MEANING

Test checking means examining less then 100% of items in the population i.e. it refers to the application of audit procedures to less than 100% of items within a population of audit relevance such that all sampling units have a chance of selection in order to provide the auditor with a reasonable basis on which to draw conclusions about the entire population.

WHY IT IS REQUIRED

• Auditor usually doesn’t have enough time for detailed 100% examination.
• Numbers of transactions/ Balances are generally very high.
• Mostly items are identical.
• If, on basis of compliance procedures, it is concluded that internal control system is very effective, there is no need for detailed 100% examination.

EXAMPLES WHERE IT MAY NOT BE SUITABLE

• Checking bank reconciliation statement.
• Few transactions, very high in amount.
• Few transactions with related parties.
• Few transactions, having unusual nature.
• Disclosure requirement of accounting standard.
• Compliance with statutory provision.
• Significant entries near/ at year-end.
• Few transactions involving foreign exchange.
• When internal controls are very weak.