Before
stating anything I have two words to explain aspects and procedures. Now if we
want to do any work perfectly than we should know the aspects and procedures
related to that particular work. To be professional in our work we should
analyze first what we have to do and how it can be done in a professional
manner?
As far
as audit is concerned we should know the different audit procedures and audit
aspects.
Now
what are audit aspects and procedures? In short it is nothing but the
areas which we have to cover in the course of our audit and the audit
procedures are the steps which we have to take to complete the different audit
aspects.
So both
audit aspects and audit procedures are inter related to each other.
Now to
discuss the relationship between audit procedures and aspects first we should
analyze them separately.
The
audit aspects cover the following:
Examination of the system of Accounting and
Internal control
An
examination of the system of accounting and internal control to ascertain
whether it is appropriate for the business and helps in properly recording of
all the transaction. This is followed by such test and enquires as are
considered necessary to ascertain weather the system is in actual operation.
Review of the system and procedures
Reviewing
of the system and procedures to find out whether they are adequate and
comprehensive.
Checking the arithmetical accuracy
Checking
the arithmetical accuracy of the books of accounts and verification of
postings, balances etc.
Verification of authenticity & validity
of transaction
Verification
of authenticity and validity of transaction entered into by making an
examination of the entries in the books of account with relevant supporting
documents.
Proper distinction between items of capital
& revenue nature
Ascertaining
that proper distinction has been made between items of capital and revenue
nature and that the amounts of various items of income and expenditures
adjusted in the accounts corresponding to the accounting period.
Comparison
of the balance sheet and profit and loss account or other statement with the
underlining records in order to see that they are in accordance therewith.
Verification
of the title, existence and value of the assets appearing in the balance sheet.
Verification
of the liabilities stated in the balance sheet.
Checking
the results shown by the profit and loss account and see weather the results
shown are true and fair.
Compliance
of statutory requirements
The
audit procedures includes
1.
Compliance
Procedures.
2.
Substantive
procedures
Compliance
procedures are the test designed to obtain reasonable assurance that those
internal control on which audit reliance is to be placed are in effect.
On the
other hand the substantive procedures are designed to obtain evidence as to the
completeness, accuracy and validity of the data produced by the accounting
system. The substantive procedures are of two types
(a)
Test
of details.
(b) Analysis
of significant ratios and trends, including the resulting enquiry of unusual
fluctuation and items.
Relation ship with Audit Aspects and Audit
Procedures
As far
as the audit aspects are concerned before starting the audit we should know the
internal control and the accounting system prevails in the client’s
organization. Now by adopting the compliance procedure we cover the same. In
compliance procedure we have to check the internal control and the accounting
system of the client to ascertain the effectiveness of the internal control
system as well as to determine the nature, timing and extent of the substantive
audit procedures.
Again
we have to check the authenticity and validity of the transaction and account
balance after giving some expected degree of reliance on the internal control
and accounting system of the organization on the basis of our compliance
procedures. Now in substantive procedures we will check the same through
vouching and verification.
Again
we have to compare different ratios, trends to ascertain that is there any
major fluctuation or inadequacy in the financials results as compare to the
previous year results and industry standards. Again in substantive procedures
we can analyze the same through analytical procedures.
CAclubindia
