Specific methods of audit methodology

The specific methods of auditing, mainly the collection of audit evidence, can be broadly divided into the method of reviewing written information and methods of confirming objective things, in addition to audit investigation methods.

Methods of reviewing written information

The technology of reviewing written information can be divided into checking, reviewing, reviewing, comparing, analyzing; the order of reviewing the information is divided into the reverse checking method and the smooth checking method; the scope of reviewing the information is divided into the detailed checking method and the sampling method.

1

. Reconciliation method

Checking method is the accounting records and related information in more than two of the same value or relevant data against each other to verify whether the content is consistent, whether the calculation is correct audit method, the purpose is to ascertain whether the certificate, account, table is consistent with each other to confirm that the audited unit of the financial position and financial results of the real, correct and legal. Generally want to check between the following information:

a. First, the original vouchers and related original vouchers, original vouchers and summarized original vouchers, vouchers and summarized vouchers (or a summary of accounts). The content of the check is attached or related to the number of original documents are complete, the date, business, content, amount of accounting vouchers with the accounting department and the amount of money is consistent with the original documents, accounting vouchers with the summary of accounting vouchers between the contents of the consistency.

b. Second, vouchers and books. Check the date of the vouchers, accounting subjects, detailed accounts, the amount of records with the books of account whether the content is consistent; summary vouchers (or summary statement) and the general ledger account, the amount, direction is consistent.

c. Third, the ledger with the general ledger. Mainly check whether the opening balance, the current period's incidence and the closing balance are consistent.

d. Fourth, the books and statements. Based on the general ledger or ledger of the closing balance or the current period as the basis for checking the account records with the relevant statement items are consistent.

e. Fifth, the statement and statement. Check whether the statement is prepared in accordance with the requirements of the system, the corresponding relationship between the statement is correct.

Check if you find errors or doubts, should promptly identify the reasons. In particular, it is necessary to point out that the use of the reconciliation method as evidence of information must be true and correct, otherwise the reconciliation is meaningless. When there is a lack of basis for cross-checking data should be at least two different sources, and to make their checks match.

2.

Review method

Review method is the vouchers, books and statements, as well as business decisions, plans, budgets, contracts and other documents and information on the content of the detailed reading and review, in order to check whether the economic operations in compliance with the laws and regulations, the economic information is true and correct, and whether it is in line with the requirements of accounting standards. The review method is mainly to check the evidence, accounts, tables and other accounting information.

a. First, review the original documents, bookkeeping vouchers. Both from the form and technical review, but also from the content of the review. The former is mainly to review whether the vouchers are complete and correct, such as the date, summary, amount, capitalization, signature, etc. should be filled out whether complete, with or without alteration; the latter is mainly to review whether the economic operations in line with the relevant procedures, whether there is a violation of the financial and economic discipline, financial and accounting system, or even engaged in illegal business activities, such as the fact.

b. The second is to review whether the records of economic information in accordance with the relevant principles and principles. For example, whether the use of accounts in the accounting books is correct, account correspondence is normal and reasonable; accounting statements are prepared in accordance with the provisions of the system, whether the statements should be the correct relationship.

c. Third, review the records of economic information for abnormalities. Such as the books of account whether there is alteration, scraping, gouging, forgery, and non-compliance with the provisions of the writing and change; statement of the project there is no abnormal increase or decrease in the phenomenon of change.

3.

Repeat algorithm

Repeat algorithm is the vouchers, books and statements, as well as budgets, plans, analyses and other written information to re-review, a method of checking. This method is included in the reconciliation method. The main aspects of the review and accounting: First, the original vouchers in the unit price multiplied by the number of products, subtotals, totals, etc., the second is the total of the detailed amount of vouchers, the third is the amount of each page of the books of the columns of the subtotals, totals, balances, the fourth is the statement of the relevant items in the subtotals, totals, grand totals, and other calculations, and the fifth is the budget, plans, analysis of the relevant data.

The review method is generally used in conjunction with the review method, which can improve the insurance factor of the audit.

4.

Comparative method

Comparative method is to compare and analyze the amount of the same audited items through the actual and the plan, the current period and the previous period, the enterprise and similar enterprises to check whether there are any abnormalities and suspicious problems, in order to track and trace the clues and obtain audit evidence. Such as the current period compared to the relevant projects (such as profit did not synchronize with the growth of product sales revenue), to be audited with other units of the same project compared to the same project (such as the level of working capital turnover with the advanced enterprises than), can illustrate the situation and find problems.

The comparative method can be divided into absolute and relative comparative method, the purpose of the two exist only one, is to better audit and check.

5.

Analytical method

Analytical method is to break down the content of the item being audited in order to reveal its essence and understand the interrelationship of its constituent elements. It includes:

a. Ratio analysis. It is through the ratio relationship between related items, such as capital turnover, capital profitability, cost of goods sold rate, etc. to compare and analyze, from which to find out the situation, or to judge whether the economic activities of the unit under review are economic and reasonable.

b. Account analysis. It is based on the principle of account correspondence, the debit and credit of certain accounts and their corresponding accounts to analyze the comparison, from which to find anomalies. For example, the "product sales", "bank deposits" and "accounts receivable" combined analysis, on the one hand, you can review any errors, on the other hand, you can understand in-depth Product sales and accounts receivable situation, if any anomaly should be further audited using other methods.

c. Trend analysis. That is, the method of analyzing the development trend of an economic indicator in a number of periods. The use of this method, in three steps: first, to determine the economic indicators to be analyzed (such as contributions, accounts receivable, accounts payable, finished goods, etc.), and second, to determine the number of base period, and finally the amount of the indicators of the year divided by the number of the base period, to find the annual trend rate of the base period. Through this method, we can observe the changes and development trend of an indicator in different periods, and if we find that the changes are too large or too small and other anomalies, we need to further review in depth.

In addition, there are relevant accounts by the duration of the categorization of analysis, in order to further focus on the tracking of the age analysis method; the balance of accounting statements between the balance of the relationship between the relevant items, the relationship between the balance of the analysis; analyze and calculate the extent of changes in the various factors on the relevant economic indicators of the factor analysis method. According to the use of the method of time and purpose of the different analysis, analysis, analysis before, during and after the analysis of the difference.

The above analytical methods used in auditing is mainly economic benefit auditing, management auditing, of course, it is also used in financial management and other aspects of business management, such as financial analysis, technical analysis, statistical analysis and analysis of economic activities, and it is the main method of these analyses.

6.

Reverse checking method

It is the audit method from the end to the beginning according to the opposite order of economic activities. In the financial audit, it is in accordance with the accounting procedures in the reverse order, first review the accounting statements, from which errors and problems are found, and then targeted review and analysis of statements, books and vouchers in turn.

The main advantage of this method is to start from the big picture, the audit surface is wider, the focus and purpose of the review is relatively clear and easy to identify the main issues, the audit efficacy is higher; shortcomings are focused on reviewing and analyzing the statements, and accordingly focus on the reverse checking of the accounts, may be omitted or negligent of some of the more important issues, and it is difficult to reveal the wrongdoings. And the reverse check method is more difficult, therefore, the auditor requires a higher quality of business.

7

Shun checking method

It is in accordance with the sequence of economic activities occurring in order to check from the beginning to the end of the audit method. The review of accounting information in accordance with the order of accounting procedures, in order to review and analyze the vouchers, books and statements.

Specific practice is: the first review of the original documents and vouchers, and then further combined with the vouchers to check the books, and finally according to the books of review of the accounting statements.

The main advantage of this method is simple and easy to implement, because it is according to the bookkeeping procedures one by one, carefully checked, the audit content is detailed, generally speaking, the accounts on the errors and malpractices can be omitted, the results of the audit is more reliable. The disadvantage is that no matter how big or small are treated equally, often can not grasp the focus and the direction of the main and secondary, and focus on the evidence of the mechanical checking of the accounts, time-consuming and laborious, may be lost due to small, so generally applicable to the smaller, not much of the business of the unit audited by the use of.

Reverse checking method and smooth checking method has its own focus, each has its own advantages and disadvantages, in order to play the audit is more practical, in practice, often combine the two methods of application, that is, the use of reverse checking method, for the need to understand the part, do not prevent the local part of both the smooth checking method of detailed checking; the use of the smooth checking method, for the important matters can be used both the reverse checking method, in order to avoid omissions.

8.

Detailed investigation method

is the audited unit is being audited during the entire certificate of account or an important (or suspicious) items included in all the accounts for a comprehensive, detailed review. Early financial audit, usually use this method.

9.

Sampling method

refers to a part of the audited unit from the audited object of the audit; based on the results of the review, in order to deduce the audit object of the overall errors and shortcomings. Its basic feature is: according to the specific circumstances of the audit object and audit purpose, after judgment, select a representative, relatively important project as a sample, or from the reviewed information randomly selected a certain number of samples, and then according to the sample of the results of the review to infer the correctness of the overall, or to infer the rest of the unsampled part of the errors and drawbacks. The key to this method is to draw samples, so it is also known as sampling audit method. Modern audits use this method.

Sampling method can be divided into arbitrary sampling method, judgment sampling method and statistical sampling method.

(1) arbitrary sampling method. This method is the auditor in the overall arbitrarily selected part of the audit, the starting point of sampling is purely to reduce the auditor's workload. What is selected, what economic information and economic activities, how much content is selected, how many samples, etc. There is no certain law and basis, the auditor's mind countless. Therefore, the audit evidence it obtained, the risk is greater, sometimes with great chance and arbitrariness.

(2) judgment sampling method. Also known as the focus of the sampling method, which is based on the audit purpose, the degree of completeness of the internal control of the audited unit and the evidence needed, by the auditors based on experience, selective and focused on the audit of the overall part of the audit, in order to make inferences about the overall. This method is focused and targeted, but it is not easy to determine whether the sampling results obtained are valid. This sampling method and the quality of the auditor is inseparable.

Obviously, the above two methods are too subjective, less objective, can not correctly reflect the effect of the audit.

(3) statistical sampling method. Also known as the number of mathematical sampling method, which refers to the auditor to use the principles of probability theory, according to the principle of randomness in the audit of the overall number of content as a sample audit, and then based on the results of the sample to infer the overall characteristics. Statistical sampling method has three main features: ① rely on the principles of probability theory of sampling, does not rely on the experience and judgment of the auditor's ability, the sample size by the audit of the overall number of factors; ② samples are not artificially focused on the selection, but according to the principle of randomness, to ensure that all parts of the overall audited project was selected by the sampling of the same opportunity; ③ based on the results of the randomly selected samples to infer the overall characteristics, the more scientific and reasonable. More scientific and reasonable. There are two specific uses of statistical sampling, one is to use the compliance test, used to estimate the incidence of the overall characteristics, and the second is used for substantive testing, used to estimate the overall amount of the value of the difference, the former is called attribute sampling, the latter is called variable sampling.

Sampling method of reviewing the focus is clear, if you choose the right target, save time and effort, with twice the result with half the effort, but if the target and the object is not selected properly or lack of representativeness, often can not find the problem, and even give up the previous work. In the financial income and expenditure audit and financial law and discipline audit, sampling method is often less than the detailed investigation method, so it still has certain limitations. In practice, it is often used in conjunction with other methods.

Confirmation of objective things

In addition to the collection of written information, the audit must also obtain the physical existence of information, that is, to prove the implementation of the objective things in the form, nature, location, quantity, value, etc., in order to audit whether the accounts are consistent with the absence of errors and shortcomings. These methods are mainly inventory method, reconciliation method and identification method.

1. Inventory method

The auditor of the property and materials through the field inventory, check the number of objects, varieties, specifications, the amount of the actual situation, in order to confirm that the economic information and economic activity is true and correct, the economic information and the physical consistency of the audit method.

Inventory method is divided into direct inventory method and supervision of inventory method. Direct inventory method is by the auditor in person inventory, in order to confirm the written information with the relevant property and materials are consistent, this method is generally on valuable property, such as rare metals, treasures, valuable cultural relics and cash and other inventory is used, the other cases by the audited unit of their own inventory, with the unit leaders and supervisors and auditors can sign. Supervision of inventory method is the auditor in person to observe and check the scene, by the audited unit to organize their own inventory, if necessary, the auditor can be spot-checked, double-checked to ensure the quality of the inventory. This method is generally used for a larger number of physical objects, such as plant, machinery and equipment, materials, commodities and so on.

2. Reconciliation method

If the readily available data and the need to confirm the data on the surface is inconsistent, in order to confirm the authenticity of the data, we need to use the reconciliation method. Reconciliation is a method of investigating the necessary additions and subtractions to the data from a certain starting point, which is the normal business that has taken place. For example, the reconciliation method is often used to prepare a bank deposit statement in order to verify the correctness of the balance of the bank deposit account based on the balance of the bank statement. In addition, the reconciliation method can also be used to prepare a reconciliation of property and materials to verify that the property and materials on the closing date of the number of accounts and the number of actual inventory is consistent with the basic method: when the inventory and the written information on the closing date is different, the first physical inventory, and then you can review the accounts are consistent.

3. Appraisal method

Appraisal method refers to the need to invite relevant professionals to use specialized technology to determine the written information, physical and economic activities and identification methods. Such as the physical performance, quality, value, the authenticity of written information and economic activities, such as rationality, effectiveness and other identification, it is beyond the ability of the general auditor, and the need to hire a certain number of engineers and technicians, lawyers, etc. to provide the identification of conclusions, and make independent audit evidence. Therefore, in order to work better, the audit department should be in the legal department of production and technology departments in order to improve.

Audit investigation methods

Audit investigation is an important and indispensable part of the audit methodology. Audit implementation process in addition to the review of written information and confirm the objective things, but also need to economic activities and their activities within or outside the information on certain objective facts of internal and external investigations, in order to determine the truth, or to look for new clues, or to obtain audit evidence, which requires auditors to go into the reality of the audit investigation. Audit investigation methods include observation, inquiry, correspondence, thematic investigation method.

1. Observation method

It is the auditor in person to observe the field observation and inspection, in order to find out the truth, to obtain audit evidence of an investigation method. Auditors into the audited unit, in-depth to the workshop, section, site, warehouse and other places, for the production and management work, property and materials storage and utilization, the implementation of internal control systems, etc., to carry out direct observation and inspection, pay attention to whether it is in line with the audit standards and written information, from which to identify weaknesses and problems, in order to collect evidence other than written information. Adequate collection of evidence is the key to a good audit, otherwise it is not able to find the problem.

2. Inquiry method

The audit process of the doubts and problems found through verbal inquiries or questioning the way to open the truth and obtain verbal or written evidence of a method of investigation. Such as the review of suspicious accounts or abnormalities, internal control systems, economic efficiency, etc., can be made to the relevant personnel oral or written inquiries. For general issues, oral or written inquiries can be. But for important issues, try to use written inquiries and obtain written evidence. Written evidence is very important, sometimes the most important factor in the success or failure of the audit.

3. Correspondence method

Correspondence method is actually a query method, it refers to the auditor through the relevant units and individuals to send a letter in order to understand the situation to obtain evidence of a method of investigation. This method is mostly used for the verification of current accounts, as a necessary means of authentication of debts, the audited unit of banks, insurance companies, legal advisers and other units of the situation, can also be used to verify the authentication of this approach. Correspondence method has a strong verification, very effective in checking, is an important part of the audit is essential.

4. Thematic audit investigation method

Thematic audit investigation is actually a thematic investigation, refers to the national audit institutions of the country, a region, an industry within the scope of some of the thematic organization of the strength of the audit investigation, it is the audit to play a role in promoting micromanagement, to strengthen the role of macro-control and a powerful means of decision-making by the government, rationalization of the information to ensure. With the establishment of the socialist market economy, to strengthen the role of macro-control is a powerful means of government decision-making scientific, rationalized information to ensure. With the establishment of socialist market economy, strengthen the macro-control has slowed down the government management of the economy of the necessary leverage, therefore, as an important part of the national economy audit investigation will be closely around this center. Such as the past two years of the electric power industry audit survey, "the national ownership of industrial enterprises to convert the operating mechanism of the regulations" implementation of the audit survey, for the government, the department to strengthen the macro-management to provide accurate and reliable information.

In addition to the above audit methods, for specific types of audit, there are a number of specialized methods, such as evaluation of the internal control system using the questionnaire method and the flow and map method, computerized audit bypassing the computer audit and through the computer audit methods.

Auditing methodology as a system of technical methods, its content will be constantly updated with the development of social and economic, deepening of auditing science. In fact, in the development process from traditional audit into modern audit, audit methods have gone through three stages of development: first, from the development of data-oriented to system-oriented and data-oriented, second, from the development of purely financial auditing to financial auditing and economic efficiency auditing, third, from the development of purely hand-recorded data-processing system auditing to the development of hand-recorded data-processing system auditing and electronic data-processing system auditing. The technology of auditing is still evolving. The technology of auditing is still under constant improvement and development. With the advance of the times, the audit work is also becoming more complex, systematic and advanced. Some inherent traditional auditing methods may have to be eliminated from the game, but of course it is inevitable.

Lastly, it is necessary to make clear that the actual work of the use of various methods is not isolated, a single, usually an audit to use a variety of auditing methods, complement each other, and promote each other, in order to ascertain as soon as possible the correctness of the economic activities and economic information, authenticity, legitimacy, reasonableness and validity of a variety of methods of "integrated utilization "is worthy of strong advocacy.