What Is Test Checking In An Audit And How Is It Done?

Question

What Is Test Checking In An Audit And How Is It Done?

2 Answers

Answer Question

Answer 1

The concept of test checking in auditing is based on the Law of Statistical inertia which means the selection and checking of a representative number of entries of each class of transactions instead of going through every entry. The basis of though selected or checking during the audit. Whether the auditor should resort to test check or not depends upon several factors. The existence of a sound system of internal control or otherwise the existence of an efficient system of internal audit or otherwise.

However the following precautions must be taken by the auditor while carrying a test check of the transactions:
• While making selection for test checks every effort must be made to ensure that the entries are representative of the whole set of books.
• The clients should not know the period selected for the test check.
• The months selected for test check should be different in the forthcoming year.
• The first and the last moths of the period covered by the accounts may preferably be checked in every case.

International standard of accounting deals with audit sampling, details in this respect have been included.So this is the way audit checking can be done by the auditor. So these are the precautions the auditor should take care of.

Answer 2

There are two types of sampling methods; statistical and non statistical methods. Judgment is non statistical method. The judgment sampling requires the selection of data on the basis of auditor's experience. The experience and judgment is involved in checking the selected data. The auditor's opinion affects the decision for the selection of sample.
There are six statistical methods; random, systematic, haphazard, stratified, cluster and block. All items are given numbers.

Every item has equal chance of selection in a sample. The calculators, computers or tables can be used to select the numbers to be included in the sample. The systematic methods can be pick first item at random and thereafter items are included under serial numbers. The sample selected may not be representative of the population. Haphazard is an alternate to random selection when an auditor tries to draw sample from the entire population. The auditor personal opinion should not influence in the selection of sample.

The stratified sampling requires the data to be divided into sub population. One part of data may be tested on cent per cent basis. The other part may be tested by samples. The clusters sampling is possible when data is kept in groups. A cluster is selected at random and then all items in a cluster are examined.