Control Procedures, Test of Controls and Substantive tests

Control proceedures r methods & protocols that form e way in which transactions and operations of an enterprise are done. Test of controls are procedures followd by e auditor to find out if e controls are properly working. If so ths means transactions r being authorised & recorded well thus reducing possiblty of material misstatement. A satisfactory internal control wl reduce need for thorough substantive testing. Substantive tests r tests of figures i.e tests to find out accuracy o financial records supporting Fin Statemts. Ths wil envolve checking of relevent source documents which prove legitimacy o transactions.
For such a question ur supposed to design a system and test it dependin on e situation. Always remember this mnemonic for Evry system : ODIACO
lets luk @ abc industries’ sales system:
1)Ordering
test that customers are credit worthy by pickng throug a sample 2 find out that credit reports were used b4 aproval
2) Delivery
test that goods dispatchd are the ones orderd by comparing gdn & sales order notes and also observing checks when loading trucks
3) Invoicing
test that customers are charged for wt ey recievd by checking a sample gdn have customers’ & have an invoice issued for those goods
4) accounting
test that al invoices have been posted correctly by checking tht sample invoices have been recorded
in e sales day book and correctly posted to sales legder
5) Cash
test tht cheques recieved have been banked the following day by comparing e register for checks recieved with the Bank statement
6) Overal
check that correct supervision of al functions is done by going thru supervisory log books which give details of spot checks carried out at al levels of processing.
I hope u find e above useful

U r welcome