Meaning of test control

Meaning of test of controls;

Test of controls may be defined as an audit procedure designed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at the assertion     

Circumstances of test control

Following two situation me test of control 

Tests of controls are necessary in two circumstances.

1	When Operating effectiveness of controls is  required	When the auditor's risk assessment includes to check operating effectiveness of controls then the auditor should test those controls to support the risk assessment.
2	When substatntive procudeure is not enough	when the substantive procedures alone do not provide sufficient appropriate audit evidence, the auditor should perform tests of controls to obtain audit evidence about their operating effectiveness.

 

 

Nature and Extent of Test of Controls

In designing and performing tests of controls, the auditor shall:

 

1	Perform other audit procedures in combination with inquiry to obtain audit evidence about the operating effectiveness of the controls
2	Determine whether the controls to be tested dependent upon other controls

 

1.Perform other audit procedures in combination with inquiry to obtain audit evidence about the operating effectiveness of the controls including.

(i)	Auditor will check how the controls were applied at relevant times during the period under audit.
(ii)	The consistency with which they were applied.
(iii)	By whom or by what means they were applied.

 

 

2Determine whether the controls to be tested dependent upon other controls including the followings;

 

I	he frequency of the performance of the control by the entity during the period.
ii	The length of time during the audit period that the auditor is relying on the operating effectiveness of the control.
Iii	The expected rate of deviation from a control.
Iv	The relevance and reliability of the audit evidence to be obtained regarding the operating effectiveness of the control at the assertion level.
V	The extent to which audit evidence is obtained from tests of other controls related to the assertion.

 

Timing Of Test Of Controls

The auditor shall test controls for the particular time, or throughout the period, for which the auditor intends to rely on those controls in order to provide an appropriate basis for the auditor’s intended reliance.

Audit evidence pertaining only to a point in time may be sufficient for the auditor’s purpose, for example, when testing controls over the entity’s physical inventory counting at the period end. If, on the other hand, the auditor intends to rely on a control over  a period, tests that are capable of providing audit evidence that the control operated effectively at relevant times during that period are appropriate. Such tests may include tests of the entity’s monitoring of controls.