Incomplete records emanate risk of misstatement of financial statement due to omission and wrong recording of transactions. Therefore, the auditor should be careful in this regard. Steps that are followed in audit of incomplete records are as below:
a) Ascertain the exact status of accounting records available including memoranda records.
b) Ensure that the management compiles / reconstructs accounting records to the extent practicable.
c) Perform compliance procedure to assess whether any control system is in operation.
d) Vouch transactions recorded in books of account with reference to appropriate audit evidence. Check posting, casting etc.
e) Examine the system in operation in respect of custody managed cash memos, receipts, check books etc.
f) Verify fixed assets observing physical verification.
g) Conduct surprise checks to verify cash in hand, inventory etc.
h) Apply analytical review procedures in depth and notice deviations to investigate in detail.
i) Formulate an appropriate audit opinion based on above findings.