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Glossary/Audit procedures

Inspection

Inspection is an audit procedure that examines records or documents, internal or external, in paper, electronic or other form, or physically examines an asset such as inventory or equipment.

CORAA TeamUpdated November 5, 2026

Definition

AU-C 500 defines two forms. Inspecting records or documents includes reading contracts, invoices, minutes, bank statements and system reports. Physically inspecting an asset includes viewing equipment, counting cash or looking at inventory. Both can serve as tests of controls or substantive tests, and vouching is a form of inspection.

Why it matters in an audit or review

Inspection of documents provides evidence of varying reliability depending on source and nature. External original documents carry the most weight. Physical inspection gives reliable evidence of existence, though not necessarily of rights or valuation. Inspecting a cost record does not show the asset is still usable.

Example

For a $7 million manufacturing line (illustrative), the auditor inspects the purchase contract and invoice for cost and the title or lease terms for ownership, then walks the plant to see the equipment is installed and in use. The documents support rights and cost; the walk supports existence and condition.

Common mistakes

  • Reading a document for its existence but not its terms, such as side agreements, cancellation rights or dates.
  • Relying on a copy when original or direct access is practical.
  • Inspecting an asset without matching its serial number or description to the register.

FAQ

Does inspection prove ownership?

Not by itself. Seeing an asset shows it exists. Ownership needs documents such as titles, invoices or agreements.

Sources

  • AICPA, AU-C Section 500, Audit Evidence
  • AICPA, AU-C Section 330 (tests of controls and substantive procedures)

Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error

Standards

AU-C 500

Related terms

  • Vouching
    Vouching is working backward from a recorded amount in the accounting records to the original supporting document, mainly to test for overstatement or whether a recorded item actually occurred.
  • Observation
    Observation is an audit procedure that consists of looking at a process or procedure being performed by others, such as a physical inventory count or the handling of cash receipts.
  • Inquiry
    Inquiry is an audit procedure that seeks information from knowledgeable people inside or outside the entity, in formal written or informal oral form, and is rarely enough evidence on its own.
  • Audit evidence
    Audit evidence is the information an auditor uses to reach conclusions about the financial statements, including the accounting records underlying them and other information such as confirmations, documents and observations.

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