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If the internal control is effective, then the auditor will emphasize the use of test of control compared to substantive test. In contrast, if the internal controls are less effective, the auditor will emphasize the use more on substantive tests.

In short,
- effective internal control; use test of control > substantive test
- ineffective internal control; test on control < substantive test

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definition test of control and substantive test

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definition test of control and substantive test

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- test of control is an audit procedure to check if a control used by a client is effective or not.

- substantive test is an audit test to test the fairness of items in the financial statements.

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What is the relationships between test of controls and substantive tests?

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3. The organization structure requires plot between at least two people.

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2. Asset custody must separate from asset record keeping.

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1. Transaction authorization must be isolated from transaction processing.

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What are the three rules that ensure that no single employee or department processes a
transaction in its entirety?

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4. Archive Files

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3. Reference Files

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2. Transaction Files

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1. Master Files

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Computer based systems employ four types of files. Name them.

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LU1 - LU4

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-  consists of
processing cash sales, credit sales, and the receipt of cash following a credit sale.
- organization sells their goods to customer through the revenue cycle.

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-  consists of two main subsystems: the production system and
the cost accounting system.

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- Business activities begin with the acquisition of materials, property, and labor in exchange
for cash

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What are the three cycles of transaction processing?