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Audit methods. Audit methods Documentary audit methods

Audit methods are a set of techniques by which the condition of the objects under study is assessed.

Various audit methods can be combined into three groups, which are discussed in Fig. 16.

Rice. 16 - Audit methods

The techniques of the first group are inspection, recalculation, measurement, which make it possible to determine the quantitative state of an object; laboratory analysis, the purpose of which is to determine the qualitative state of the object; request; documentary check.

Checking by the auditor the actual availability of individual items or all materials and finished products allows not only to verify availability, but also to determine the state of accounting in storage areas and the procedure for drawing up receipts and expenditure documents.

To compare individual reporting indicators, analytical procedures are used - techniques of the second group.

During the planning stage, analysis helps the auditor plan the nature, timing and extent of other audit procedures. At the stage of conducting significant checks, process significant detailed information.

At the final stage - make a general overview of financial information.

The results of analytical procedures can be:

1) persuasive;

2) confirming;

3) not applicable.

The techniques of the third group are an assessment of the past, present and future state of the audited objects, the logical conclusion of the comparison process. The state of resources, the feasibility and legality of business transactions, the reliability of economic information related to events and not reflected in accounting are assessed.

In addition to these techniques, the auditor can use methodological provisions external to the audit, borrowed from other sciences:

Mathematical theories (formal sampling, regression and cluster analysis);

Economic theories (time value of money, capital valuation theory);

Theories of accounting and finance (theory of interest, financial analysis and bankruptcy forecasting);

Theories of information and communication (the ability of the auditor to come into contact with third parties, drawing up an opinion);

Information technologies (expert systems, computer systems, database technology);

Management (planning and control, organizational theories and theories of motivation);

Issues of law and taxation and more.

Auditors independently determine the techniques and methods of their work. All audit methods can be divided into two groups:

1) methods of organizing the audit in general;

2) specific methods for verifying operations.

Methods for organizing the audit in general:

Complete check;

Custom scan;

Documentary verification;

Factual check;

Analytical verification;

Combined check.

The first four methods are widely known, have been and are being used in Russia in audit work. Naturally, a complete or random inspection can be both documentary and factual.

Analytical check- this is the use of various methods and techniques of analysis of business activities, mathematics, statistics to identify problems and contradictions in the client’s accounting and reporting in order to pay attention to these issues during the audit.

Combined check- is a combination of various methods of organizing an audit.

The rule (standard) of auditing activities in the Russian Federation “Audit evidence” provides a list of the main specific methods for obtaining audit evidence, methods for verifying transactions, accounts, and documents.

The most common verification methods that audit organizations can use in specific areas of the audit:

1) Checking the client’s arithmetic calculations (recalculation).

2) Inventory. The client's property and financial obligations are subject to inventory.

3) Checking compliance with accounting rules for individual business transactions. This method allows the audit organization to exercise control over the accounting work performed by the accounting department. Information is considered reliable only if it is received directly at the time of research of these operations.

4) Confirmation. To obtain information about the reality of balances in cash accounts, settlement accounts, accounts receivable and accounts payable, the audit organization must obtain confirmation in writing from an independent party. If the information received by the audit organization from an independent party differs from the accounting data of the economic entity, it is necessary to apply additional audit procedures to determine the reasons for the discrepancy.

5) Oral survey of personnel, management of the economic entity and an independent (third) party. Oral questioning can be conducted at all stages of the audit. The results of oral interviews must be recorded in the form of a protocol or a brief summary, which must indicate the name of the auditor who conducted the interview, as well as the last name, first name, and patronymic of the person who was interviewed. Written information based on the results of oral interviews should be attached by the audit organization to other working documents of the audit.

6) Verification of documents. Documentary information can be internal, external, or internal and external at the same time. Documents prepared and processed within an economic entity are internal. The degree of trust of an audit organization in an economic entity depends on the reliability of its internal control system for the preparation and processing of such documents.

Verification of documents means that the auditor must verify the reality of a certain document. To do this, it is recommended to select certain entries in accounting and trace the reflection of the operation in accounting down to the primary document that should confirm the reality and feasibility of performing this operation.

Types of document verification:

· formal verification;

· arithmetic check;

· substantive verification of documents.

7) Tracking- a procedure during which the auditor checks some primary documents, checks the reflection of these primary documents in the registers of synthetic and analytical accounting, finds the final correspondence of accounts and makes sure that the relevant business transactions are correctly reflected in the accounting records.

Tracing allows you to study atypical items and events reflected in client documents.

8) Analytical procedures - analysis and assessment of the information received, research of the most important financial and economic indicators of the audited economic entity in order to identify unusual and incorrectly reflected facts of economic activity in the accounting records, as well as identifying the causes of such errors and distortions.

9) Preparation of an alternative balance sheet. To obtain evidence of the reality and completeness of the work performed and services provided in the accounting of finished products, the audit organization can draw up a balance of consumed raw materials and materials according to the standards per unit of production and the actual output of products.

The balance of raw materials, materials and product output allows the audit organization to identify deviations from the standard consumption of raw materials and materials and product output and thereby ensure the reliability of the calculation of the financial result.

10) Working hypotheses- assumptions about the actual situation based on audit evidence.

Audit procedures

Audit procedures- this is the order and sequence of actions of the auditor to obtain the necessary audit evidence in a specific area of ​​the audit.

The main procedures include:

Inspection (checking records, documents, tangible assets);

Observation (monitoring a process or procedure performed by others);

Inquiry (search for information from knowledgeable persons, both within and outside the audited entity);

Confirmation (response to a request for information contained in accounting records);

Recalculation (checking the accuracy of calculations in primary documents or accounting records, or the auditor performing independent calculations);

Document verification means that the auditor must verify the reality of a certain document (Fig. 17).

Rice. 17 – Types of document verification in audit

To do this, it is recommended to select certain entries in accounting and trace the reflection of the operation in accounting down to the primary document that should confirm the reality and feasibility of performing this operation.

The results of performing analytical procedures are the auditor’s identification of the presence or absence of unusual deviations in the financial statements of an economic entity. If the auditor identifies unusual deviations that are not supported by evidence obtained from other sources, he should carefully examine them in order to ensure the objectivity and reliability of the analytical procedures performed.

The auditor must reflect the results of the analysis of unusual deviations, as well as the results of planning and performing analytical procedures in the working documentation for the audit.

The results of performing analytical procedures should be used to obtain audit evidence necessary in drawing up the audit report, as well as to prepare written information from the auditor to the management of the economic entity based on the results of the audit.

Analytical procedures

Analytical procedures consist in identifying, analyzing and assessing the relationships between the economic indicators of the activity of the inspected object.

The main purpose of using analytical procedures is to identify the presence or absence of necessary or incorrectly reflected facts, results of economic activity, which determine potential risk and require special attention from the auditor.

Analytical procedures are carried out throughout the entire process

audit. Their use makes it possible to improve the quality of the audit and reduce the time spent on it.

Objectives of analytical procedures are:

Studying the activities of an economic entity;

Assessment of the financial position of an economic entity and the prospects for the continuity of its activities;

Identification of facts of distortion of financial statements;

Reducing the number of detailed audit procedures;

Providing testing to obtain answers to questions that arise.

As a result, areas requiring additional audit procedures may be identified (Fig. 18).

Rice. 18. - Elements of analytical procedures in auditing

When conducting an audit, the following analytical procedures are applied:

1. Comparison of actual financial statements with planned or estimated (budget) indicators;

2. Comparison of actual indicators of financial statements with calculated indicators independently determined by the auditor;

3. Comparison of financial statements and related financial ratios with standards established by current legislation or an economic entity;

4. Comparison of financial reporting indicators with industry average data;

5. Comparison of financial reporting indicators with non-accounting data (i.e. data not included in the financial reporting);

6. Analysis of changes over time in financial reporting indicators and relative ratios associated with them;

7. Other types of analytical procedures that take into account the individual characteristics of the organizational structure of the enterprise.

When comparing actual performance with planned performance, the auditor should:

– evaluate the planning methodology used by the client. If, in the opinion of the auditor, planning is carried out poorly and, therefore, the indicators of the plans are unrealistic, then the auditor should not use the planned indicators to obtain audit evidence;

– make sure that the client has not changed the accounting indicators of the reporting period.

At the audit planning stage, the implementation of analytical procedures contributes to understanding the activities of the economic entity being audited, identifying areas of potential risks and more accurately determining the degree of audit risk.

At the stage of the actual audit, the auditor can perform analytical procedures when examining unusual deviations in the financial statements of an economic entity.

At the completion of the audit, analytical procedures are used to make a final determination of whether there are any material misstatements or other financial problems in the financial statements.

Documenting the audit

An audit conducted by an audit organization must be accompanied by mandatory documentation, i.e. reflection of the information received in the working documentation of the audit, drawn up in accordance with the FSAD.

Working documentation of the audit includes:

Audit plans and programs drawn up in accordance with the requirements (Table 7, 8);

Descriptions of the procedures used by the audit organization and their results;

Explanations, clarifications and statements of the economic entity;

Copies, including photocopies, of documents of an economic entity;

Description of the internal control system and the organization of accounting of an economic entity;

Analytical documents of the audit organization;

Other documents.

An approximate list of documents that may be included in the working documentation of an audit organization:

1) materials regarding the legal form and organizational structure of an economic entity;

2) materials indicating audit planning and audit programs;

Table 7 – Audit plan for the LLC “XXXX” enterprise for 201X.

Table 8 – Audit program at the LLC “XXXX” enterprise for 201X.

Audited organization
Audit period
Verified period
Head of inspection
Acceptable audit risk
Planned level of materiality
Scroll	Period	Executor	Workers	Note
audit procedures	carrying out		documentation	(recommended
by audit section				verification methods)
1.
2.

3) records of the study and assessment of accounting and internal control systems (descriptions, questionnaires, document flow diagrams or combinations thereof);

4) records containing an analysis of significant indicators and trends in the activities of an economic entity;

5) information about who and when performed the audit procedures;

6) copies of correspondence with other audit organizations, experts and other persons in connection with the ongoing audit of an economic entity;

7) letters of confirmation received from the economic entity;

8) conclusions made by the audit organization based on the results of the audit, etc.

The composition, quantity and content of documents included in the working documentation of the audit are determined by the audit organization based on:

The nature of the work being carried out;

The nature and complexity of the activity of the economic entity;

State of accounting of an economic entity;

Reliability of the internal control system of an economic entity;

The required level of management and control over the work of the audit organization’s personnel when performing individual procedures.

Forms of working documentation are independently developed by the audit organization, if the acts regulating auditing activities in the Russian Federation do not prescribe such forms.

The working documentation is the property of the audit organization that conducted the audit. The economic entity in respect of which the audit was conducted, and other persons, including tax and other government authorities, do not have the right to demand that the audit organization provide working documentation or copies thereof, in whole or in any part.

Working documentation must contain all the information necessary and sufficient for:

Drawing up an audit report based on the audit results;

Confirmation that the audit was carried out by the audit organization in accordance with the acts regulating auditing activities in the Russian Federation;

Monitoring the progress of the audit by the audit organization;

Audit planning by the audit organization.

All significant issues requiring the auditor's professional judgment, together with the conclusions drawn on these issues, must be reflected in the working papers.

The working papers must be sufficiently complete and detailed so that an experienced auditor, upon reviewing them, can obtain a general understanding of the audit conducted by the audit organization.

Working documentation must be created in a timely manner: before, during and at the end of the audit. By the time the audit report is submitted to the economic entity, all working documentation must be created and completed.

Upon completion of the audit, the working documentation must be submitted to the archives of the audit organization for mandatory storage.

The safety of working documentation, its execution and transfer to the archive falls within the competence of the head of the audit organization or a person authorized by him.

As a rule, employees of the audit organization who are not involved in the audit of a given economic entity are not allowed to access the working documentation documenting the ongoing or completed audit.

Working documentation is stored in the archives of the audit organization for at least five years.

The auditor's working papers are stored in folders - the so-called client files (Fig. 19).

Rice. 19 – Types of client files in an audit

The audit organization is not obliged to provide working documentation to the economic entity in respect of which the audit was conducted.

The audit organization does not have the right and is not obliged to provide working documentation to other persons, including tax and other government bodies, except in cases expressly provided for by the legislation of the Russian Federation.

The auditor must establish appropriate procedures to ensure the confidentiality and security of working papers, and for their retention for a sufficient period of time, based on the nature of the auditor's activities, as well as legal and professional requirements, but not less than five years.

2.7. Audit report – the final document of the audit

Related information.

Audit procedures and methods are briefly reflected in both the International Standard on Auditing ISA 500 and the Russian Federal Rule (Standard) No. 5 “Audit Evidence”.

Procedures for obtaining audit evidence. The auditor obtains audit evidence by performing the following substantive procedures: inspection, observation, inquiry, confirmation, recalculation (checking the arithmetic calculations of the audited entity) and analytical procedures. The duration of these procedures depends, in particular, on the period allotted for obtaining audit evidence.

Inspection is the examination of records, documents or tangible assets. During the inspection of records and documents, the auditor obtains audit evidence of varying degrees of reliability depending on its nature and source, as well as the effectiveness of internal controls over the processing of it.

Documentary audit evidence, characterized by varying degrees of reliability, include:

• documentary audit evidence created and held by third parties (external information);
• documentary audit evidence created by third parties, but held by the audited entity (external and internal information);
• documentary audit evidence created and held by the auditee (internal information).

An examination of documents relating to the entity's property provides reliable audit evidence regarding its existence, but not necessarily regarding its ownership or valuation.

Observation- this is the auditor's monitoring of a process or procedure performed by others (for example, the auditor's observation of inventory counts carried out by employees of the audited entity, or monitoring the implementation of internal control procedures for which there is no documentary evidence for audit).

Request is the search for information from knowledgeable persons within or outside the audited entity. A request on the form can be either a formal written request addressed to third parties or an informal oral question addressed to employees of the audited entity. Answers to inquiries (questions) may provide the auditor with information that he did not previously have or that supports audit evidence.

Confirmation is a response to a request for information contained in accounting records (for example, the auditor usually requests confirmation of accounts receivable directly from the debtors).

Recalculation- this is checking the accuracy of arithmetic calculations in primary documents and accounting records or the auditor performing independent calculations.

Analytical procedures represent an analysis and assessment of the information received by the auditor, a study of the most important financial and economic indicators of the audited entity in order to identify unusual and (or) incorrectly reflected business transactions in the accounting records, and identify the causes of such errors and distortions.

Audit methodology. Each science, including economics, in addition to a specific subject and object of study, must have its own method as a general approach to research, which is specified in the methodology. The methodology (philosophy of methodology) of an audit consists of a method as a general approach to research and a specific methodology as a set of special techniques (methods) used in audits.

The audit method as a general approach to research is based on dialectics. The basic principles of the audit method reflect the following main features of dialectics:

• unity of analysis(decomposition of the phenomenon being studied into its component parts and the study of each of them) and synthesis (combination of analyzed phenomena divided into elements into a single, internally connected whole); analysis and synthesis represent two sides of a single process of cognition of phenomena;
• unity of deduction(the study of phenomena through a gradual transition from the general to the particular, individual) and induction (the study of phenomena through a gradual transition from the particular to general generalizing patterns);
• study of phenomena in their interrelation(the interconnection and causal interdependence of phenomena determine the need for an integrated approach to the study and assessment of economic activity);
• study of phenomena in development, dynamics. The development of economic activity is not just a quantitative increase in production, but also reflects the qualitative state in the field of technical and organizational level of activity. The method of comparison in time and space (with average indicators in the market economy of the world, country, with indicators of similar enterprises, competitors) makes it possible to correctly assess the activities of the audited entity.

The audit method, as a general approach to the study of business activities reflected in accounting information, forms the basis for the audit.

Audit methodology- this is a set of special techniques (methods) used to process economic information for audit purposes.

Various techniques can be combined into three groups: determining the real state of objects, analysis, evaluation.

Techniques of the first group- this is an inspection, recalculation, measurement that allows you to determine the quantitative condition of an object; laboratory analysis, the purpose of which is to determine the qualitative state of the object; request; documentary check. Checking by the auditor the actual availability (inventory) of individual items or all materials and finished products allows not only to verify availability, but also to determine the state of accounting in storage areas, the procedure for drawing up receipts and expenditure documents.

To compare individual reporting indicators, analytical procedures are used ( techniques of the second group).

At the planning stage, analysis helps the auditor plan the nature, timing and scope of other audit procedures; at the stage of significant audits, it helps to process significant detailed information (for example, if a company's chart of accounts includes 20 cost accounts, then it is easier for the auditor to deduce trends in these costs by month than selectively check some amounts to detect unusual expenses or transactions), and finally, make a general review of financial information.

The results of analytical procedures can be:

• persuasive (if the auditor can reasonably assess the correctness of the account balance after analysis, then he does not need to carry out other procedures);
• confirmatory (if the analysis only needs to confirm the information received from the client or the conclusions made by the auditor, then he needs to perform additional checks before the analytical procedure);
• inapplicable (if the results of the analysis cannot serve as evidence of the auditor’s conclusions, then he needs to develop other verification procedures).

Techniques of the third group- this is an assessment of the past, present and future state of the audited objects, the logical conclusion of the comparison process. The state of resources, the feasibility and legality of business transactions, the reliability of economic information related to events and, accordingly, not reflected in accounting, are assessed. The accounting valuation method usually determines the amount of reserves for guarantee obligations, reserves for doubtful debts, the cost of securities, etc.

In addition to these techniques, the auditor can use methodological provisions external to the audit, borrowed from other sciences:

• mathematical theories (formal sampling, regression and cluster analysis);
• economic theories (time value of money, capital valuation theory);
• theories of accounting and finance (theory of interest, financial analysis and bankruptcy forecasting);
• theory of information and communication (the ability of the auditor to come into contact with third parties, drawing up an opinion);
• information technologies (expert systems, computer systems, database technology);
• management (planning and control, organizational theories and theories of motivation);
• legal and tax issues.

The audit technique also includes the provision of consulting services (control, banking services, compensation of employees, etc.).

Auditors independently determine the techniques and methods of their work. All audit methods can be divided into two groups: methods for organizing an audit in general and specific methods for checking transactions, account balances, etc.

Methods for organizing an audit in general:

1. full check;
2. custom scan;
3. documentary check;
4. factual check;
5. analytical check;
6. combined check.

The first four methods are widely known, have been and are being used in Russia in audit work. Naturally, a complete or random inspection can be both documentary and factual.

Analytical testing is the use of various methods and techniques for analyzing business activities, mathematics, and statistics to identify problems and contradictions in the client’s accounting and reporting in order to pay attention to these issues during the audit. In some cases (long-term cooperation of auditors with a given client, trust in the management of the audited company, etc.), the audit may be limited only to an analytical check.

A combined audit is a combination of various methods of organizing an audit.

Specific methods for checking transactions, accounts, documents.

Federal Rule (Standard) of Auditing No. 5 “Audit Evidence” provides a list of the main specific methods and procedures for obtaining audit evidence, methods for verifying transactions, accounts, and documents.

Introduction

The development of science and applied economic disciplines, which include auditing, is inextricably linked with the creation of a methodology necessary for application in the applied activities of people. Similar to the division of objective laws into general and specific, related to the development of certain individual branches of knowledge, audit methodology, which was understood as a set of methods used in individual sciences, can be general and partial.

The general audit methodology is a set of principles of dialectics, as well as a general scientific theory of knowledge, which explore the laws of development of scientific knowledge as a whole.

Partial audit methodology is based on the laws of economic science and is manifested, on the one hand, in theoretical generalizations, the principles of this science, and on the other, in applied research methods.

An audit method is a set of specific methodological techniques.

Audit methodological techniques are specific techniques developed on the basis of practical achievements, as well as the development of economic and legal sciences. These techniques were formed depending on the target function of the audit and in conjunction with general scientific methods. They are characterized by mutual penetration into homogeneous branches of knowledge.

Thus, the development of accounting, analysis of economic activity, statistics, audit and control, forensic accounting, as well as legal sciences gave impetus to the formation of audit methodologies.

The object of this work is audit research.

The subject of the test is the methodology of audit research.

The purpose of this work is to consider the methodology of audit research.

In accordance with the purpose of the test, the following tasks can be distinguished:

1. Consider audit research methods.

2. Identify audit research techniques.

The theoretical and methodological foundations of the control work were the works of Russian audit scientists, namely: Abramova N.Yu., Beloglazova G.N., Krolivetskaya L.P., Lebedeva E.A., Bank V.R., Bank S .V., Klimovicha V.P. and others.

Audit research methods

The audit method is the generalized properties of a set of specific methods and methodological techniques for collecting, studying information about the actual state of the audit object, comparing this state with the regulated (planned, programmed), assessing deviations between them and expressing this assessment in the form of conclusions suitable for making management decisions. Bogataya, I.N. Audit / I.N. Rich. - Rostov n/a. : Phoenix, 2008. - P.105.

It has a practical orientation.

Audit methodology is a scientifically based, logically structured organization of a systematic determination of the feasibility of using the necessary set of general scientific, applied and special methods and methodological techniques for conducting financial and economic control of business activities, generating information reflecting its results and suitable for making decisions in the management system of these activities.

The methodology involves the use of general scientific, applied and special methods and methodological techniques for observing, studying, researching and assessing the legality of the operations of the financial and economic activities of an enterprise: entrepreneurs and reflecting indicators of its condition in accounting and financial reporting. The use of these methods and methodological techniques should ensure the receipt of reliable and complete information about the performance of economic activities, the legality of financial transactions, the state of taxation, financial stability, etc.

One of the most important elements of audit methodology is its method, techniques, methods and procedures, with the help of the totality of which the subject and objects of the audit are examined.

The auditing method as a science is a body of knowledge about the techniques, methods and approaches of the auditor’s thinking when studying financial and economic activities in order to obtain evidence of a reliable and objective assessment of it, and the formation of information from such an assessment for use.

In turn, specific audit methods, which are tools for conducting audit control, are implemented through the use of certain verification techniques and methods of its organization.

The audit methodology is characterized by a certain set of audit procedures carried out in a certain sequence using specific audit methods and techniques. Podolsky, V.I. Audit. Workshop: Textbook for universities / V.I. Podolsky and others; Ed. Prof. IN AND. Podolsky - M.: UNITY - DANA, Audit, 2008. - P.75.

In audit practice, two groups of methods are used:

General scientific;

Own (specific).

General scientific methods include: analysis, synthesis, induction, deduction, analogy, modeling, abstraction, concretization, system analysis, functional-cost analysis.

Own (specific) audit methods are methods formed under the influence of audit theory and practice and aimed at solving special audit problems during the audit. They have historically developed under the influence of auditing needs and advances in other branches of knowledge.

Specific auditing methods have developed over the centuries under the influence of methods and principles of accounting, economic analysis, statistics, economic and mathematical methods, audit and control, and computer technology.

In turn, our own audit methods are widely used in other economic sciences and their practical implementation.

Specific audit methods:

Observation and review;

Inspection;

Study in essence;

Request (confirmation);

Analytical review;

Generalization.

Observation and review are methods that consist of direct control (observation) by the auditor of the actions of officials of the client enterprise in performing their functional duties.

The auditor supervises the work of accountants (drawing up primary documents, accounting registers, reports), the internal auditor; for the implementation of the process of capitalization of material assets in the warehouse and their documentation. In addition, such methods provide for a review and determination of the status of certain objects of audit control that have a material form (fixed assets, inventories, cash, securities, enterprise documentation). Bogataya, I.N. Audit / I.N. Rich. - Rostov n/a. : Phoenix, 2008. - P.105.

A survey is a method that involves obtaining written and oral information from informed officials of the client enterprise (most often its management, administration, accountants). The reliability of this information depends on the integrity and competence of the personnel interviewed.

Inspection is a method that consists of checking the actual presence of an enterprise’s assets, monitoring the correctness of inventory, checking relevant accounts and calculations.

It is closely related to the survey method, but it is characterized not only by observation and review, but also by calculation procedures and comparison.

Audit methods also include (indirectly) inventory. In a routine audit, the auditor or his assistant must observe the progress of the inventory by the company's employees, and then selectively check the correctness of its results.

Assessment is a method by which the condition, efficiency, and reliability of various objects of audit control are assessed (the reliability of the accounting system and the internal control system, the condition of fixed assets and the efficiency of use of equipment, the organizational structure of the enterprise, management efficiency). Podolsky, V.I. Audit. Workshop: Textbook for universities / V.I. Podolsky and others; Ed. Prof. IN AND. Podolsky - M.: UNITY - DANA, Audit, 2008. - P.75.

This method should not be confused with the assessment of the real value of fixed assets, an enterprise as a whole or a separate property complex, which is carried out by professional appraisers and experts. They can also be involved in the audit process if necessary.

Study in essence is a method of audit control that involves the auditor studying (evaluating) the economic content of business transactions, establishing their results, the factual and legal reliability of their implementation, assessing the correctness of the reflected amounts and their mutual correlation (for example, the correspondence of synthetic and analytical accounting data or data primary documents and accounting registers).

Request (confirmation) - a method that is often also called confirmation, consists of sending letters to debtors, creditors, banks, lawyers and other third parties associated with the client company with a request to confirm, provide information about transactions performed, account balances, obligations , claims and other data of interest to the auditor. Such letters are sent on behalf of the company being audited, and the recipient of the response to them is the auditor (audit firm).

An analytical review is not only an analysis of the financial statements of an enterprise, but also an unconventional comparative analysis of actual data with data from previous reporting periods or planned (budgetary indicators).

The purpose and task of the analytical review is much broader. The auditor must determine the status, development trends and prospects of the client enterprise based not only on its actual financial reporting data, but also on an analysis of the results of other similar enterprises in this industry.

And if a number of enterprises in the industry found themselves bankrupt in the current economic conditions, then it is possible that this could happen to the company being inspected.

Generalization is a method that involves grouping and systematizing all collected audit evidence during the audit as a whole or at a separate stage, assessing the significance of identified deficiencies, establishing compliance of the actual state of affairs at the enterprise with the data reflected in its reporting, as well as drawing up an audit report and developing recommendations .

Closely related to the specific audit methods discussed are audit techniques that detail the methods and implement their application in practice.

Concept of audit methods

Definition 1

Audit methods are options for carrying out audits, in accordance with the regulations of generally accepted internal auditing standards.

Based on the interpretation of the law “On Auditing”, individual auditors and audit companies can themselves determine what methods to use when conducting audits.

In a broad sense, all audit methods can be divided into two main groups.

1. Methods of organizing audits.
2. Methods for collecting audit evidence.

Application of methods for organizing an audit

The group of methods for organizing an audit contains the following types:

• continuous verification method;
• sampling method;
• documentary audit;
• analytical audit;
• factual check;
• combined check.

The continuous inspection method means that the auditor checks all elements of the audit of the audited object without exception. For example, if this is an audit of goods, then the auditor checks all documents on the movement of goods in the organization and all operations to reflect accounting information on accounts and in accounting registers. This method is usually used for audits of short periods and with low turnover of the audited object.

The sampling method means that the auditor applies some system of selecting elements when auditing one object. The auditor chooses audit sampling methods independently, based on his own experience and professional judgment. As a rule, selective checking takes place during long periods of checking, or when large volumes of information on an object are being studied.

The documentary verification method means that the audit is aimed only at studying documents on the object being inspected: their availability, correctness of execution, completeness of content, etc.

Analytical audit involves the analysis of evidence obtained during the audit.

An actual inspection involves the study of all actually performed operations on the object being inspected.

A combined audit involves the use of two or more methods.

Application of techniques to gather audit evidence

During the audit process, the auditor collects audit evidence using one of 2 methods.

1. Set of tests.
2. Substantive checks.

Tests, as a rule, are used by the auditor to evaluate the internal control system of the audited entity. Tests can be varied and are compiled by the auditor independently, based on the nature of the audited object and the peculiarities of its accounting at the audited enterprise.

Most often, auditors use:

• detailed tests that can be used to assess the comparability of indicators in different registers (for example, in accounting accounts and in financial statements);
• analytical procedures by which the auditor analyzes where an error could have been made that led to distortions in accounting and reporting.

In most cases, only substantive checks are required to collect evidence, since only the result of an actual check of the correctness and reliability of the reflection of transactions with the audited object can serve as iron-clad evidence.

To gather evidence, the auditor evaluates the following elements:

• organization (construction) of an accounting system at the audited enterprise;
• the actual presence of those audit objects that are reflected in the system of accounts or in the financial statements.
• legal ownership of the audited object (or obligation when auditing liabilities);
• the fact of occurrence of the audit object in the audited period;
• completeness of availability of the audited object;
• cost expression of the audited object;
• measurement of the audited object;
• presentation and precise definition of the audit object.

Note 1

All specified audit methods must be defined in the internal standards of the audit company. Also, local documents may regulate in what cases certain audit methods are used.

According to the federal auditing standard (FSAD 7/2011) “Audit evidence”, approved by order of the Ministry of Finance of Russia dated August 16, 2011 No. 99n, the auditor obtains audit evidence by performing the following substantive testing procedures: inspection, observation, inquiry, confirmation, recalculation (checking the arithmetic calculations of the audited entity) and analytical procedures, which are presented in table. 1.3.

Table 1.3

Methods for obtaining audit evidence

Inspection	An examination of records, documents, or tangible assets during which the auditor obtains audit evidence of varying degrees of reliability depending on its nature and source and the effectiveness of internal controls over its processing.
Observation	The auditor's monitoring of a process or procedure performed by others (for example, the auditor's observation of inventory counts performed by employees of the entity being audited, or monitoring the implementation of internal control procedures for which there is no documentary evidence available for audit)
	Seeking information from knowledgeable persons within or outside the entity being audited. A request in form can be either a formal one, addressed in writing to third parties, or an informal oral question addressed to employees of the audited entity. Answers to inquiries (questions) may provide the auditor with information that he did not previously have or that supports audit evidence.
Confirmation	Response to a request for information contained in accounting records (for example, the auditor typically requests confirmation of accounts receivable directly from the debtors)
Recalculation	Checking the accuracy of arithmetic calculations in primary documents and accounting records or performing independent calculations by the auditor
Analytical procedures	Analysis and assessment of the information received by the auditor, research of the most important financial and economic indicators of the audited entity in order to identify unusual and (or) incorrectly reflected business transactions in the accounting records, identifying the causes of such errors and distortions

When choosing methods planned to be used during the audit, the auditor must be guided by the provisions of FSAD 7/2011.

The selection of elements to be tested is carried out in terms of the effectiveness of the expected and obtained results in relation to the purpose of the audit.

Audit tests of controls and substantive tests can be considered effective for audit purposes if appropriate audit evidence is obtained from their performance.

The selection of items for testing should be based on the relevance and reliability of the information used as audit evidence.

The auditor may use the following methods when selecting items for testing:

• a) selection of all elements (full check);
• b) selection of specific (certain) elements;
• c) constructing an audit sample.

The choice of one method or a combination of several methods for selecting elements for testing depends on:

• – on specific circumstances (risks of material misstatement in relation to the premise for drawing up the audited financial statements, etc.);
• – practical feasibility of the method;
• – effectiveness of the method.

A complete audit is carried out in relation to a group of similar business transactions or turnover in an accounting account (or stratum within the population). A full check is typically used when performing detailed tests when:

• a) the set consists of a small number of elements with high value;
• b) a significant risk exists and other methods of selecting items for testing do not provide sufficient appropriate audit evidence;
• c) there is a repetitive nature of calculations or other processes automatically performed by the information system, which makes a continuous check cost-effective.

A sweep test is generally not used when testing controls.

When making a decision on the selection of specific (defined) elements from a set of elements, the auditor must proceed from knowledge of the activities of the audited entity, the assessed risks of material misstatement, and the characteristics of the population being tested. Selecting specific (defined) elements based on the auditor's professional judgment entails risks not associated with the use of sampling.

Selected specific (certain) elements can be:

• a) high value elements or so-called key sample elements (for example, elements that are suspicious, unusual, particularly at risk or that have previously been associated with errors);
• b) elements exceeding a certain value, which will allow checking a large part of the total amount of turnover in an accounting account or a group of similar business transactions;
• c) elements for obtaining certain information (for example, information about the characteristics of the audited entity’s activities, the nature of business transactions).

When using the method of selecting specific (defined) elements, the auditor must keep in mind that the selection of specific (defined) elements within the turnover of an accounting account or a group of similar business transactions is not an audit sample. Conclusions from the results of procedures applied to elements selected by this method cannot be extended to the entire population; Accordingly, testing specific (certain) elements does not provide audit evidence regarding the remainder of the population.

The construction of an audit sample is carried out in order to obtain conclusions regarding the entire population based on testing of selected elements of this population.

In addition to these techniques, the auditor can use methodological provisions external to the audit, borrowed from other sciences:

• – mathematical theory (formal sampling, regression and cluster analysis);
• – economic theory (time value of money, capital valuation theory);
• – theories of accounting and finance (theory of interest, financial analysis and bankruptcy forecasting);
• – theories of information and communication (the ability of the auditor to come into contact with third parties, drawing up an opinion);
• – information technologies (expert systems, computer systems, database technology);
• – management (planning and control, organizational theories and theories of motivation);
• – law and taxation.

Currently, analytical procedures are increasingly used in auditing. In accordance with international standards, their use is mandatory when conducting an audit, the purpose of which is to conclude on the reliability of the company’s financial information. Analytical procedures help the auditor to understand the economic activities of the audited enterprise, understand the changes occurring in its activities and make it possible to identify areas in its activities in which it will be necessary to conduct more in-depth audit procedures in the future.

Analytical procedures include comparison of financial information (financial statement data):

• with previous periods;
• forecast data;
• reporting data of enterprises belonging to the same branch of economic activity.

By carrying out analytical procedures, the audit organization must identify areas that are significant for the audit. The complexity, volume and timing of analytical procedures depend on the volume and complexity of the accounting data of the economic entity.

To form an opinion on the reliability of the financial (accounting) statements of an enterprise, the auditor needs reasons - audit evidence. The body of reliable audit evidence that allows certain conclusions to be drawn with acceptable audit risk is the basis for writing the audit report.

Analytical procedures play a significant role in the theory and practice of auditing. As a result of their use, the quality of inspections is improved by focusing on potentially “dangerous” areas and minimizing the risk of non-detection on this basis; audit costs are also reduced, since the volume of inspections is reduced.

Analytical procedures represent an assessment of the interdependencies that exist and are identified during the audit for both financial and non-financial information, and include the study of identified deviations and relationships that deviate from predicted values. The main purpose of such procedures is to identify unusual or incorrectly reflected facts and results of business activities in accounting, identify the causes of such errors and distortions, and identify areas of potential risk that require special attention from the auditor.

Analytical procedures can be applied at all stages of the audit:

• – at the planning stage to assess the risks of material misstatement of the financial statements and determine the nature, timing and extent of procedures;
• – at the stage of conducting an audit to obtain audit evidence in support of specific prerequisites for reporting;
• – at the final stage to assess the reliability of financial statements.

When planning an audit, the auditor needs to use analytical procedures to understand the activities of the entity being audited and identify areas of possible risk.

According to FPSAD No. 20 “Analytical Procedures,” the use of analytical procedures during a substantive audit to achieve the stated goal is based on the professional judgment of the auditor. In this case, the auditor needs to consider:

• – the purpose of performing the analytical procedures and the extent to which he considers it possible to rely on their results;
• – characteristics of the audited entity and the degree of possible separation of information and the availability of financial and non-financial information;
• – reliability, relevance, comparability, source of available information;
• – the knowledge gained by the auditor during previous audits, as well as his understanding of the problems of the audited entity, which served as the reason for comments and adjustments to the financial statements.

The auditor should apply analytical procedures toward or near the end of the audit in forming an overall conclusion about whether the financial statements as a whole are consistent with the auditor's opinion of the entity being audited.

In general, analytical procedures allow us to solve the following problems:

• a) study the activities of the audited entity;
• b) assess the financial position of the audited entity and the prospects for the continuity of its activities;
• c) identify distortions in accounting and financial statements;
• d) reduce the number of detailed audit procedures.

Analytical procedures allow us to identify cause-and-effect relationships between the analyzed indicators, in particular:

• – fixed assets – the amount of accrued depreciation;
• – revenue from sales – accounts receivable – funds received by the organization from the sale of goods (works, services);
• – sales revenue – cost of products sold;
• – number of employees – costs of creating a wage fund, etc.

The order of performing analytical procedures consists of the following steps:

• determining the purpose of the procedure;
• choosing the type of procedure;
• performing the procedure;
• analysis of results.

The type of analytical procedures depends on the purpose of their implementation, the availability and adequacy of the information necessary for their implementation.

Before using the results of analytical procedures as audit evidence, it is necessary to evaluate their reliability. The auditor’s degree of confidence in the results of analytical procedures depends on:

• – on the materiality of the accounting accounts and parts of the financial statements under consideration;
• – other audit procedures aimed at achieving the same objectives;
• – the accuracy with which the results of analytical procedures can be expected;
• – assessment of inherent risk and control risk.

The auditor will have confidence in the reliability of the information and results

analytical procedures to a greater extent if the auditee's internal controls over the preparation of information used in the analytical procedures can be considered effective. If, as a result of the application of analytical procedures, deviations from expected patterns or relationships are identified that are inconsistent with other information or differ from expected values, then the auditor should investigate such discrepancies, obtain explanations from management of the audited entity and relevant audit evidence. The study of identified deviations begins with requests submitted to the management of the audited entity. The responses received to the request are assessed for reliability. If necessary, other audit procedures are also applied.

When using analytical procedures during an audit, the auditor analyzes relationships and patterns based on information about the activities of the audited entity, studies the relationship of these relationships and patterns with other information available to the auditor, as well as the reasons for possible deviations.

The choice of procedures, methods and level of their application are subject to the auditor's professional judgment. The classification of methods for applying analytical procedures is presented in Table. 1.4.

Table 1.4

Classification of methods of application of analytical procedures

Comparison criterion	Types of information compared
Comparison of financial and other information about the audited entity	With comparable information for previous periods
	With the expected results of the audited entity's activities, such as estimates or forecasts, as well as the auditor's assumptions
	With information about organizations conducting similar activities
Consideration interrelations	Between items of information that are expected to conform to a predictable pattern based on the auditee's experience
	Between financial information and other information
Method of analysis	Simple comparison
	Comprehensive analysis using sophisticated statistical methods
Degree of aggregation of analyzed information	Consolidated financial statements
	Financial statements of subsidiaries, divisions or segments
	Selected elements of financial information
Stages of an audit in which analytical procedures are used	The auditor's planning of the nature, timing and extent of other audit procedures (audit risk assessment)
	Conducting substantive audit (analytical) procedures when their use may be more effective than conducting detailed tests of transactions and account balances to reduce detection risk in relation to specific financial reporting assertions
	General review of financial statements at the final stage of the audit

The use of analytical procedures is based on cause-and-effect relationships between the analyzed indicators; indicators can be both financial and non-financial. In addition, analytical procedures are performed on the consolidated statements, the financial statements of subsidiaries, divisions and segments and individual elements of financial information.

As can be seen from the table above, analytical procedures can be carried out in different ways. The most commonly used:

• – non-quantitative analytical procedures;
• – simple quantitative analytical procedures (method of simple comparison);
• – complex quantitative analytical procedures (complex analysis using statistical methods, factor analysis, etc.).

Non-quantitative analytical procedures are based on the application of general knowledge in the field of accounting or the specifics of the organization's activities, which allow drawing conclusions about the completeness, validity and accuracy of accounts and relationships. The disadvantage of these procedures is their subjectivity. They allow you to identify only those articles in which significant changes have occurred.

Simple quantitative analytical procedures are used to establish relationships between accounting accounts. The basis of such procedures can be the analysis of coefficients, trends, and variation analysis. This type of procedure includes express analysis and in-depth analysis of financial statements.

• – comparison of actual values ​​of financial reporting indicators with planned (estimated);
• – comparison with forecast values ​​(determined by auditors);
• – comparison of actual values ​​of financial reporting indicators and related relative ratios with standard values ​​(established either by current legislation or by the audited entity);
• – comparison with industry average values;
• – comparison with data not included in the financial statements;
• – analysis of changes in the actual values ​​of financial reporting indicators and related relative ratios, etc.

Analytical procedures based on the comparison method include comparison of the ratio of changes in individual indicators.

Examples of such pairs of indicators are:

• – growth rate of product sales and its cost;
• – increase in product sales and changes in accounts receivable;
• – increase in purchases of inventories and accounts payable;
• – growth of inventories and growth of sales volumes;
• – the volume of work performed and personnel wages, at the same time the personnel wages and the number of employees of the enterprise.

A large difference in the ratio of these pairs of indicators suggests that the auditor should pay attention to the atypicality of such differences.

Sophisticated quantitative analytical procedures rely on the use of economic statistical models applied to either account balances or the variables that cause changes in balances. These procedures establish financial intelligence by combining internal economic and environmental factors into a single formalized model. The procedures are based on statistical analysis techniques to produce accurate and quantifiable results. But these procedures are rarely used, since their application requires significant costs and special knowledge, as well as the study of a large amount of data over time.

Business game

Review the available information for six companies. Discuss what can be said about these companies based on the information provided and argue which of them is subject to mandatory audit.

1. CJSC "Alfa" has the following balance sheet at the end of the year:

2. Municipal Unitary Enterprise of Obninsk "Beta" has the following consolidated balance sheet:

• 3. During the year, the Children 0+ Charitable Foundation received charitable contributions from various commercial organizations and individuals and sent them (minus expenses associated with the activities of the foundation) to orphanages and boarding schools.
• 4. At the end of the year, CJSC Gamma received revenue from product sales in the amount of 981,370 thousand rubles, the total value of its assets at the end of the year amounted to 2,863 thousand rubles. Foreign investors own 34% of the authorized capital.
• 5. At the end of the year, OJSC "Delta" received a profit from sales of 2,118,136 thousand rubles, the cost of goods sold amounted to 2,633,758 thousand rubles, other expenses - 292,895 thousand rubles.
• 6. Zet LLC re-registered as an open joint-stock company. Sales volume for the year amounted to 54,161 thousand rubles, the total value of assets on the balance sheet at the beginning of the year amounted to 21,119 thousand rubles.