There are generally seven primary types of audit procedures used by auditors to gather evidence, which include inspection, observation, inquiry, confirmation, recalculation, reperformance, and analytical procedures. These methods are often combined to test internal controls or perform substantive testing to verify financial accuracy.
What are audit procedures?
Audit procedures to obtain audit evidence can include inspection, observation, confirmation, recalculation, reperformance and analytical procedures, often in some combination, in addition to inquiry.
Although every audit is unique, the audit process usually consists of four stages: Planning, Field work, Reporting and (for some audits) Follow-up. Engagement of the client, or the area being audited, is critical at every stage of the audit process.
A successful internal audit function relies on four fundamental pillars, often referred to as the “4 C's”: Competence, Confidentiality, Communication, and Collaboration. These principles guide auditors in delivering meaningful and impactful results.
The principles of independence, objectivity, competence, confidentiality, professionalism, due professional care, and continuous improvement are essential for the internal audit function to fulfill its role as a trusted advisor to the organization.
According to this article from Chron, physical inspection, confirmation from a third party, and inspection of records and documents are considered three of the most reliable audit procedures.
The Big 4 are the largest accounting and auditing firms in the world: Deloitte LLP (Deloitte), PricewaterhouseCoopers (PwC), Ernst & Young (EY) and Klynveld Peat Marwick Goerdeler (KPMG). They're so big that their joint revenue in 2024 was—you guessed it—$212 billion.
1) Correspondence Audit
The first of the four types of tax audits are correspondence audits are the most common type of IRS audits. In fact, they comprise roughly 75% of all IRS audits.
The five main stages of the audit process are Planning, Risk Assessment, Fieldwork (Execution/Testing), Reporting, and Follow-up, moving from initial engagement to ensuring corrective actions are taken to provide assurance on financial statements or processes. Auditors first plan the audit, then assess risks, perform tests (controls & substantive), report findings, and finally track implemented solutions for improvement.
Balancing the 3 C's in Auditing Practice
Balancing competence, confidentiality, and communication is essential for the effectiveness of the auditing process.
Let's take a closer look at each of the different assertion types and how they work.
These nine different test methods used during audit procedures cover everything from examining records and documents to re-performing work to confirm whether the figures reported were correct or not. Each type has its purpose and specific goals when used together with other types of testing methods.
The 5 Cs of audit (Criteria, Condition, Cause, Consequence, Corrective Action) are a framework for structuring clear, actionable audit findings, explaining what should be (Criteria), what is found (Condition), why it happened (Cause), what the impact is (Consequence/Effect), and how to fix it (Corrective Action/Recommendation) to drive organizational improvement and compliance.
The 7 E's in operational auditing are Effectiveness, Efficiency, Economy, Excellence, Ethics, Equity, and Ecology, forming a comprehensive framework for internal auditors to assess an organization's success beyond mere compliance, focusing on goal achievement, resource optimization, quality, moral conduct, fair treatment, and environmental impact to add significant value.
The Big 8 Accounting Firms History
An 8-Step SOX Audit Process
1) Selecting a topic. 2) Agreeing standards of best practice (audit criteria). 3) Collecting data.
The COSO internal control framework identified five interrelated components:
Objectivity is the cornerstone of the internal audit golden rule. Auditors must approach their work without bias, ensuring their evaluations are fair, impartial, and based solely on evidence.
The 6 key phases of an internal audit process are: Planning, Preliminary Investigation, Implementation, Quality Assurance, Reporting, and Follow-Up. Each phase includes steps like defining audit procedures, analyzing the audit object, verifying facts, and reviewing outcomes to ensure compliance and improvement.