Principal Procedures of Auditing:

80.Principal Procedures of Auditing: An all-inclusive list of audit
procedures is difficult to prepare. Judgment, with a tempering of
experience, remains the basis for the determination of the type and extent
of audit procedures. However, the following may be cited as the principal
audit procedures:
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1. Reviewing, testing and evaluating the internal accounting controls
relating to inventories, purchases, payroll, sales invoice preparation,
stock valuation, depreciation accounting and analysis, routing of
invoices, etc.
2. Inspecting, counting and calculating the different assets relating to
cash, stocks, investment, plant and equipment, furniture; and
determining that the inventory is calculated properly at the lower of
cost or market price in accordance with generally accepted
accounting principles consistently applied; and obtaining confirmation
in regard to the validity of debtors and creditors balances, etc.
3. Obtaining the proof of accuracy - A copy of final inventory listing can
be obtained and its clerical accuracy checked and tested; obtaining
the earnings records of employees and checking the same for
accuracy with the original copies of appointment-cum-increment
letters; Similarly, appropriation of profit and the board's resolutions.
4. Reconciling, comparing and confirming - Sales invoices may be
reconciled with the total charges to customers. The reconciliation
between the cost account records and the books of financial
accounts is an illustration. The Bank reconciliation statement
provides a good measure of confirmation. The fact that the inventory
belongs to the client and that any lien on the inventory is disclosed
properly can be compared and confirmed from the minutes of the
board of directors for indications of pledges or assignments.
5. Observation and inquiry about any excess, slow-moving, obsolete, or
unassailable inventory.
6. Accounting of all pre-numbered inventories tags before and after the
physical stock-taking.
6. Verification as to the evidences relating to the ownership of assets
and existence of assets and liabilities, as a part of auditing
practices and procedures, is the principal duty of the auditor
before he certifies that the assets and liabilities that appear in the
balance sheet exhibit 'true and fair view' of the state of affairs of
the business.