[jslo123]

Which are examples of test of controls?

I know that substantive testing includes = test of details and analytical (ratio)

but what does auditor EXACTLY do for test of controls?
See if the controls are operating effectively?

ANY MORE??

THANKS SO MUCH AUDITORS

[fragchild]

Controls (aka internal controls) help companies prevent or reduce fraud, errors, etc. A company with good internal controls is likely to have less errors, fraud, etc.

Why do we test controls? For big listed companies, its compulsory. However we also do it so we can perform less substantive testing. If controls are operating effectively, we believe less fraud, errors will occur and therefore we can perform less substantive testing.

How do we test controls? Examples of an expenditure internal control can be the approval from head of purchases. To perform this test, we can request to see a sample of purchase orders and sight whether it has been approved by the head of purchases by sighting their signature. Another internal control is that new suppliers can only be added to the accounting system by authorized personnel. We can test this by re-performance by trying to add a new supplier to their system. We can even go further and request their IT to provide a list of new suppliers added into their system and check the user(s) is an authorized personnel.

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