the concepts of nature, timing, and extent as they relate to controls testing

Discuss the concepts of nature, timing, and extent as they relate to controls testing.

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Expert Solution

Nature refers to the type of test (enquiry, observation, inspection of physical evidence, re-performance). As discussed in review question 8.4, the types of tests vary in the reliability of the evidence produced.

Timing refers to the date of testing (i.e., interim vs. year-end). Interim testing is common for controls testing because it provides evidence about control risk which influences the nature, timing, and extent of substantive testing to be conducted at or near year-end. Further control testing is conducted during the remainder of the year to provide evidence that the controls continue to operate effectively throughout the financial period.

Extent refers to the number of items tested (i.e., size of the sample). A larger sample provides more reliable evidence about the strength of controls, and would be used if the auditor wishes to gain a higher level of assurance from the controls testing.

Raffay answered 1 year ago

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