Tests the strength of the internal control system by working backwards to get the initial transactions. It is based on verification of assets by checking;
- Description: Mainly of recording entries.
- Ownership: Prove of ownership either by use of logbooks for cars or title deeds for land.
- Value: Cost and method of depreciation.
- Existence: Is the asset really there?
1. It is cheap compared to other audits.
2. A balanced opinion can be reached.
1. It is a partial audit.
2. Applied only to business with strong internal control system.