Class Notes Audit Techniques

Auditing - Audit Techniques


Evidences are very important for an Auditor to form an opinion regarding financial statements.
If Auditor fails to collect proper evidence, it will reduce the reliability of audit report. The method
of collecting evidence is called audit technique. Following are a few important audit techniques
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Vouching
When the Auditor verifies accounting transactions with documentary evidence, it is called
vouching. Through vouching, the Auditor verifies authority and authenticity of records.

Confirmation
Confirmation is a technique used by an Auditor to validate the correctness of the transactions;
for example, an Auditor obtains written statement directly from debtors to confirm the debtors
balance as appeared in the books of client.

Reconciliation
Reconciliation is a technique used by an Auditor to know the reason of differences in balances.
For example, to know the difference in the bank book of the client and the bank balance as
appeared in the bank statement or pass book, the Auditor prepares the reconciliation
statement. The same method may be used for debtors, creditors, etc.

Testing
Testing is a technique of selecting representative transactions out of whole accounting data to
draw a conclusion about all items.

Physical Examination
Physical examination requires verification and confirmation of the physical existence of tangible
assets as appears in the Balance Sheet like cash in hand, land and building, plant and machinery,
etc.