Audit assertions and procedures are critical in the auditing action.
Audit assertions and procedures avow an auditor to transact away testing activities on a event conformation's internal controls, policies or guidelines and financial reporting processes. Assertions relate to financial statement tests, and build presentation and disclosure, growth or episode, rights and obligations, completeness and worth or allocation. Audit procedures show steps in testing internal controls and financial legend balances.
For example, an auditor might ask how Company XYZ values its real-estate assets. Allocation techniques could relate to how a business entity allocates costs to products, segments or time periods.
Operating Environment Knowledge
An auditor understands an organization's operating environment by reading corporate policies and guidelines, departmental procedures and segment-level standards.Disclosures favor supplemental data to a reader of financial reports.
Existence or Occurrence
Vitality tests proof if an asset or a liability can be verified physically. For instance, an auditor might verify the vitality of inventory inventories at warehouses. Incident tests could inform an auditor approximately the period and accommodation a game step happened.
Rights and Obligations
An auditor tests if a pursuit protest has rights to its assets--what it owns--or has legal obligations for its liabilities--what it owes. For instance, an auditor might verify a bond Treaty to confirm Corporation ABC's Obligation.
Completeness
Completeness in financial reporting money that a business entity's financial statements include four reports: a balance sheet, a statement of profit and loss, a statement of cash flows and a statement of stockholders' equity.
Valuation or Allocation
Valuation tests check whether a corporation appraises its assets or liabilities properly.
Presentation and Disclosure
Presentation ensures that a field reason's financial statements are reported in accordance with generally universal accounting guideline and Production standards. Accurate presentation mode that accounts are reported in particular ways in financial statements--for contingency, short- and long-term.An auditor also could acquire such knowledge by reading industry publications, inquiring from external auditors and reading prior years' reports.
Control Knowledge
An auditor acquires knowledge about controls existing in a process, or in an area under review, by discussing with a variety of experts--such as accountants, risk managers, tax specialists and traders. For instance, an auditor might ask a risk manager to explain the process for calculating a bond option's price.
Control Testing
An audit specialist applies generally accepted auditing standards (GAAS) to ensure that internal controls, processes and procedures are "adequate" and "effective." Adequate controls explain in detail steps involved in task performance and decision-making processes. Effective controls remedy deficiencies properly.
Tests of Account Balances
An auditor test account balances when a business entity's control environment is not adequate or effective. For instance, an audit specialist reviewing Insurance and Co.'s premiums receivable balances might assess whether premium amounts are computed properly.
Tests of Account Details
An auditor conducts detailed tests of accounts and account groups to ensure that individual account balances agree with financial statement balances. For instance, an auditor might review individual policyholders' accounts to verify that the sum of these accounts agree with amounts reported on an insurance company's balance sheet.
