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Inspection and observation are the procedures among others those are used by the auditors to obtain sufficient appropriate audit evidence. Would you please like to clarify the two procedures withe definition and example? Thank you.
They are close. Inspect can apply to inspecting documents, records and assets. Observation is more appropriate to a process. Observation is more common when testing controls eg observe goods being counted when received, observe the approval of orders by sales staff. However, when an inventory count is observed, then observation is being used as a substantive test.
Inspection can be used for both tests of control and substantive tests. Invoices can be inspected for a signature to ensure that they have been approved; assets can be inspected to ensure their existence.
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