Identify and explain briefly the audit procedure used by the auditor to obtain audit evidence in following situations: (i) While auditing the books…
CA Intermediate · Auditing and Ethics · MTP · May 2025
Identify and explain briefly the audit procedure used by the auditor to obtain audit evidence in following situations: (i) While auditing the books of accounts of ANT Limited for the financial year 2023-24, the auditor checked the complete documents and records of the company in detail to obtain audit evidence. (ii) Mr. M, auditor of company, looks at the process of inventory counting by the entity's personnel and of the performance of control activities. (iii) XYZ Ltd. is engaged in export of goods to Europe. The sales invoices raised in Euros are converted into Indian rupees as per applicable norms. The auditor wants to verify whether conversion of foreign currency into Indian rupees is proper or not. (iv) CA Isha is appointed as auditor of TUV Ltd., during the initial stage of audit, she reviewed the Gross Profit Ratio of the company. She also compared GP ratio of TUV Ltd. with the other companies operating in similar industry.
Suggested Answer and Working Notes:
(i) Inspection: The audit procedure used by auditor of ANT Limited is known as Inspection because inspection is an audit procedure in which complete documents and records of a company are checked in detail for the purpose of obtaining audit evidence. (ii) Observation: Mr. M is using Observation as audit procedure as Observation consists of looking at a process or procedure being performed by others. (iii) Recalculation: The audit procedure used by auditor is Recalculation. Recalculation consists of checking the mathematical accuracy of documents or records. Recalculation may be performed manually or electronically. (iv) Analytical Procedure: CA Isha is using Analytical Procedure to obtain audit evidence. Analytical procedures consist of evaluations of financial information made by a study of plausible relationships among both financial and non-financial data. Analytical procedures also encompass the investigation of identified fluctuations and relationships that are inconsistent with other relevant information or deviate significantly from predicted amounts.
Topics: Audit Evidence
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