## Tests of Controls

After understanding the internal control system, the auditor examines whether and how far it is actually in operation.

### Purpose of Tests of Controls

To obtain audit evidence about the effectiveness of:

1. Design of the accounting and internal control system

2. Operation of the internal control throughout the period

### Procedures Used in Tests of Controls

#### 1. Re-performance

The auditor independently executes procedures or controls that were originally performed as part of the entity's internal control.

Example: Reconciliation of bank accounts to ensure they were correctly performed.

#### 2. Inspection of Documents

Inspection of documents supporting transactions to gain evidence that controls operated properly.

Example: Verifying that a transaction has been authorised.

#### 3. Inquiry and Observation

For controls that leave no audit trail — determining who actually performs each function, not merely who is supposed to perform it.

#### 4. Testing of IT Controls

Testing controls operating on computerised applications or over the overall IT function.

Example: Access controls or program change controls.

Worked example

### Example 1

Scenario: CA B, auditor of Star Limited, reconciled the company's bank accounts independently to check correctness. What type of test of control is this?

Answer: CA B is performing Re-performance — independent execution of a control procedure originally performed by the entity (bank reconciliation) to verify it was correctly performed.

### Example 2

Scenario: An auditor wants to verify whether purchase transactions are properly authorised before payment. Which test of control procedure would apply?

Answer: Inspection of documents — the auditor examines supporting documents (purchase orders, approval signatures) to verify the authorisation control operated properly.

⚠️ Common exam mistakes

Confusing re-performance with re-computation — re-performance is re-executing a control procedure (e.g., reconciliation), while re-computation is recalculating a figure (e.g., depreciation).
Overlooking observation as a test of controls — it is specifically used when controls leave no documentary audit trail.
Stating tests of controls provide sufficient evidence for the audit opinion — they do not; further substantive procedures are still required.

Reference: — SA 315 – Identifying and Assessing the Risk of Material Misstatement through Understanding the Entity and its Environment

Now that you've read this — what's next?

Move from understanding → mastery in 3 clicks. Each option below picks up from this lesson's topic.

🔥 Drill 5 Qs on this → ✍️ Adaptive practice →

Tests of Controls – Re-performance and Other Procedures

Worked example

⚠️ Common exam mistakes