Terms used in audit procedures

An audit procedure is an action the auditor takes to obtain evidence. Its purpose determines whether it is a test of controls or a substantive procedure. For example, an auditor can inspect the same sales invoice to answer two different questions: Did the supervisor perform the required check? and Did the recorded sale actually occur? standards.auasb.gov.au

Term	Meaning	Example
Inspect or examine	Read a document or examine a physical asset.	Inspect a loan agreement to identify the interest rate, repayment dates and assets pledged as security.
Vouch	Start with an item in the accounting records and work back to supporting evidence. This commonly tests occurrence or existence.	Select a sale from the sales journal and vouch it to the customer’s order and signed delivery note to establish whether the sale occurred.
Trace	Start with a source document or physical item and follow it into the accounting records. This commonly tests completeness.	Select signed delivery notes and trace them to the sales journal to find completed deliveries that the company may have omitted.
Agree	Compare a specific detail in one record with the corresponding detail in another.	Agree the quantity on the sales invoice to the quantity on the signed delivery note.
Recalculate, cast or cross-cast	Recalculate means check the arithmetic. Cast means add a column. Cross-cast means check totals across rows.	Recalculate 20 tables × RM500, then cast the invoice lines to check the total charged.
Reconcile	Compare two records, identify differences and establish what explains them.	Reconcile the bank statement balance to the cash book and examine the items explaining the difference.
Observe	Watch someone carry out a procedure.	Observe how warehouse staff mark furniture after counting it to prevent double counting.
Enquire	Ask a knowledgeable person for information and obtain supporting evidence where necessary.	Ask the credit controller why a customer has stopped paying, then inspect correspondence about the disputed invoices.
Confirm	Obtain a direct written response from an external party.	Ask a customer to confirm directly to the auditor how much it owed at 31 December.
Reperform	Independently repeat a procedure or control originally performed by the client.	Repeat the supervisor’s matching of delivery notes to invoices and compare the exceptions identified.
Scan	Look through records for unusual items that merit further investigation.	Scan the December sales journal for unusually large entries, then inspect the documents supporting those entries.

Why direction matters: If a delivery was never invoiced, it will be missing from the sales journal. Starting with the delivery notes gives the auditor a chance to find it. Starting with the sales journal helps the auditor investigate whether the sales already recorded are genuine.