Page 199 - DCOM509_ADVANCED_AUDITING

Advanced Auditing

Notes 11.1.1 Special Auditing Techniques

Techniques of auditing refer to specific art and skill used for obtaining the evidence required by
the auditor. The techniques are given below are in addition to conventional audit procedures
such as posting, casting and vouching.
1. Confirmation: Confirmation refers to a reply to the inquiry put forth to corroborate the
information contained in the records.
2. Surprise Checks: An element of surprise while conducting an audit improves its
effectiveness. Elements of surprise in an audit may be with regard to time of audit or item
of audit.

3. Inquiry: Inquiry involves seeking appropriate information from knowledgeable sources,
both inside and outside the organization.

4. Cut-off Procedures: These are procedures employed to ensure the separation of transaction
at end of one year from those at the commencement if next year.
5. Analytical Review Procedure: This is a technique designed to obtain evidence as to
completeness, validity and accuracy of data produced by accounting system.
6. Observation: Observation consists of witnessing a process being performed by others.

11.1.2 Types of Special Audit

Following are the various types of Special Audit:

1. Statistical Sampling: Statistical Sampling in auditing stands for the technique of forming
an opinion about a group of items on the basis of an examination of a few of the items. It
may be recalled that test checking technique is one of the accepted auditing techniques,
which most of the professional bodies of the world, including the ICAI have recommended
for use by the members of a proper consideration of facts and applicability. These techniques
may be considered as a refined application of the test check technique which has all the
advantages of the latter with the shortcomings removed. The greatest merit of this technique
lies in its being based on the statistical theory of probability. It is however not as simplistic
as the test checks.
On the basis of the audit carried out, an auditor is required to give a report containing his
opinion, about truth and fairness of the accounting statements. In expressing his opinion
the auditor never guarantees absolute accuracy of the accounting statements; but he takes
a risk of being challenged about the validity of his opinion. Even after a complete checking,
he cannot be sure that the accounts and the resulting accounting statements are absolutely
free from error, manipulation, fraud or mistake. However, the opinion that he expresses,
represents his overall assessment of the truth and fairness of the accounting statement
based on his satisfaction that he has applied all professional skill at his command to see
that no material error or fraud exists to distort the true and fair view of the accounting
statements.

When he checks only a part of the total accounting data in lieu of checking of all the data,
it is obvious that the degree of satisfaction obtainable from the latter would not be available;
however, a small loss of the degree of satisfaction will be more than compensated by the
considerable savings in time and costs for having checked only a fraction of the total data.
It is again true that bigger the sample, the greater would be the satisfaction, but from a
practical consideration the minimum requisite sample size, if determined statistically

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