ISA 500 – Audit Evidence

4 Nature of audit procedures applied

All the audit procedures discussed above can be applied by the auditor for different purposes or in other words one type of procedure can be used to execute tasks of different nature.

By nature, audit procedures can be classified as following:

  • Risk assessment procedures; and
  • Further audit procedures i.e.:
    • Tests of controls
    • Substantive procedures

Risk assessment procedures are performed by the auditor to gain understanding of:

  • Entity
  • Entity’s environment; and
  • Entity’s internal control system

Through understanding, auditor enables himself to assess the risk of material misstatement at financial statement level and assertion level.

Tests of controls are performed to evaluate operating effectiveness of entity’s internal control system in prevent or detecting and correcting material misstatements at assertion level.

Substantive procedures are applied by the auditor to detect material misstatement at assertion level. Substantive procedures include:

  • Tests of details
  • Substantive analytical procedures