9/7/2019 Tests of control and substantive testing | CA Student Blog | Education | ICAS

Tests of control and substantive

testing

Tests of control and substantive testing come up in the Principles

of Audit and Reporting course, and are a topic that can
sometimes be confusing. In this short article we set out the key
differences between the two tests.
Tests of control: Quick recap

Tests of control involve the auditor testing processes or procedures carried out by staff at the client.
In every organisation, there will be business and accounting systems which should have appropriate
controls in place.
There are a variety of different controls that can be broadly classified into five categories. The
categories of control activities are: Authorisation, Performance Reviews, Information Processing,
Physical, and Segregation of Duties (APIPS).
Testing controls involve the auditor selecting some of these controls that the client carried out during
the year, and checking to make sure they operated effectively.
An example of a control could be where the client had a control whereby the monthly payroll
summary had to be approved by the finance director before payment was made.
As a test of control, the auditor would look for evidence of that authorisation – most commonly the
signature / initials of the Finance Director on a copy of the payroll summary.

Substantive tests: Quick recap

Substantive tests are the procedures that the auditor undertakes to detect possible
misstatements that may exist in the financial statements - that is, testing the numbers at the year
end.
When carrying out a substantive test, the auditor is testing to ensure that the figures included in the
financial statements can be traced back to source documents and meet one or more of the audit
assertions.
There are different assertions for items from the Profit or Loss Account, Balance Sheet, and
disclosures.

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9/7/2019 Tests of control and substantive testing | CA Student Blog | Education | ICAS

Remember that the auditor won't test every number - they will select a sample based on risk,
judgement etc.
Using the payroll example above, an example of a substantive test would be the auditor selecting a
sample of employees paid in the year, and agreeing amounts paid to the payslips and bank
statements.

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