Statement on Auditing Standard No.99 Consideration of Fraud in a Financial Statement Audit talks about how fraud can affect an organizations financial statements. Recent studies in fraud reveal that most financial statement fraud is done through journal entries. Auditing journal entires for fraud can be uphill task for auditors. Journal entries if audited properly can provide evidence of material mis-statement due to fraud. An auditor needs to take a step by step approach to auditing journal entries. Here is starting guide for auditing journal entries.

1. Understand the entity's financial reporting process.
2. Identify the controls over journal entries and adjustments.
3. Identify the journal entries to be tested. This will depend upon the complexity of the systems, ERP's used, control over journals etc.
4. Personally, I would use CAAT computer aided auditing techiniques to identify the journal entries to test based on the population.
5. Determine the timing of the journal entry testing to be performed.
6. Identify if there are any select group of journal entries which are not subject to controls.
7. Identify if there are specific individuals with ability to override controls over journal entries either manually or through the system.
8. Finally identify any unusual activity relating to journal processing in the financial reporting process.

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