What are the steps taken to audit financial statements?

Steps Taken to Audit Financial Statements

These are:

(a) Review of the Financial Statements: The Financial Statements of the Organization will be analyzed into various departments and reviewed on monthly basis.

(b) Review of the system: The Ministry’s or departmental system is reviewed for internal control adequacy or otherwise.

(c) Planning and Control: Based on the review of the system the audit will be planned and samples picked, for testing. Departments which have weak system will supply large sample and vice versa. Samples may be picked, using scientific or ‘best- of-judgement’ approaches.

(d) ‘Compliance Test’ otherwise called ‘Walk-Through Test.’ This approach involves tracing a chosen transaction from initiation to conclusion. The objective of the test is to test the compliance and effectiveness of the system. It is an assessment of the reliability of the internal control system in operation.

(e) ‘Substantive Test’: This involves ‘in depth test’ to provide audit evidence as to the completeness, accuracy and validity of the information contained in the accounting records or the financial statements.

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