Meaning of Audit-in-Depth
It is a technique of audit wherein sample checking of the transactions is made by the auditor. It means a step by step examination of selected transactions. It resembles closely to detailed test checking and selective verification of transactions. The only difference being that in audit-in-depth step by step measures are the transactions. For example, if an taken for examination and verification of auditor wants to check purchase invoice and adopts the technique of audit-in-depth, he will examine purchase requisition slip, the purchase order, the tenders against which the purchase order was made, the goods receipt note, the stores inspection report, the quality control report, and entries in the bin-card and the stores ledger.
Thus to examine a purchase invoice, on the basis of audit-in-depth, the auditor has to go step-by-step and each step is checked thoroughly. He thus, reviews all the accounting and operational aspects of the selected transactions.
Thus in audit-in-depth the transaction is verified from the roots till its final stage. For example, a creditor is being paid by cheque for the goods purchased. The transaction is to be verified through the technique of audit-in-depth.
The auditor should go for these steps in such a case:
1. See the authority for making such payment and the sanction;
2. Invoice and details received from the creditor;
3. Evidence that the goods received have been entered in the stock
register;
4. Goods received slip and examination slip; and
5. Verification of the cheque paid.
In planning audit-in-depth, auditor should go through the object of the enterprise, nature, its activities, account books maintained, internal control system and such other controls practiced and study them properly.
While going through the audit-in-depth, the auditor should gradually reduce the number of selected transactions, so that they may well examined deeply.
The following three stages exist in audit-in-depth
- sufficient number of transactions for verification;
- actual verification of selected transactions;
- proper valuation for arriving at correct conclusions applicable on all transactions.
Advantages of Audit-in-Depth
The following advantages can be stated:-
- Audit-in-depth brings authenticity in the audit work.
- It helps in checking manipulation of account books.
- Auditor gets help in planning his audit work.
- This type of audit vouch-safes interests of owners or shareholders of the enterprise
- An able and enthusiastic auditor gets an opportunity to practice new thinking in this type of audit.
- The auditor gets a basis to have full knowledge of audit work.
- The auditor does not feel monotony in this type of audit.
- The cost of audit is reduced in such type of audit work.
Disadvantages of Audit-in-Depth
Audit-in-depth suffers from the following disadvantages:-
- This system is purely based on verification of selected transactions and figures. If care is not taken in taking the sample, the whole exercise becomes useless.
- Such system of audit creates obstacles in the conduct of business. Time is not saved, rather activities of the auditor disturb the smooth functioning of the business activities.
