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?

Advantages

1. It is cheap compared to other audits.

2. A balanced opinion can be reached.

Disadvantages

1. It is a partial audit.

2. Applied only to business with strong internal control system.