© D.L. Crumbley
An auditor must perform “walkthroughs” of a business’ significant processes. PCAOB suggest that an auditor should confirm his or her understanding by performing procedures that include making inquires of and observing the personnel that actually perform the controls; reviewing documents that are used in, and that result from, the application of the controls; and comparing supporting documents (for example, sales invoices, contracts, and bills of lading) to the accounting records.”
According to PCAOB, in a walkthrough an auditor traces “company transactions and events – both those that are routine and recurring and those that are unusual – from origination, through the company’s accounting and information systems and financial report preparation processes, to their being reported in the company’s financial statements.” Auditors should perform their own walkthroughs which provides auditors with appropriate evidence to make an intelligent assessment of internal controls.
Source: PCAOB Briefing Paper, Proposed Auditing Standards, October 7, 2003.