Commercial Law and Preliminaries of Auditing · Ch 4 — Routine Checking and Test Checking

Routine Checking vs. Test Checking

Note

Routine Checking vs. Test Checking

Basis	Routine Checking	Test Checking
Coverage	EVERY transaction/entry is checked (casting, carry-forward, posting, balancing)	Only a representative SAMPLE of transactions is examined
What it verifies	Mechanical/arithmetical accuracy of the books	A reasonable conclusion about the accuracy of the WHOLE set of transactions, drawn from the sample
Time and cost	Time-consuming and costly, especially for a large volume of transactions	Saves time and cost, especially valuable for a large volume
Nature of skill needed	Largely mechanical; can often be delegated to junior staff	Requires considerable auditor judgment to select a genuinely representative sample
Risk	Low risk of missing an item, but does not examine the substance of any transaction	Carries a real sampling risk — an error/fraud outside the sample goes undetected
Suitability	Appropriate for a small business, or wherever 100% checking is feasible	Appropriate for a large business with a high volume of similar, routine, low-risk transactions

The two techniques are not mutually exclusive substitutes — a real audit programme typically uses

BOTH together: routine checking for the basic arithmetical accuracy of the books as a whole …