Auditing - What are Tests of Controls

The video tutorial discusses the role of tests of controls in auditing, particularly for publicly traded companies where it is mandatory. It explains that auditors may use sampling techniques and will proceed with testing controls if initial risk assessments indicate effective internal controls. For non-public companies, testing is optional but can reduce substantive testing. However, if it incurs significant time or costs, auditors may skip it. The video also outlines various testing methods, including inquiry, observation, document examination, and re-performance, which provides the strongest evidence.

What is the purpose of testing internal controls in publicly traded companies?

How does the initial risk assessment influence the testing of internal controls?

What factors might lead auditors of non-public companies to forgo testing controls?

List some testing methods that can be used to evaluate internal controls.

Explain the method of 'reperformance' in the context of internal control testing.