The audit methodology, including this 2021 update, has been prepared with the objective to assist the Commission auditors and audit authorities (AAs) for their audits pursuant to Article 127 of the Common Provisions Regulation (CPR). The methodology sets out the overall audit approach of the Commission services for carrying out audits of financial instruments in accordance with the applicable rules. It focuses on the key risk areas that might have a material impact in terms of legality and regularity of the expenditure related to the financial instruments operations. Expenditure related to financial instruments is part of the annual accounts and is therefore subject to the same assurance process as any other type of expenditure. This audit methodology aims to clarify the specificities of the audit work related to the nature of the financial instruments operations and is relevant both for system audits and audits of operations. The four annexes of the audit methodology include an audit checklist (Annex 1), a sampling manual to the audit authorities (Annex 2), guidance on the verification of the use for intended purpose in case of working capital (Annex 3) and an overview of the management and control responsibilities (Annex 4). The relevant parts of the audit checklist can also be used by the managing authorities while carrying out their management verifications under Article 125 CPR.