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Trade-offs in audit testing

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  • Spires, Eric E.

Abstract

This case is designed to help you to understand one of the fundamental concepts underlying audits of financial statements: the impact of testing controls on the substantive audit testing to be conducted. When determining the nature, timing and extent of substantive testing, the auditor must consider the costs involved in testing controls and compare that cost to the savings in substantive testing that can occur by relying on the tested controls. In other words, the auditor trades off control testing and substantive testing to determine the best mix of procedures. Similarly, for substantive evidence, the auditor must determine the best mix of substantive analytical procedures and tests of details. In this case, you will assess the trade-offs between the various types of auditing procedures (tests of controls, substantive analytical procedures and tests of details) to determine the optimal audit strategy.

Suggested Citation

  • Spires, Eric E., 2012. "Trade-offs in audit testing," Journal of Accounting Education, Elsevier, vol. 30(2), pages 220-232.
    • Handle: RePEc:eee:joaced:v:30:y:2012:i:2:p:220-232
    DOI: 10.1016/j.jaccedu.2012.08.002
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    References listed on IDEAS

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    1. Peecher, Mark E. & Schwartz, Rachel & Solomon, Ira, 2007. "It's all about audit quality: Perspectives on strategic-systems auditing," Accounting, Organizations and Society, Elsevier, vol. 32(4-5), pages 463-485.
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    Cited by:

    1. Chiang, Christina & Wells, Paul K. & Xu, Gina, 2021. "How does experiential learning encourage active learning in auditing education?," Journal of Accounting Education, Elsevier, vol. 54(C).

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