Test checking is a substitute for detailed checking. It involves only a partial checking. The auditor normally does not check completely all the records made into the books of accounts but, through a process of sampling, selects a few items and if they are found correct, he presumes that the remaining entries would also be correct likewise.
Thus, test checking 1S based on a simple theme that” if a representative number of transactions, so selected at random by the auditor for test checking, is found to be correct, the remaining ones would also be correct.”
Thus, the whole system of test checking implies selecting and checking only a few selected transactions so as to enable the auditor to form his final judgement as to the whole set of transactions.
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This totality is called universe or population and the portion of’ the universe or population to be examined is known as sampling. The universe is composed of all items of one type.
Thus, part of cash sales, cash purchases, cash receipts, cash payments, credit sales or credit purchases etc., constitute sampling for respective items although, taken separately they are universe, i.e., all items of similar nature. This test check is known as ‘selective verification’ or ‘sampling process.’
As stated above, in applying ‘test check’, the selection of transactions is made by the auditor at random and no specific principles are followed in it. The choice for adoption of testing methods is fully dependent on the discretion and judgement of the auditor who will depend on the situation of individual cases.
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The use of test checking is, however, dependent upon the system of internal check in operation. If this system is satisfactory, test checking can be of immense help to the auditor.
Where there is an efficient system of internal check and the business maintains a separate staff for internal audit, test checking can be a very reliable device to carry on the work of audit.
But it should be kept in mind that if the system is reliable and test check is applied but mistakes are detected, a thorough checking of books would provide an answer. Thus, given an efficient system of internal check in operation, test checking can reduce the volume of work involved in audit.
Test checking should be applied and carried out intelligently and carefully, otherwise, it may lead to dangerous consequences. But much will depend on the system of internal check and the intelligence of the auditor.
