Recalculation (or computation) is an evidence gathering activity that may be applied in all of the audit stages. However, it is particularly applicable to the substantive testing stage.
The activity of recalculation refers to the auditor performing mathematical calculations (such as additions and extensions) and reconciliations as well as the counting of items. Recalculation primarily provides evidence as to the accuracy (of valuation) of an account balance or underlying class of transaction.
In the substantive testing stage, recalculation by the auditor may provide highly reliable, but incomplete, evidence as to the accuracy (of valuation) of an account balance or underlying class of transaction. For example, the auditor (perhaps using CAATs) may check the calculations of quantity x unit cost in a client's inventory records. This provides highly reliable evidence as to the accuracy of valuation of the inventory, but it is incomplete evidence as, for example, evidence is required as to the accuracy of the unit cost figures included in the records.
However, note that the reliability of the evidence gathered depends on the competence and experience of the person making the recalculation.
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