- *internal controls. In contrast to *substantive testing, which focuses on verifying the accuracy of quantifiable amounts, compliance testing aims to gain Reasonable assurance that underlying procedures (i) reliably reflect an organization’s activities and (ii) are suitably controlled. In general terms, auditors tend to reduce the level of substantive testing if compliance testing indicates the satisfactory operation of controls and procedures: "Where a system of accounting and internal control has been well designed and adhered to in operation, and its integrity secured by effective internal check and internal audit, a high degree of reliability may be placed on the data derived from the system" (Flint, 1988, 114). Most audits consist of a mixture of compliance and substantive testing - the balance between the two tends to be determined by factors like the volume of transactions to be tested, and the sophistication and reliability of an entity’s computerized accounting systems. Contrast Compliance audit.
Auditor's dictionary. 2014.
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