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hello and welcome to this session in which we will discuss audit procedures in the prior sessions we looked at the eight types or eight categories of evidence which are as a review physical examination confirmation inspection analytical procedures inquiries of the client recalculation reperformance and observation so those are the types of evidence and we already covered each one of them separately in this session we need to learn about the procedures the steps that we need to undertake in order to collect this evidence so audit procedures refer to specific steps typically documented as instructions designed together support for the eight categories of audit evidence simply put those instruction they will need to be clear in a sense that all members of the audit team can follow understand the required tasks simply put in this session we're going to be looking at 12 terms or 12 audit procedures and we're going to cover an example for each to show you how these 12 audit procedures can collect evidence for the eight categories support the eight categories let's go ahead and get started before we proceed any further I have a public announcement about my Company forat lectures. forat accounting lectures is a supplemental educational tool that's going to help you with your CPA exam preparation as well as your accounting courses my CPA material is aligned with your CPA review course such as Becker Roger Wy gleam miles my accounting courses are aligned with your accounting courses broken down by chapter and topics my resources consist of lectures multiple choice questions true false questions as well as exercises go ahead start your free trial today starting with the audit procedures and in front of you examine scan read compute recompute foot Trace compare count observe inquire and vouch what's going to happen for each of these terms starting with examine we're going to look at the definition look at an example and determine what type of evidence does exam support starting with exam and when we say exam you are examining document remember examining document the definition conduct a thorough analysis of a document or a record to ascertain to make sure specific details related to it so we're looking at the document we're inspecting the document an example will be conduct an an an examination of subset of vendors invoices to make sure the reasonableness and the alignment with the usual product or Services utilized by the client this is an example of it look at the invoices make sure it's something that the company do what do purchase purchase those goods and services what type of evidence are we supporting here since we are dealing with documents it's called inspection not examination although the word examine you might think well examination remember examination deals with tangible assets assets that we can see and touch just make sure examine as a procedure is the type of evidence we are supporting is inspection the second step is scan what does it mean to scan well the definition is perform A Brief Review scans like real quick scan it of a document or a record to identify anomalies here what you're looking for is unusual amount unusual transaction that might necessitate additional inquiries an example will be look at the sales journal and look for significant or uncommon transaction something does that make any sense here what you're doing is to conduct analytical procedures so the type of evidence I already told you it's analytical procedures so you scan the record looking for something un usual looking for anomalies it's a form of analytical procedures well you get a read that's interesting read is what analyze written document to extract important relevant information for the audit what could be an example of it well reviewed the minutes for the board of directors to determine if they made a decision about purchasing the asset mergers and acquisition and compile a summary of all relevant information for the financial statement within the audit documentation the type of since you are looking at documents it's inspection remember we are looking at document it's inspection compute well what does it compute means perform a calculation that is carried out by the auditor independently of the client you are Computing something independently of the client an example will be compute inventory turnover ratios and compare them to pre previous year as a means to test potential inventory obsolesence maybe the the the the client did not perform the step you're performing the step in independently of them and when you compute ratios it's the type of evidence is analytical procedures recompute so notice here compute here is recompute it means perform the computation again conduct a calculation to verify the accuracy of the client computation do you see the difference is you are performing the computation again verify the total here what you're doing is verifying the total by recalculating the product unit sales and the quantity of the unit for a selection of duplicate sales invoices and subsequently compare the results to the client calculation now you performed the calculation you got a number you look at what you got compare it to the client if it's the same gr what type of audit evidence is this is this analytical procedures no there's there's an Evidence that's called recalculation and notice here recompute recalculate hopefully easy to remember but examine is not the same thing as examination footing foot is another thing what's footing hopefully you know what footing is it's summing totaling a column of numbers to make sure the sums matches that of the client you just totaling foot and the reason why we we differentiate between recompute and foot foot is basically adding a column those are very specific instructions examples calculate the total sales journal for one month duration and cross reference all the sums with the entries in the general ledger total it compare it to the general ledger everything hopefully everything looks good again this is part of recalculation footing is recalculation because most likely what happened is the auditor already performed this calculation so you are recalculating tracing tracing is basically tracing the steps tracing the steps involving Tracking Information Tracking Information and it moves from from sources such as following financial data from one document to another for example Auditors might trace the amount from sales invoice to the sales journal to confirm accuracy or it could be validating the transfer of entries from the sales journal to the general ledger basically the same thing but also making sure the figures are correct tracing is form of inspection because you are looking at document and reperformance because you are doing the same thing that the that the client did you are rep performing their work because that's what they should should have done as well comparing compare what's the definition a comparison of data from two different sources that's easy comparing two different things comparing right the instruction should explicitly outline the specific information being compared in as a comprehensive as a manner in a comprehensive manner as possible simply put the instruction will be compared one thing to the other an example of it will be compare a subset of sales invoices and examine the unit selling price recorded on each invoice subsequently contrasted compared it with the roster of unit selling price endorsed by management do they match compare it what's the process here what's the evidence inspection count what's count 1 2 3 4 an assessment of existing asset basically at a specific point in time how many units do we have an assessment of that this designation should pertain to the category of evidence categorized as physical examination because what do you count you count things things are asset an example will be conduct count of a subset of 100 inventory items then cross reference the quantity and description against the count provided by the client here you are counting physical asset what type of evidence is this this is examination physical examination because you are dealing with existing asset when we the difference between physical examination and inspection inspection you are looking at documents and the document by themselves don't have any intrinsic value observe the definition basically the act of watching should exclusively relate to the classification of evidence characterized as observation so we have an observation category of evidence and You observe this is the this is the step monitor whether the two separate inventory count teams individually perform and document the inventory counting system if they're saying two different teams count the inventory observe this process if they tell you this there's no way for you to verify this unless you observe or they tell you account receivable don't handle cash well observe the process make sure that account receivable people don't handle cash the type of evidence is observation inquire ask questions the process of seeking information should be linked with the category of evidence delated as inquiries you're asking questions that's a form of inquiry an example will be engage with management to make sure whether there are any any absolute inventory absolete inventory on hands as of the balance sheet you just simply ask them do you have any absolete inventory inventory that's lost some utility the type of evidence is inquiries not the best type of evidence nevertheless it's a type of evidence vouch vouching means getting support notice here they're supporting each other support definition is the use use documents to authenticate so use the document to authenticate documented transaction so you documented transaction on the books look at documents to make sure whatever is recorded we have an evidence for an example will be authenticate a subset of recorded transaction by referencing vendor invoice and receiving report so you saw the transaction you saw that we purchased something I want to see the receiving report I want to see the vendor invoice you're vouching for it the type of evidence is inspection you're dealing with documents here what should you do now go to farhead lectures look at additional resources especially mcqs true false that's going to help you understand auditing procedures the 12 auditing procedures that's going to support the eight categories or the eight types of evidence why do we need evidence to support our opinion of the financial statements very important topics for CPA exam candidate as well as accounting students invest in yourself good luck and stay safe