Procedure Types Description Remarks

1. Link to ISA 315: Understand the entity’s

controls to assess risks.
Asking management or staff about 2. Use when controls are expected to be
1. Inquiry
how controls operate. effective.
3. Document the process and conclusions
carefully.
1. Use for controls that leave no
Watching a process or control being documentary evidence (e.g.,
2. Observation performed (e.g., observing segregation of duties).
1. Test of Controls
inventory counts). 2. Combine with other procedures like
inspection for stronger evidence.
Examining documents, records, or 1. Focus on key controls that mitigate
control logs for evidence of control significant risks.
3. Inspection
operation (e.g., checking 2. Check for consistency in application
authorization signatures). (e.g., all invoices are authorized).
Repeating the control process to 1. Use for high-risk areas.
4. Reperformance verify its effectiveness (e.g., 2. Provides the strongest evidence of
reperforming bank reconciliations). control effectiveness.
1. Use during planning and final
review stages.
Comparing financial data over time
2. Investigate significant fluctuations or
1. Trend Analysis to identify patterns or anomalies
unexpected trends.
(e.g., revenue growth over 5 years).
3. Link to audit assertions like
completeness or accuracy.
1. Compare ratios with prior years or
Using financial ratios (e.g., gross industry benchmarks.
profit margin, current ratio) to 2. Use to identify areas of potential
2. Ratio Analysis
2. Analytical assess consistency and misstatement (e.g., declining gross
Procedures reasonableness. profit margin may indicate overstated
costs or understated sales).
Checking if financial data makes 1. Use for predictable relationships (e.g.,
3. Reasonableness sense in the context of other payroll vs. employee count).
Testing information (e.g., comparing payroll 2. Investigate deviations from expected
expenses to employee numbers). results.
1. Use to assess reasonableness of
Comparing the entity’s performance
4. Comparison with financial data.
with industry averages or
Industry Benchmarks 2. Be cautious of differences in accounting
competitors.
policies between entities.
1. Use for high-risk areas or when controls
Transactions: are weak.
Testing individual transactions for 2. Focus on audit assertions like
accuracy (e.g., vouching sales existence, completeness, and accuracy.
invoices to supporting documents). 3. Use sampling techniques to select items
1. Tests of Details for testing.
Balances: 1. Use external confirmations for strong
Verifying account balances (e.g., evidence (e.g., bank balances,
confirming receivables with receivables).
3. Substantive
customers or physically counting 2. For inventory, attend physical counts
Procedures
inventory). and observe procedures.
Using analytical procedures to 1. Use for predictable relationships or low-
2. Substantive Analytical
detect material misstatements at risk areas.
Procedures
the assertion level (e.g., comparing 2. Investigate significant differences.
 Procedure Types Description Remarks
current year expenses to prior 3. Combine with tests of details for higher
years). risk areas.
1. Refer to ISA 315 for detailed guidance.
Identifying and assessing risks of 2. Document risks and responses in the
1. Risk Assessment material misstatement (e.g., audit plan.
Procedures understanding the entity’s 3. Use a combination of inquiry,
environment and controls). observation, and inspection to
understand the entity.
1. Use when relying on controls to reduce
substantive testing.
Evaluating the effectiveness of
2. Document the design and
2. Tests of Controls internal controls (as described
implementation of controls.
above).
3. Link to ISA 330 for auditor’s responses
to assessed risks.
Audit Procedures 1. Use when controls are ineffective or
risks are high.
Obtaining direct evidence to detect
2. Focus on material accounts and
3. Substantive Procedures material misstatements (as
transactions.
described above).
3. Refer to ISA 500 for audit evidence
requirements.
1. Use inquiry to gather audit evidence but
corroborate with other procedures.
Includes procedures
2. Observation provides evidence about
like inquiry, observation,
4. Other Audit Procedures processes but not their ongoing
and inspection that are used
effectiveness.
throughout the audit.
3. Inspection provides reliable
documentary evidence.

Aspect Test of Controls Analytical Procedures Substantive Procedures Audit Procedures

Tests performed to evaluate Evaluations of financial Detailed tests to detect Broad term for all procedures
Definition the effectiveness of internal information through analysis material misstatements in (tests of controls, analytical,
controls. of relationships. financial statements. and substantive).
To assess whether controls To identify unusual trends, To obtain direct evidence To gather sufficient evidence
Purpose are operating effectively to fluctuations, or relationships about the accuracy and to form an opinion on the
prevent/detect errors/fraud. in financial data. completeness of accounts. financial statements.
During planning, execution, When controls are weak or
When reliance is placed on
When Used and completion phases of when material Throughout the audit process.
internal controls.
the audit. misstatements are likely.
Focuses on plausibility of Focuses on verifying
Focuses on the operating Includes all types of
Nature financial data using transactions, balances,
effectiveness of controls. procedures used in an audit.
comparisons and ratios. and disclosures.
- Inspecting authorization
- Comparing revenue growth - Confirming account - Test of controls + Analytical
signatures.
Examples with industry trends. balances with third parties. procedures + Substantive
- Observing control
- Ratio analysis. - Physical inventory count. procedures.
activities.
Low reliance; used when
Reliance on High reliance on controls if Limited reliance; used as a Depends on the type of
controls are ineffective or
Controls they are effective. risk assessment tool. procedure being performed.
insufficient.
Provides direct evidence to Forms the basis for the
Determines whether Identifies areas of potential
Outcome support financial statement auditor's opinion on the
controls can be relied upon. risk or misstatement.
assertions. financial statements.