Objectives of testing

In this lesson

1. 0:00 Why auditors test internal controls
2. 0:37 Understanding control risk and reliance
3. 2:03 How control risk affects audit procedures
4. 4:26 The controls testing process explained
5. 5:37 Three key objectives for testing controls

About this lesson

The core purpose of testing controls is threefold: to confirm the control actually exists, to verify it's properly designed to prevent or detect misstatements, and to ensure it's been operating consistently throughout the period. By assessing control risk—the likelihood that a material misstatement won't be prevented or detected by the entity's controls—you can decide how much reliance to place on those controls and therefore how much substantive testing you'll need to perform. You'll explore the controls testing process step by step: identifying and documenting the internal control systems in place, conducting testing to verify they exist and function as described, and evaluating their effectiveness. If controls are strong and reliable, you can reduce substantive testing. If control risk is high, you'll need to do more detailed audit work. This lesson equips you to make those critical judgments confidently.

Duration: 7m