Reperformance

Definition

Reperformance is the audit procedure where an auditor independently executes or redoes a procedure or control to verify its accuracy and effectiveness. This method helps confirm the reliability of the initial data or results, ensuring that the processes followed by the entity align with prescribed standards and that the financial statements are accurate. Reperformance acts as a key technique for auditors to gather sufficient evidence during their examination, reinforcing the integrity of both internal controls and substantive testing of financial information.

5 Must Know Facts For Your Next Test

1. Reperformance is often used to verify calculations in financial statements, such as recalculating depreciation or confirming account reconciliations.
2. This technique helps auditors identify any discrepancies between their findings and the client's recorded data, highlighting potential errors in reporting.
3. Reperformance can be applied to both automated and manual processes, providing flexibility in how auditors validate different types of controls.
4. When performing reperformance, auditors may utilize software tools for data extraction and analysis, enhancing efficiency in verifying complex calculations.
5. The results from reperformance can provide strong evidence supporting an auditor's opinion on the fairness of financial statements, contributing to overall audit quality.

Review Questions

• How does reperformance enhance the reliability of audit evidence collected during an audit?
  • Reperformance enhances the reliability of audit evidence by allowing auditors to independently verify that procedures or controls were executed correctly. By repeating a process, auditors can confirm that the original data aligns with their findings, thus increasing confidence in the accuracy of financial statements. This independent validation is essential for assessing internal controls and ensuring that substantive testing yields reliable results.
• In what situations would an auditor prefer to use reperformance over other audit procedures like inquiry or observation?
  • An auditor might prefer to use reperformance over inquiry or observation when they need concrete verification of calculations or control activities. For example, if a significant transaction involves complex calculations, merely asking management how they arrived at a figure may not suffice. Instead, by reperforming the calculation themselves, auditors can directly validate its accuracy. This approach is particularly useful for high-risk areas where precise data is crucial for forming an opinion on financial statements.
• Evaluate the importance of reperformance in relation to detecting potential fraud during an audit.
  • Reperformance plays a critical role in detecting potential fraud during an audit by providing a method for auditors to independently validate information presented by management. When discrepancies arise during reperformance, it raises red flags that may indicate underlying issues such as misstatements or intentional manipulation of data. The thoroughness of this procedure allows auditors to scrutinize high-risk areas effectively, contributing significantly to uncovering fraudulent activities and ensuring the overall integrity of the financial reporting process.

Related terms

Substantive Testing: Substantive testing involves procedures performed by auditors to detect material misstatements in financial statements, focusing on the details of transactions and balances.

Internal Control: Internal control refers to processes and procedures implemented by an organization to ensure the integrity of financial and accounting information, promote operational efficiency, and prevent fraud.

Audit Evidence: Audit evidence encompasses all the information used by auditors to draw conclusions on whether the financial statements are free from material misstatement.