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AUD - Auditing & Attestation (Forum Locked Forum Locked)
 CPAnet Forum : AUD - Auditing & Attestation
Subject Topic: Test of control and substantive test (Topic Closed Topic Closed) Post ReplyPost New Topic
  
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torontoacc
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Posted: 21 Aug 2009 at 10:24 | IP Logged  

Can somebody explain me the difference between test of
control and substantive test and whats the theory around
it. thanks

__________________
BEC July 6, 09 - 80
AUD Oct 5, 09 - 70, Feb 23, 2010 - 85
FAR Aug 2 2010 - 90
REG Aug 31 2010 - 81

California State
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minicre
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Posted: 21 Aug 2009 at 10:50 | IP Logged  

A control is something management has in place to detect mistakes, errors, and/or fraud. For an example, management says that all  purchases above 1,000 dollars needs to be signed by the treasurer. That is a control put in place to stop just anyone from being able to buy stuff for the company. Therefore a test of control is simply one done by the auditor to make sure that control is working properly. Before they actually test the control they get an understanding of it and assess the risk on that control. If they assess it to be high risk (aka the control is not implemented properly, or just stinks), then they will NOT test the control, cause whats the point? It doesn't work! Instead they will just do substantive tests.

Substantive test is a test of dollar amounts/balances. Therefore in this example the auditor would have to test the actual financial statement balances connected with purchases, to make the physical numbers are correct on the FS.

Basically test of controls are used to limit substantive testing. It is way for auditors to use their judgment in saying, yes this control is working good, so the will catch their own problems, so we can rely on it in making non materially stated FS. If they aren't good we need to do substantive tests which will make us work harder and test the actual numbers on the FS.


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REG------FAR------BEC------AUD

-79-------78-------77------90->

ALL DONE on 1st TRY, w/Becker!
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CPA-Exams
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Posted: 21 Aug 2009 at 14:46 | IP Logged  

Thats a very precise and good explanation. I am doing internal control. It helps a lot.

Thanks

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CPA-Exams
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Posted: 21 Aug 2009 at 14:52 | IP Logged  

 

Toronto acc

I am giving BEC in oct /Nov 09 window. Its my first exam for CPA. Which authors are best suited for self study plan BEC. Which author did you use for studying the section?

I study with textbooks as i am more comfortable with it. Online Lectures is just not for me. Nor have i purchased any online material. I am studying with Wiley.

 

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cpa2bsoon
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Posted: 22 Aug 2009 at 16:08 | IP Logged  

minicre- very good summarization! you'll do awesome on your communication part for sure!

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Michelle/New Hampshire
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