What Is Test Checking?

In big business houses where the number of transactions is very large and time at the disposal of the auditor is little. A few transactions may be checked are all correct and there is no suspicion of nay error or fraud, the auditor may presume that all the other transaction actions may be correct such a check is called test checking. So by test checking is meant short cuts adopted by auditor in not checking the whole of the transaction of particular class but restriction the same to any selected period.

This method of checking the accounts will minimize the work of auditor as all transaction needs not to be checked. The auditor should apply test checking only, if he is fully satisfied that the internal check system of the concerns is efficient and no suspicion arise in his mind, otherwise auditor would be held responsible for showing negligence in performance of his duties, if later on, it is found that there was fraud in transaction which auditor did not check.

There are some precautions to be taken while applying test checking. Entries of every description should be check. Selection of entries to be checked should be at random. Periods and entries selected for test check should be different at each visit. A large number of entries of the first and last months of the audit period should be checked.