Test of control

Inquiry ALONE is not sufficient as a TOC. It’s reperformanc for a TOC. Recalculation confirms a monetary amount and is therefore substantive.

Hi Cindy – I recommend that you ask new Qs on new posts to make sure they are not overlooked.

Look at the overview at the beginning of Chapter 8. A ToC is exactly that – it is a test to ascertain whether (or not) a control is operating effectively to prevent and/or detect and correct errors. If controls are effective, the auditor may rely on these and so reduce the amount of other (substantive) testing.

If you look at the M/J18 exam (available on ACCA www) you will see examples of ToCs in the answer to Q16(a), but let me give you just one example. In a purchases/payments system there should be one or more controls “to ensure that payments cannot be made for goods that have not been received”. Let’s say that the control is supposed to be that every purchase invoice is matched to a goods received note before it is paid and this matching is evidenced by the GRN # being included on the invoice. The auditor would review a sample of paid invoices to check whether every invoice showed a GRN #. Any omissions of GRN #s would mean that either the control was not carried out or it was carried out but not evidenced. Depending on the number of “deviations” in control, the auditor would consider whether substantive tests could be reduced.

ToCs are concerned with control processes – the amount of each purchase invoice is irrelevant – a deviation is a deviation regardless of whether the invoice was for $10 or $1,000.

Substantive procedures are concerned with $ amounts of classes of transactions and balances that are reported in the financial statements. Here, the auditor is concerned with the financial statement assertions – see section 4 of Chapter 10. You will find examples of substantive procedures on three audit areas in the answer to Q18 in the M/J18 exam.

ABSOLUTELY – please see the overview in the notes – there would be NO point whatsoever carrying out ToCs on controls that are expected to be INeffective – because you can only rely on effective controls.

To help your fellow students search for information on suitably named posts please post new questions to new threads with new titles.

The same as the difference between TX and ATX, PM and APM, FM and AFM – “Advanced” exams at the strategic level assume all the knowledge and skills of the applied skills exam and include further, more advanced, topics. The method of examining is also more challenging. See ACCA’s www or our content on AAA for details.