MEANING OF TEST CHECKING
Due to the paucity of time and the numerous and complex audit work, the auditor may feel that he will not be able to finish the whole work in time. He shall also not be able to do full justice with the audit work. Thereby the whole of his labour shall go waste. Under the circumstances, he chooses to check and verify only a few transactions from each category, instead of going for extensive checking of the whole audit work, provided he feels and is satisfied with the internal check system in vogue in the enterprise. Such checking of sampling basis is known as Test Checking or Sample Checking.
By this method of checking he applies the result of the checking upon the whole audit work, i.e., if the result of test checking is favourable, he feels that everything is o.k. If on the other hand, the result of the test checking is unfavourable, he feels that the account books are not correctly and truly maintained.
Thus, Test Checking in audit involves the selection and checking of a certain number of transactions, e.g., 25% of the postings from Cash Book to General Ledger or all the postings from Cash Book to General Ledger for any two or three months. The object of such checking is to arrive at an approximation of certain characteristics present in the recording of mass transactions.
DISADVANTAGES OF TEST CHECKING
The important
disadvantages of Test Checking can be enumerated as below:
(1) Mistakes and Frauds remain undetected-
Test Checking is
done for sample transactions. This is every possibility of mistakes and frauds
remaining undetected in this process.
(2) Carelessness in Working-
The employees of the enterprise
become careless in their work and duty. They know that all the work done by
them is not to be audited by the auditor. Therefore, they do not give full
attention to their duty and work.
(3) Unsatisfactory Report-
An audit Report based upon Test
Checking is usually not treated to be satisfactory, as the audit work does not
comprise all the transactions.
(4) Liability of the Auditor-
In Test Checking there are all
possibilities of some irregularities remaining undetected. Under the
circumstances, the auditor cannot absolve himself from the liabilities of such
omissions. Thus, his responsibility and liability increased under Test Checking.
