Test Checking in Auditing and its Precautions

Detailed checking or routine checking of each and every transaction is possible mostly for small businesses. But when there are a significant number of identical or routine transactions, test checking might be used. In this blog, we have thoroughly discussed the concept of test checking in auditing.

What is test checking and why is it needed?

The volume of transactions in large corporations is huge. As a result, it is physically impossible to validate all of the entries. Moreover, it is not required for the auditor to perform a detailed check if the company has a competent system of internal check and control. Test checking is used instead of detailed checking.

The auditor makes use of test checks wherein he limits his examination of every transaction entered by the client in the books to only some specific tests of the internal control and certain records or transactions. Here, a more extensive check of a limited number of transactions is done that are selected on a random basis from the total accounting database as against doing a detailed checking of all the transactions.

Thus, test checking is a method of verification of a selected number of items from an entire population of similar items. Here, an auditor would verify a representative set of items out of all of the client’s transactions. For example, the sample chosen for examination may vary anywhere from 5 to 50% of the total number of items. This technique is a form of partial/selective verification where a random or arbitrary percentage of transactions is selected. However, the quantum of test checking is usually dependent on the judgment or experience of the auditor and his overall assessment of the client’s operations.

Under test checking, the auditor would examine only a few transactions in-depth (out of many) to draw an opinion on the whole of them. If the sample is found to be satisfactory, the rest shall be considered satisfactory too.

Relationship with the internal control system

Test checking can be a credible method to carry out audit work when there is an effective system of Internal Control and the organization maintains a separate workforce for internal audits. The auditor would only want to verify a few items and rely on the controls set out in the organization. As a result, if an efficient internal control system is in place, test checking can reduce the volume of work involved in the audit.

However, it should be noted that if the system is reliable and tests are performed, yet errors are discovered, a thorough examination of the books will provide an answer.


When applying test checking in auditing, the following points must be taken into consideration:

  • A sample should be drawn from several books of account and at varying times.
  • Transactions pertaining to the beginning and end of a specific year should be thoroughly checked.
  • Entries related to cash and stock must be scrutinized in detail.
  • The sample should be chosen at random, rather than in a planned manner. There should be no bias in sample selection.
  • A thorough examination of the Bank Reconciliation Statement is required.
  • Before selecting a sample, the organization’s internal control system should be reviewed as this will provide an insight into the sample size that should be used. If the internal controls are strong, the sample size could be small and vice versa.
  • The pattern of test checking should be modified on a regular basis so that the client’s team does not understand it.
  • The concept of materiality can be applied to select a sample.
  • It may be helpful when the auditor needs to certify the accounts shortly after the accounting period ends.
  • When deciding on the type and size of samples to verify, the auditor should employ his prior experience.
  • The test check should be designed in such a way that a significant amount of each employee’s work gets checked.
  • The auditor should choose entries for test checking with caution, using his judgment and professional skill.

Advantages and disadvantages of test checking in auditing

Some of the advantages and disadvantages associated with the application of test checks are as follows:

1. Because only a few transactions may be tested, a test check allows an auditor to finish his work in less time.1. Because transactions involving frauds may be left out of the audit, there is a risk of ongoing errors and frauds.
2. An auditor can conduct audits of various enterprises within the time frame specified.2. The test check method is unsuitable for auditing small businesses.
3. Test checks save labor, time, and money for auditors. As a result, rather than checking similar things, an auditor can examine specific items in a detailed manner.3. Due to the usage of test checking in auditing, the result shown by Income Statement may be erroneous and the report presented to management may not be accurate.
4. To some extent, test checking gives assurance as to the accuracy and reliability of transactions.4. The implementation of test checking increases the auditor’s responsibilities because the auditor is held responsible for undetected errors and fraud due to the use of test checks.
5. Accounting staff in the auditee company remains vigilant and cautious since auditors examine transactions on a random basis.5. It is unsuitable to use test checking when the internal control system of the client is not effective.
6. It reduces the workload of the auditor.6. Complicated or material transactions that need more attention may not be apt for test checking. For them, the approach of auditing-in-depth is appropriate to carry out an extensive examination.


Test checking can be used in place of detailed checking. It just entails a partial check. The auditor does not generally review all of the records put into the books of accounts, but instead selects a few items and, if these are found to be correct, he assumes that the remaining entries will be correct as well.

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