Question

when is it acceptable for the auditor to perform tests of controls and substantive tests of transactions for sales and cash receipts at an interim date?

Answer 1

It is often acceptable to perform tests of controls and substantive tests of transactions at an interim date. The auditor may decide it is necessary to test the untested period at year end.

It is acceptable to perform tests of controls and substantive tests of transactions for sales and cash receipts at an interim date and not perform additional tests of the system at year end under the following circumstances:-

• The auditor believes that internal controls are effective.
• The auditor does not anticipate significant changes in the internal controls during the remaining period.
• The transactions normally occuring between the completion of the tests of controls and substantive tests of transactions and the end of the year are similar to the transactions prior to the test date.
• The remaining period is not too long.

Thus in all the above mentioned circumstances, it is acceptable for the auditor to perform tests of controls and substantive tests of transactions for sales and cash receipts at an interim date.