AUDIT TEST

AUDIT TEST

The language and vocabulary of audit test (ing) include the following;
i. Walk through audit test
ii. Compliance audit test
iii. Substantive audit test
iv. Rotational audit test

i. WALK THROUGH AUDIT TEST

This is the test of the recording of transaction to determine if the auditor has obtained a correct description and understanding of a system.

The modern system base audit requires auditor to have in his working papers a record of the accounting system, this record may be in the form of simple written description, the answer to an internal control questionnaire or a flow chart which may be prepared by audit staff or client staff.

When these has been prepared by the staff sof the client. It is necessary for the auditor to be sure that the record correctly described the system as it exist and is operated. To test the correctness of the description, the auditor takes a field transaction of each type (sample) and walkthrough them. This means tracing the transaction from it ignition e.g. as an enquiry from a customer to the entry in the books of account, looking at documents and records produced, the manner of preparation and the internal control applied.

The objective is to make sure that the auditor has a correct description and understanding of the system.

ii. COMPLIANCE AUDIT TEST

These are those tests which seek to provide evidence that the internal control procedures are being applied as described. If the system appears to be defective, weak then the auditor may need to abandon the system approach and apply substantive test. If the system is effective then the next stage is for the auditor to obtain evidence that the system is applied in accordance to its description at all times.

The evidence is obtained by examining the sample of the transaction to determine that each has being treated as required by the system. A pragmatic (practical) illustration of a compliance test; suppose that a system provided that all credit note used by a client had to be approved by the sales manager and space was provided on each credit note for the initial, then the auditor will inspect a sample of the credit note to determine if all of them have being initialized by the sales manager.

iii. SUBSTANTIVE AUDIT TEST

These are those that test of transaction and balances and other procedures such as analytical review which seek to provide audit evidence as to the completeness, accuracy and validity of the information contend in the accounting record or financial statement. It is any test which seeks direct evidence of the correct treatment of the transaction, a balance of the asset, liability or any item in the books or the account.

Some examples

a. Of a transaction: The sale of a piece of plant will require the auditor to examine the company‟s invoice, the authorization, the entry in the plant register and other books. The accounting treatment and some evidence that the price obtained was reasonable.

b. Of a balance: Direct confirmation of the balance in a deposit account obtains from the bank.

c. Of analytical review Evidence of the correctness of cut off by examining the gross profit ratio.

d. Of completeness of information: Obtaining information from client legal adviser that potential payments from correct litigation have being considered.

e. Accuracy of information: Obtaining from directors a confirmation that a correct statement of remuneration or expenses has being obtained.

f. Validity of information: Validity means base on evidence that can be supported.

iv. ROTATIONAL AUDIT TEST

These are test carried out on the assumption that the auditor will be in office for several years and can in any individual year bring to bear special emphasis on a particular branch. There are basically two kinds of rotational test:

a. Rotation of audit emphasis: The auditor perform a system audit on all areas of client business every year but each year he select one area (wages, sales, stock control, purchase etc) for special in depth testing.

b. Visit Rotation: where the client has numerous branches, factories, locations etc in such case the auditor visit them in rotation so that each will not be visited every year, all will be visited over a period of years. It is vital the rotational tests are carried out randomly so that the client staffs do not know which area of location will be selected in any one year.

Furthermore, the techniques of auditing testing involve four (4) categories which include:

1. INSPECTION
Looking at records, document and tangible assets which involves examining company‟s sales for initial of the member of staffs charged with checking invoice calculation. Give evidence of compliance with a system which prevents calculation error. Example: inspecting building provide evidence of the existence of the building.

2. OBSERVATION
With regard to the procedures actually taking place e.g observing the counting of stock at the year end with the same end in view.

3. ENQUIRY
Seeking relevant information by asking questions from knowledgeable persons inside or outside the enterprise whether formally, informally, orally or in writing. Example: Circularizing debtor or routine quarries to client staffs such as why is invoice company invoice number 63 missing.

4. COMPUTATION
Checking or performing calculation e.g. verifying the accuracy of detailed internal calculation by global calculation or checking the accuracy of stock extension (quantity × cost price).

REFERENCES

Nweke & Unegbu (1998). Introduction to Auditing. Onitsha: Scholar Book Company.

Nwokolo, C. O. (1985). Auditing as a Watchdog. Enugu Pitman Publication.

Osita, A. (1993). Fundamental of Auditing. Onitsha: Tabashi press ltd.

Pratt, M. J. (1993). Audit Practice. London: Pitman publishing company Inco.