test control

A test of controls is an audit Procedure to test the effectiveness of a control used by a client entity to prevent or detect material misstatements. Depending on the results of this test, auditors may choose to rely upon a client's system of controls as part of their auditing activities. However, if the test reveals that controls are weak, the auditors will enhance their use of substantive testing, which usually increases the cost of an audit. The following are general classifications of tests of controls:

• Reperformance. Auditors may initiate a new transaction to see which controls are used by the client and the effectiveness of those controls.
• Observation. Auditors may observe a business process in action, and in particular the control elements of the process.
• Inspection. Auditors may examine business documents for approval signatures, stamps, or review check marks, which indicate that controls have been performed.