Understand Controls
• An auditor partners with accountants, external auditors and departmental risk managers to gain an understanding of controls, procedures and policies around a business entity's purchasing process. An auditor applies generally accepted auditing standards, industry practices and regulatory guidelines to acquire this expertise. An auditor also may read prior years' reports to gain familiarity with purchasing processes, or send questionnaires or formal inquiries--such as letters, surveys and checklists--to lower-level employees.
Test Purchasing Controls
• An auditor tests a business entity's purchasing controls, policies and guidelines to ensure that such controls are operating effectively and are adequately designed. Controls are methods and mechanisms a corporation's management puts into place to avoid losses due to error, fraud or technology system breaks. Controls are effective when they remedy problems or deficiencies properly. They are adequate if they describe in detail steps for task performance, decision-making processes and lines of hierarchy. An auditor also may test controls by observing such controls in practices and by re-performing the same activities.
Test Account Balances
• An auditor tests account balances in an organization's financial statements to ensure that such balances are "fair" and "complete", and that they adhere to generally accepted accounting principles (GAAP), sector practices and regulatory standards. Financial reports are "fair" if they are objective and accurate. They are "complete" when all four financial statements are presented. These statements include a balance sheet, a statement of profit and loss, a cash flow statement and a statement of owners' equity.
Test Account Details
• An auditor tests details of accounts in a business entity's financial statements to obtain "sufficient" and "competent