Types of Audit Tests

The types of tests that auditors use change over the life of an audit.

1. Risk assessment - At the beginning of an audit, the auditors try to get a high-level view of the company and try to figure out which areas are more likely to have issues and which are less likely. This lets them use their resources efficiently by focusing on the areas where issues are most likely to be discovered.
2. Tests of controls - The auditors then test the rules and processes that the company has put into place to ensure that problems either don't exist or are dealt with internally. The theory is that the better the controls, the less likely problems will exist for the auditors to discover. In other words, the better the controls, the less time and energy the auditor will have to spend looking at small details.
3. Substantive procedures - When the auditors have narrowed down the areas that most need investigation, they start looking at transactions and account totals to see if they make sense. This tends to be very energy and time intensive, so the most likely areas that are very likely to be exposed to substantive procedures will have been rated as high risk with poor controls.

👉 Answer:

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• This was an analysis of the effectiveness and usage of controls.