Control testing. Key items are usually items that, if they are revealed as being exceptions, then the related internal control procedure may not be considered effective. That is, items associated with a higher than average control risk.
Take, for example, the instance of an entity in which employee A is the person that normally approves requisitions for cash disbursements greater than $50,000 and employee B approves these requisitions when employee A is on leave. Assume the auditor considers employee B is not as competent as employee A. In such an instance, if the auditor wishes to place reliance on this control procedure, the auditor may select as key items all requisitions that have been approved by a employee B and sample other disbursement requisitions.
Substantive testing. Key items are usually items that, if they are revealed as being exceptions, then the related class of transaction or account balance may be materially misstated. That is, items associated with a higher than average risk of material misstatement.
For example, in the substantive testing of purchases transactions the auditor may select for vouching all purchase transactions that have been debited to a particular general ledger account as key items and take a sample of other items. In the substantive testing of an account balance, say retail inventory, the auditor may select as key items for vouching all items that have been on hand for longer than 4 months; or with trade debtors, the auditor may select as key items for positive confirmation, all debts greater than a certain dollar amount, and negatively confirm a sample of other trade debtors account balances.
Audit testing procedures, index
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