Transaction testing
This is an all encompassing term used by auditors that refers to evidence gathering activities directed at classes of transactions underlying a particular account balance assertion. It is primarily applicable where the audit approach for a particular account balance assertion is in-depth.
Thus transaction testing includes:
- tests of control directed at a class of transaction underlying an account balance assertion when the audit approach for that account balance assertion is both an in-depth as well as a controls testing approach. For example, where the audit approach for the completeness of trade creditors is an in-depth controls testing approach, transaction testing includes the testing of internal controls of classes of transaction underlying the completeness of trade creditors, such as controls relating to the completeness of purchases transactions and the validity of cash disbursement transactions. (If cash disbursements relating to trade creditors are not valid, then trade creditors cannot be complete.)
- tests of detail directed at a class of transaction underlying an account balance assertion when the audit approach for that account balance assertion is any in-depth approach, other than an analytical in-depth approach. For example, where the audit approach for the validity of trade debtors is a non-analytical in-depth approach, transaction testing includes tests of detail directed at the validity of sales transactions and the completeness of those cash receipt transactions relating to trade debtors. (If cash receipt transactions relating to trade debtors are not complete, then trade debtors cannot be valid.)
- analytical procedures, especially scanning, directed at classes of transaction underlying an account balance assertion, irrespective of the audit approach. The scanning of underlying classes of transactions is applicable in all audit approaches and where the approach for an account balance assertion is an analytical in-depth approach, transaction testing may include other analytical procedures directed at classes of transaction underlying that account balance assertion.
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