Techniques of AUDIT

Test Check Routine Checking

 Test Check “ Test checking means to select

and examine a representative sample from
large number of similar item.”
 It is practically impossible for the Auditor
to vouch each & every transaction from the large
population. In such situation he will apply the test
check technique.
e.g. Checking of 1st & Last week’s sales,
Transactions above 5000 rupees.

 The selected transactions are correct, it is assumed

that the rest all transactions are correct.

 e.g. In a T.V. show, Master chef, the judges are

testing 1 or 2 spoon from whole dish & concluding
that whole dish is good.
 1. When the Volume of Transactions are
large.

 When the auditor has less time.

 When the nature of transactions are same.

 When the internal control system is good in

the company.
 Systematic planning
 Study of Internal control system of a
Company.
 How many transactions to be selected should
be decided in advance.
 Test check may not possible in unsuitable
area.
 The selection should be randomly.
 ADVANTAGES OF TEST LIMITATIONS OF TEST
CHECK CHECK
It save time If selection is wrong
Whole conclusion will be
wrong.
It reduced work load Some errors may
Remain undetected
Convenient for client Moral check on staff may be
less

Use expertise (Auditor's It does not reduce liability

mind & judgment) Of the auditor
 What is a Sampling?

 Select from a large

 What is Audit Sampling?

 It is a Audit Procedures to less than 100% of

the items get selected by the Auditor for
auditing.
 We mostly try a Small Pack of new
Shampoo before buying it in a bulk.

We are expecting the result either positive or

negative. If Positive next time we will buy in
a bulk. If negative it will get reject.
 The above same technique we can apply in
Auditing
Selection of Samples
S.V.= 100
P.V.=170
C.V.=280
B.V.=250

Sales Purchase Cash Bank

Vouchers Vouchers Vouchers Voucher
(200 Vouchers) (300 Vouchers) (550 Vouchers) (450 Vouchers)
 Systematic Selection
Selection by using
Constant interval.

Random Selection
Randomly Selection
from the population, equal
chance of getting selected.
 Haphazard Selection
It is alternative to
random selection
Selection of samples
from all over the
place.
 To decide the Object of Audit

 Study of Population area.

 Deciding Sample Size (30%, 60% etc)

 Tolerable Error from Samples

 Selection of large size if expected error are

more.
 1) Analysis of Errors in the Sample
e.g. Errors in type of transaction
Errors in selection of wrong head of A/cs
Errors of posting
 2) Projection of Errors
Whether the error is tolerable?
Auditor will apply various methods for projecting
errors.
 3) Reassessing
If the Projected error is more than the tolerable
error , Auditor will go for 100% checking system.