Surprise Checks under Audit

ABINAYA SURESHBABU | Last updated: 15 May 2021

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Quick Summary

Surprise checks are a vital part of audit procedures, designed to enhance an audit's effectiveness. They can involve unexpected timing, visit dates, or item selections, focusing primarily on the strength and operation of internal controls. These checks help auditors identify weaknesses, potential fraud, or errors, allowing management to take prompt corrective action and influencing the overall audit scope and reporting.

Audit procedures are the process and techniques that an auditor performs to obtain sufficient and appropriate audit evidence. There are different types of audit procedures like Inquiry, observation, Analytical review, and so on. Surprise checks should be a part of the audit procedures to improve the effectiveness of the audit.

The element of surprise can be with regard to three things

1. Time of the Audit,
2. Selection of the date at which auditor visits the client place,
3. Selection of the Items.

The main focus of the surprise checks is on internal control; they check whether the system of internal control is operating effectively or not. If surprise checks reveal a weakness in the internal control system, the auditor can inform the same to management so that the management can take the action accordingly.

Surprise Audit Checks: Enhancing Audit Effectiveness

The results of surprise checks will help the auditor in deciding the scope of the audit and submit the report.

Surprise checks are conducted to check that the accounting and other records are prepared and kept up to date. As a result of the surprise checks, if the auditor finds any fraud or error or the fact that any books or register are not maintained properly can be brought to the attention of the management immediately.

The auditor can do surprise checks in the area where he feels like the internal control system is not effective or the company is very large having numerous branches and engaged in different activities.

The surprise checks are relevant in certain items that are Cash, Investments, stocks, stores, Statutory registers.

The frequency of the surprise checks is to be decided by the auditor based on his understanding of the internal control system, a surprise check should be conducted at least once during the course of the audit.

It also acts as a moral check on the client’s employees.

The auditor should satisfy himself that the appropriate actions are taken by the management for the matters communicated by him.

It is not necessary that whatever he has communicated with the management after doing surprise checks be a part of the audit report. However, the auditor should include if they are material and affects a true and fair view of the financial statements of the company.

FAQ :

The main purpose of surprise checks is to test whether the system of internal control is operating effectively and to obtain sufficient, appropriate audit evidence.

The element of surprise can be applied to the time of the audit, the specific date the auditor visits the client's premises, or the selection of items to be examined.

Surprise checks are particularly relevant for items such as cash, investments, stocks, stores, and statutory registers.

The frequency of surprise checks is decided by the auditor, but they should be conducted at least once during the course of the audit.

Findings from surprise checks do not necessarily need to be part of the audit report, but they should be included if they are material and affect the true and fair view of the company's financial statements.