Procedures that Auditor Adopts

The auditor’s procedures will include:

(1) Getting an understanding of the entity as a whole in order to see the accounting system in proper perspective and thus be able to assess how effective and appropriate the system is;

(2) By use of enquiry or internal control questionnaires or reading manuals ascertain the complete system;

(3) Record the system that he has ascertained either in the form of narrative notes, flow charts, check lists or answers to the ICQ;

(4) If the auditor intends to rely on the internal control then he further has to record the system of controls in detail;

(5) If the system's record was provided by the client or was obtained through reading manuals, then the auditor must perform walk through tests to confirm the correctness of the record and also his own understanding of the system;

(6) The auditor then performs a preliminary assessment of the system, and if he is relying on controls then he performs a preliminary evaluation of those controls;

(7) If the system of controls and accounting seems adequate and the auditor feels that he can rely upon the controls he then designs and performs compliance tests. However, if he does not wish to rely on the controls then he performs substantive tests on the records;

(8) He has to evaluate his evidence and form an opinion on whether proper books of accounts have been kept and whether the books of accounts form a reliable basis for the preparation of the financial statements.