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“Review a sample of the gross to net pay calculations for evidence that they are undertaken and signed as approved.”
ma’am this is the first TOC there in the question. don’t you think it seems more like a substantive procedure where we check the arithmetical accuracy of calculations, then a TOC?
To check whether there is a signature – yes/no – is a test of control.
To reperform the calculations and check that monetarily the figs are correct is substantive.See here for another example of the distinction https://opentuition.com/topic/test-of-controls-12
So essentially Ma’am am getting this understanding that TOC check 2 things- one whether control is implemented or not(check a sample of files, review reconciliations performed or not) and two whether it’s operating effectively(signature for evidence)?
P.S. -Ma’am you have been time and again pointing that “inspecting documents” isn’t TOC, as it’s used for risk assessment. But I feel isn’t the whole point of TOC is to check any risks of material misstatement. So then can you elaborate as to where I am going wrong?
continued P.S.- why for that matter “observation” and “enquiry” are also not preferable for TOC? If so what are the most acceptable forms of audit procedures? REVIEWING is the only procedure that remains.
TOC is checking one thing – yes/no has the control been performed? In some cases that will be evidenced by a signature but not always. For example, OBSERVING warehouse staff counting goods in when they take deliveries and write out a GRN is a TOC (admittedly not the best because it may be only at that single point in time that the warehouse staff do this – when they know that they are being observed! – but it is still a TOC).
P.S You would have to answer on a relevant post for me to clarify in context.
Let me try and put it another way – in audit there are only FIVE evidence gathering procedures: “AEIOU” (page 61 of the notes).
Of these, three are REQUIRED as risk assessment procedures: “AEIO” (see page 52)
TOC are “IO” and reperformance (which is the suspect “U” in the mnemonic).
Substantive procedures are “AI” and recalcUlation.
So what you then have is:
A – can be a risk assessment procedure or a substantive procedure (also a procedure for the completion of the audit) – see page 62.
E – enquiry provides information that is used in risk assessment. ALONE it is not sufficient for any other purpose. You can however has “Enquiry and confirmation” – as in “external confirmation” which is substantive (e.g. page 87).
I – can be a risk assessment procedure (to obtain information), can be a TOC (if inspecting evidence of a control having operated – y/n) or a substantive procedure (inspecting assets or documents with the aim of confirming $s in the financial statements).
O – can be a risk assessment procedure (to obtain information), can be a TOC (if inspecting evidence of a control having operated. But is NOT a substantive procedure as observation implies watching some activity (nothing to do with $s in the financial statements)
RecompUtation – is always substantive because $s are involved
Reperformance – is TOCOf course there are many words that mean the same thing so other words can be used – but “review” can mean “analyse” (as in analytical procedures) or “inspect”. So if using review to mean inspect you must have sufficient detail to make clear whether its outcome is simply more information/risk assessment – y/n – or evidence of $s.
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