Alternative procedures definition

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What are Alternative Procedures?

Alternative procedures are those additional audit tests used when the original set of planned audit procedures cannot be performed or prove to be ineffective. After alternative procedures have been performed, the auditor must determine whether sufficient additional audit evidence has been collected. If not, further alternative procedures must be performed. Once all audit tests have been concluded, the auditor should document them in the audit working papers.

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Alternative Procedures for Receivables

There will be cases in which the recipients of positive receivable confirmations do not reply. If so, you should follow up with additional confirmation requests. If the recipient is still not responsive, then engage in alternative procedures for those accounts, which are:

  • Examine subsequent cash receipts. The best proof that a receivable existed is to examine subsequent cash receipts to see if the receivable was paid. The assumption is that a customer would not have sent money unless a receivable had previously existed.

  • Examine supporting documents. You can examine the supporting documents for each sale that triggered a receivable, to ensure that there was a customer purchase order to authorize the sale, and shipping documents that prove the order was shipped.

The only situation in which it is not necessary to engage in alternative procedures for non-responses is when the amount is not significant and the receivables in question have no unusual characteristics.

Example of Alternative Procedures

For example, an auditor sends out receivable confirmations to a client's customers, but there are so few responses that the auditor must use alternative procedures, such as comparing subsequent cash receipts to the year-end receivable balances. Similarly, an auditor is unable to attend a client's year-end physical inventory count, and so decides to use an alternative procedure, which is tracing subsequent sales of finished goods back to the year-end inventory records.