Advanced Audit and Assurance (International) · Audit procedures and obtaining evidence

Audit Procedures and Assertions for ACCA AAA

Updated 11 October 2026 · Fact-checked

Audit procedures are the actions an auditor performs to obtain audit evidence. They are inspection, observation, inquiry, external confirmation, recalculation, reperformance and analytical procedures. You choose each one to address a specific assertion, such as existence or completeness, linked to an identified risk of material misstatement.

Understand Audit Procedures and Assertions

An assertion is a claim management makes, by presenting the financial statements, about the figures and disclosures. For example, by showing inventory of $2 million, management claims it exists, is owned, is complete and is valued correctly. The auditor's job is to gather evidence on whether those claims are true.

ISA 315 (Revised 2019) groups assertions into three categories. For classes of transactions and events: occurrence, completeness, accuracy, cut-off, classification. For account balances at the period end: existence; rights and obligations; completeness; accuracy, valuation and allocation (the last is a single combined assertion). For presentation and disclosure: occurrence and rights and obligations, completeness, classification and understandability, accuracy and valuation.

An audit procedure is what you actually do to get evidence. ISA 500 lists them: inspection (of records, documents or tangible assets), observation (watching a process, such as an inventory count), external confirmation (direct written response from a third party), recalculation (checking arithmetic), reperformance (independently doing a control or procedure the entity did), analytical procedures (evaluating information through relationships and trends) and inquiry (asking people inside or outside the entity).

Procedures also have a purpose. Risk assessment procedures help you understand the entity and identify risks. Tests of controls check that a control operated effectively. Substantive procedures (tests of details and substantive analytical procedures) detect material misstatement in the figures themselves. The same technique, such as inspection, can serve different purposes depending on what you aim to prove.

In the AAA exam, marks go to procedures that are specific, linked to a stated assertion and tailored to the scenario. 'Check the invoices' earns little. 'Inspect a sample of December sales invoices to dispatch notes dated in the same period to confirm cut-off' earns the mark.

Key rules to remember

Procedure types (ISA 500): Inspection | Observation | External confirmation | Recalculation | Reperformance | Analytical procedures | Inquiry; Inquiry alone is not sufficient to test a control or to support a material balance; combine it with other procedures.
Direction of testing: Overstatement of assets or income (existence, occurrence): start with the recorded item → agree to source document or physical item. Understatement (completeness): start with an independent source → trace to the ledger.; The source for completeness must be independent of the ledger. For liabilities the main risk is understatement, so completeness of liabilities is the key test: start from independent sources such as supplier statements and post-year-end payments. Choosing the wrong starting point is the most common reason a procedure fails to address the assertion.
Tests of controls versus substantive procedures: Controls: did the control operate? Substantive: is the figure or disclosure materially misstated?; Tests of controls are required when you rely on controls or when substantive procedures alone cannot give sufficient appropriate evidence.
Writing a procedure: Action verb + document or item + sample or source + purpose (assertion); Use this pattern to make each procedure specific and markable.

How to solve Audit Procedures and Assertions questions

Use this method for any question that asks for audit procedures or how evidence addresses assertions.

1Read the requirement. Note whether it asks for procedures, risks, or evidence, and whether it is tests of controls or substantive.
2Identify the account or balance in the scenario and pick out the facts that create risk, such as new systems, estimates or year-end pressure.
3Decide which assertion is at risk. Say it explicitly, for example 'existence of inventory'.
4Choose the direction of testing that fits the assertion. To test for overstatement of assets or income (existence, occurrence), start with the recorded item. To test for understatement (completeness), start with an independent source. For liabilities the main risk is understatement, so start from independent sources.
5Select the technique: inspect, observe, confirm, recalculate, reperform, analyse or inquire. Prefer external or auditor-generated evidence over inquiry.
6Write the procedure with a specific action, the item tested and the purpose. Use scenario names, dates and amounts.
7Give each procedure a short link to the assertion, then check you have enough distinct procedures for the marks available.

Quickest way: Assertion, source, verb

When to use it: Use when time is short and the question asks for a list of procedures for one balance.

Write the balance and the one or two key assertions at risk.
Ask: where does the evidence come from, inside the entity, outside it, or from my own work?
Start each bullet with a strong verb: inspect, agree, observe, confirm, recalculate, reperform, compare.
Add 'to confirm [assertion]' in a few words.
Aim for one procedure per mark. Stop when you reach the mark allocation.

Common mistakes in Audit Procedures and Assertions

Writing vague procedures such as 'check the sales' or 'review the file'.
You know the area but do not think about the exact document or action.
Fix: Name the document, the sample and the purpose, for example 'Agree a sample of receivables balances to year-end confirmations received directly from customers'.
Testing in the wrong direction, such as tracing ledger to invoice to test completeness.
Students learn lists of procedures but not which assertion each direction supports.
Fix: For completeness start from an independent source, like goods received notes or supplier statements, and trace to the ledger. For existence or occurrence start with the recorded item in the ledger and go to the item or document. For liabilities, remember the main risk is understatement, so completeness is usually the key assertion.
Relying on inquiry alone as evidence.
It is quick to write and sounds natural.
Fix: Treat inquiry as a starting point. Corroborate answers with inspection, observation or confirmation.
Confusing tests of controls with substantive procedures.
Both can use inspection and reperformance, so they look alike.
Fix: Ask what you are concluding about. If it is whether a control worked, it is a test of controls. If it is whether the balance is right, it is substantive.
Listing procedures without linking them to assertions or scenario facts.
Students recall a generic checklist.
Fix: State the assertion in each point and use scenario details. Professional skills marks reward tailored, commercial answers.
Describing management's actions rather than the auditor's.
The wording of controls and procedures sounds similar.
Fix: Start every point with an auditor action. 'The auditor should observe the count' is correct; 'staff count the inventory' is not a procedure.

Worked examples

Example 1

Year-end inventory of $4.8 million at a distribution company is material. Inventory is held at five warehouses, and one warehouse moved premises in November. Describe audit procedures to address the existence and completeness of inventory.

Show the solution

Assertions: existence and completeness of inventory, with higher risk at the relocated warehouse.
Observation: attend the inventory count at the main warehouses, observe staff following count instructions and check for damaged or obsolete goods.
Test counts: select items from count sheets and inspect them physically (existence), and select items from the warehouse floor and agree them to count sheets (completeness).
Relocated warehouse: inspect the transfer documents and goods dispatched and received records to confirm all goods moved were counted once, in one location.
Cut-off: record the last goods received and dispatched numbers at the count, and inspect later documents to confirm they were recorded in the correct period.
Third-party stock: obtain external confirmation of any inventory held by others, and inspect records for goods held for others that should be excluded.
Roll-forward: if any counts were not at the year end, recalculate inventory movements from count date to year end by agreeing sales and purchase records.

Answer: Observe the count, perform two-way test counts, inspect transfer and cut-off documents, confirm third-party inventory and roll forward any count not at year end. Each procedure maps to existence or completeness, with extra work on the relocated warehouse.

Example 2

An audit senior says: 'We will test the sales controls by asking the sales manager whether credit limits are applied, and that will be enough.' Explain why this is insufficient and suggest better tests of controls over credit limits and a substantive procedure for the receivables balance.

Show the solution

Inquiry alone is weak evidence on whether a control operated. It comes from management, who have an interest in the answer, and it does not show the control worked throughout the period.
Tests of controls: inspect a sample of new orders for evidence of credit-limit approval in the system or on the order form.
Reperform the check: independently compare the order value plus the existing balance to the approved credit limit for a sample of orders.
Observe an employee processing an order to see the system block an order above the limit, and inspect system settings for who can override limits.
Substantive procedure: send external confirmation requests to a sample of customers for year-end balances, and inspect cash received after the year end for unconfirmed balances.
Recalculate the receivables allowance using the ageing report and check the ageing for accuracy by agreeing a sample of items to invoices (accuracy, valuation and allocation).

Answer: Inquiry is not enough to conclude a control operated. Use inspection, reperformance and observation for the control, and confirmations, subsequent cash receipts and recalculation of the allowance as substantive procedures on existence and valuation of receivables.

Exam tips

Always state the assertion at risk. AAA markers look for the link between procedure and assertion.
Use the scenario. Mention the named entity, the date, the system or the amount in your procedures.
Write each procedure on its own line, starting with an action verb, so it is easy to credit and quick to write.
Do not pad with generic procedures. If the question asks for tests of controls, do not list substantive work, and the reverse.
Show professional scepticism where a scenario hints at pressure or bias, for example by choosing external evidence over management representations.

Practice questions from Audit procedures and obtaining evidence

Audit Procedures and Assertions in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Audit Procedures and Assertions: frequently asked questions

What is the difference between tests of controls and substantive procedures?

Tests of controls check whether a control operated effectively during the period. Substantive procedures check whether the account balances, transactions or disclosures are materially misstated. Substantive procedures are always needed for material balances, even when controls are tested.

How do I write audit procedures in the AAA exam?

Start with an action verb, name the document or item, state the sample or source, and add the assertion it tests. Tailor each point to the scenario. One specific procedure is worth more than several vague ones.

Which procedure gives the most reliable evidence?

Evidence from external sources, obtained directly by the auditor, is generally more reliable. Examples are bank and customer confirmations. Inspection of documents and observation are usually stronger than inquiry alone, though reliability depends on the circumstances.

Are analytical procedures substantive or risk assessment?

They can be both. Analytical procedures are required at risk assessment and at the overall review stage. They can also be used as substantive procedures when relationships are predictable and the data is reliable.