.080
On perusal of financial statements of a company, auditor of company finds that notes to accounts
contain aging of trade payables in accordance with requirements of Schedule III of Companies Act, 2013.
The accountant of company is responsible for ensuring proper aging of trade payables included in notes
to accounts. The auditor wants to verify whether aging of trade payables made in financial statements
is proper or not. Identify what he is trying to do
Answer • Re-performance involves the auditor’s independent execution of procedures or controls that were
originally performed as part of the entity’s internal control.

• The auditor is verifying aging of trade payables. He is “reperforming” the control which was
mandated by the management.

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