A/U1 Topic 8 Routine checking and Test checking
Routine checking means checking of arithmetical accuracy of books of original entry the ledgers with a view to detect clerical errors and frauds of a very simple nature so first time when a candidate goes for doing the auditing he has to go for checking the routine checking so first step to be followed is to check the arithmetical accuracy of the data being entered so whatever data input has been done we need to ensure whether the totals are being matching up the debit sides and credit side are being tallied there is no difference in the ledger posting which is being done for the books of original entry so this is a very simple exercise but yet with lot of detail analysis and meticulation such routine checking is to be done.
What are the advantage of going for the routine checking thorough checking of transactions can be done so that there cannot be a chance of any fraud there cannot be duplicacy of the data if a data is being entered twice whether intentionally or unintentionally it can be detected there can be lesser chances of doing any mis-statement of the information when thorough checking of transaction is being done while following the routine checking. It constitutes important base because it is being known to the organization that routine checking’s will be done they will be much particular about the fact that clerical errors or the errors manager of fraud should not be done. It facilitates the verification of arithmetical accuracy of transections and it’s very easy to perform.
First one is it is a mechanical process because it is very monotonous and regularly and on a daily basis arithmetical accuracy of the transaction are to be done it is repetitive in nature. Complex errors and fraud remain undiscovered so again when the substantive test are being implemented on a larger scale and in an extensive manner such complex errors and frauds can be determined but in the routine checking only ordinary errors can be traced out. It is expensive because its time consuming the labour is being employed to do routine checking and its tends to be boring because every time we have to find out the same sort of errors we have to do the calculation aspect so that the debit and credit side may not be mismatched there cannot be any omission or duplication of the data so in a way it tends to be repetitive so it amounts to a certain level of boredom for the staff who is doing it on a regular basis. Of course there is a method of reducing the boredom under this work there on a circular basis or on a rotational basis staff can be changed then redundent in certain cases.
What’s difference between routine checking and test checking let us understand it. Under routine checking we need to verify each and every book of accounts, while test checking is the examination of selected number of items it is not that elaborative as that of routine checking. Under routine checking, check transection verification without exception that means entire transaction which are being recorded in the original books of accounts and subsidiary books are to be checked without any deficiency or without leaving anything out while under test checking it avoids immaterial items only significant items or material items are being examine under test checking.
Routine checking is done on a daily basis while test checking can be done on a weekly, monthly or quarterly basis depending upon the size of an organization and quantum of transaction which need to be analyzed and examined.
Test checking is an accepted audit procedure wherein an audit is conducted on the basis of part checking. We are not going for a complete checking but part checking is being done for example there are a bulk of sales transaction so we will take up certain transaction of certain suitable basis and partly we will do the checking of such items in detail. In adopting this technique the auditor must take care to see the proportion of the transaction tested to the total number of transaction is reasonable so here we want to say that where there are number of transactions we can go for test checking but the test checking should not be so small that we cannot derive any information of it. If out of hundred transactions we are going to vouch only 50% of the transaction then we should setup a limit that each of these bundles last 25 or first 25 transaction would be verified randomly and they would be verified in the detail. So under test checking what we are doing is that we are not totally secluded the entire range of the accounting data’s but we are doing it in a partial manner. Only on the basis of a reasonable base we are doing the test checks. Test checks cannot be carried out in the case of size of the entity is very small and or there is no effective internal control system so we have two important things are there if the size of the organization is so small that there are only limited number of transaction there is no use of going for the test checking entire routine checking is to be done as well as vouching is to done and one more feature is there that if organization might be medium term organization or a large one but if the internal control systems are week and there are lot many errors in the transactions which we have noticed under that case it is advisable not to go for the part checking or to go for a detailed procedure of auditing here we are going to extend the audit checking we will avoid the test checks where internal control systems are week.