Types of Procedures

Tests of Controls (ToC)

Procedures that check whether the client’s controls are designed well and actually work, so the auditor can rely on them and assess control risk below the maximum.

“Do the client’s controls actually work?”

In ToC, if the client’s controls actually work, (blank) assessment and (blank) can be lowered.

control risk; substantive testing

What types of evidence is gathered under a ToC?

inspection, reperformance, inquiry, and observation

Substantive Test of Transactions (STOT)

These tests are aimed at recorded transactions: the auditor selects sales, purchases, payments, and so on from the journals (or from source documents) and checks them for dollar misstatements against the transaction-related objectives.

“Test the recorded transactions (the journal entries) for dollar error.”

What types of evidence does a STOT gather?

inspection, recalculation, reperformance, and inquiry

Substantive Analytical Procedures (SAP)

Analytical procedures involve comparisons of recorded amounts, or ratios developed from recorded amounts, to expectations developed by the auditor.

The auditor develops such expectations by identifying and using plausible relationships that are reasonably expected to exist based on the auditor's understanding of the client and of the industry in which the client operates.

“Predict what a number should be (year over year, ratios, trends) then compare it with what the client recorded.”

What types of evidence does SAP gather?

analytical procedures and inquiry

Tests of Details of Balances (TDB)

A test of details involves performing audit procedures with respect to items included in an account or disclosure (e.g., the date, amount, or contractual terms of a transaction).
“Test the ending balance itself - like confirm accounts receivable with customers.”

What types of evidence does TDB gather?

physical examination, confirmation, inspection, recalculation, reperformance, and inquiry