Considering the nature of the balance or class of transactions to be tested against the defined risks is key to an efficient and quality audit approach. Where available, client knowledge accumulated in prior years can be a valuable aid to this. But an over reliance on previous approaches can be inhibiting and auditors should employ caution.
The most effective audit approach is dependent upon key characteristics of this year’s population of transactions or balances. For example, does the
population include individually significant transactions? Is the population homogenous or should it be stratified? Are there characteristics which indicate heightened risk which can be targeted?
Such consideration also allows for highly effective dual-purpose testing, to combine substantive testing with work over controls or for value purposes.
For example, when designing a test of property, plant and equipment additions, a review of authorisation controls could also be performed, with authorisation limits compared to those seen in comparable organisations. This delivers both a high-quality audit test as well as interesting insights you can share with clients for limited additional effort.