✳️ Why Learn Audit Techniques?
When an auditor checks accounts, they don’t just look at numbers randomly.
They follow systematic methods to collect audit evidence.
These methods are called Audit Techniques or Audit Procedures.
Knowing these helps you in:
- 📚 Scoring theory marks
- 🎯 Writing neat answers in exams
- 💼 Understanding practical auditing in jobs like CA, CMA, MBA, etc.
🧰 7 Most Used Audit Techniques
Auditors use 7 standard techniques.
You can remember them with this fun memory line:
“O I Can Inspect Any Record Right-away!”
Let’s break down each one with examples.
1️⃣ Observation 👀
What it means:
Auditor watches the process being done.
Examples:
- Watching staff count cash or stock
- Seeing how invoices are approved
- Checking physical security of inventory room
Why it’s useful:
It shows if employees follow proper steps or not.
Limitation:
Employees may behave properly only because they are being watched.
2️⃣ Inquiry ❓
What it means:
Auditor asks questions to get clarity.
Examples:
- Asking manager why a certain expense was high
- Asking cashier why a certain bill was not signed
- Asking HR about salary hike policy
Why it’s useful:
It helps in understanding the “why” behind data.
Limitation:
Answers may be biased. Always support with documents or confirmation.
3️⃣ Confirmation ✉️
What it means:
Auditor sends a letter or email to outsiders for reply.
Examples:
- Asking bank to confirm account balance
- Asking debtor to confirm due amount
- Asking landlord to confirm rent agreement
Why it’s useful:
It gives external proof — which is stronger than internal proof.
Bonus Tip:
Used a lot in statutory audits and bank audits.
4️⃣ Inspection 📑
What it means:
Auditor checks documents or assets directly.
Examples:
- Checking sales invoices and purchase bills
- Verifying signed contracts
- Physically examining office furniture
Why it’s useful:
Confirms whether items exist and are valid.
Tip:
You can inspect both documents and physical items.
5️⃣ Analytical Review 📊
What it means:
Auditor compares numbers to spot problems.
Examples:
- Compare current year’s sales to last year
- Compare petrol expenses to vehicle usage
- Calculate ratios (like GP Ratio, NP Ratio)
Why it’s useful:
Saves time and gives early warnings for errors or fraud.
6️⃣ Re-calculation 🔢
What it means:
Auditor rechecks calculations for accuracy.
Examples:
- Re-adding a total from vouchers
- Checking depreciation amount
- Verifying payroll calculations
Why it’s useful:
Proves math is right. Errors in calculation = wrong financials.
7️⃣ Re-performance 🔁
What it means:
Auditor does the task again themselves.
Examples:
- Auditor checks bank reconciliation independently
- Re-creates aging report for receivables
- Re-processes inventory valuation
Why it’s useful:
This gives strongest evidence as the auditor did the task directly.
🖼️ Image Suggestion
📍 Place image here – after all 7 points above
- Title: “7 Audit Techniques Every Auditor Uses”
- Visual: A colorful wheel, each slice showing:
- Eye (Observation)
- Question mark (Inquiry)
- Envelope (Confirmation)
- File (Inspection)
- Bar graph (Analytical)
- Calculator (Re-calculation)
- Clipboard (Re-performance)
- Alt Text: Visual showing all 7 standard audit techniques with icons
- Caption: From watching and asking to recalculating — these are every auditor’s tools!
📋 Easy Example Table (Exam-Friendly!)
| Area Being Audited | Technique Used | What Auditor Does |
|---|---|---|
| Petty Cash | Observation | Watches how money is counted |
| Salary Sheet | Re-calculation | Checks payroll sheet total |
| Debtors | Confirmation | Emails 10 customers to confirm dues |
| Sales Invoices | Inspection | Examines GST and approval stamp |
| Rent Expense | Inquiry | Asks why rent was paid in advance |
| Light Bill | Analytical Review | Compares light bill for 3 months |
| Inventory | Re-performance | Calculates stock value again |
📌 How to Remember All?
Memory Tip:
“O I Can Inspect Any Record Right-away!”
- O – Observation
- I – Inquiry
- C – Confirmation
- I – Inspection
- A – Analytical Review
- R – Re-calculation
- R – Re-performance
🧠 Just write this line in exam and start explaining each!
❓FAQs
| Question | Answer |
|---|---|
| Which is most powerful technique? | Re-performance (done by auditor) |
| Is inquiry alone enough? | No, support it with confirmation or inspection |
| Which technique is fastest? | Analytical review |
| Which one gives outside proof? | Confirmation |
| Is observation done once? | Usually done during stock or cash count |
🧾 Conclusion
Auditors don’t just guess — they follow proper techniques to collect valid audit evidence.
Each technique gives different strength of proof, so a good auditor uses a combination of them.
So remember:
Watch → Ask → Confirm → Check → Compare → Calculate → Repeat!
This is how auditors ensure things are fair, accurate, and legal.