Audit and Assurance · Tests of controls

Purpose of Tests of Controls in ACCA Audit

Updated 11 October 2026 · Fact-checked

Tests of controls are audit procedures that check whether a client's internal controls operated effectively throughout the period. Auditors use them to decide how far they can rely on controls and so reduce substantive testing. They differ from substantive procedures, which test the figures directly, and from walkthroughs, which confirm understanding.

Understand Purpose of Tests of Controls

An auditor must reduce the risk of material misstatement in the financial statements. One way is to test the figures directly. Another is to test the systems that produce the figures. If a system has good controls and those controls really work, the figures it produces are less likely to be wrong.

Tests of controls are procedures designed to evaluate the operating effectiveness of controls in preventing, or detecting and correcting, material misstatements at assertion level. They ask: did the control work, consistently, throughout the period? Design is a different question. Design asks whether the control, if it operated, would be capable of stopping or catching errors.

Three procedures are easy to mix up. A walkthrough follows one transaction through the system from start to finish. It confirms your understanding of the system and whether the controls have been implemented. It is part of risk assessment. Tests of controls then test whether the controls operated effectively over the period, usually on a sample of items. Substantive procedures test the transactions, balances and disclosures themselves, through tests of detail and substantive analytical procedures.

Auditors perform tests of controls in two situations. First, when they plan to rely on controls and so reduce substantive work, because their risk assessment expects controls to operate effectively. Second, when substantive procedures alone cannot give sufficient appropriate evidence. This happens with highly automated systems that have little or no documentary trail, for example high-volume online sales.

Tests of controls are not always worth doing. They take time. If controls are weak, testing them is pointless, because you will not rely on them. If the cost of testing exceeds the saving in substantive work, it may be more efficient to go straight to substantive procedures. Even when controls pass, you can never skip substantive procedures altogether for material balances. Controls reduce the risk but do not remove it.

Key rules to remember

Purpose of tests of controls: Tests of controls → evidence of operating effectiveness of controls → lower control risk → less substantive testing; Only valid if the controls are well designed and you plan to rely on them.
Purpose of substantive procedures: Substantive procedures = tests of detail + substantive analytical procedures; They address the risk of material misstatement directly, whatever the controls are like.
Walkthrough vs test of controls: Walkthrough = one transaction, understanding and implementation; Test of controls = sample, operating effectiveness over the period; Use this one-line contrast in every comparison question.
When tests of controls are required: Required if: (1) reliance on controls is planned, or (2) substantive procedures alone cannot give sufficient appropriate evidence; Learn both conditions.
Audit risk link: Audit risk = risk of material misstatement × detection risk; Effective controls lower the assessed risk of material misstatement, so you can accept higher detection risk and do less substantive work.

How to solve Purpose of Tests of Controls questions

Use this method for any question on why or when an auditor tests controls, or how this differs from other procedures.

1Read the requirement and identify the exact task: explain purpose, distinguish procedures, or decide whether to test controls.
2State what tests of controls do: they assess operating effectiveness of controls over the period.
3Link to risk: effective controls lower the assessed risk of material misstatement, which allows less substantive testing.
4Check the two reasons for testing: planned reliance on controls, or substantive procedures alone cannot give sufficient appropriate evidence.
5If a scenario is given, assess whether the controls are well designed. Weak design means no reliance, so go straight to substantive procedures.
6Contrast with substantive procedures (test figures directly) and walkthroughs (one transaction, understanding and implementation).
7Conclude with the impact on the audit approach, and note that some substantive work is still needed for material items.

Quickest way: Three-question test for any controls question

When to use it: Use it for objective test questions and for the opening lines of a written answer when time is short.

Ask: is the question about whether a control worked over the period? If yes, it is a test of controls.
Ask: is it about one transaction traced through to confirm understanding? If yes, it is a walkthrough.
Ask: is it about checking amounts, balances or disclosures directly? If yes, it is a substantive procedure.
If the question asks why the auditor tests controls, answer with: to rely on controls and cut substantive work, or because substantive evidence alone is not enough.

Common mistakes in Purpose of Tests of Controls

Saying tests of controls check the figures in the financial statements.
Students blur controls testing with substantive testing because both use samples.
Fix: Remember that tests of controls check how the system operates. Substantive procedures check the amounts.
Treating a walkthrough as the main test of controls.
Both involve looking at controls in operation.
Fix: A walkthrough is one transaction and confirms understanding and implementation. It is not enough evidence of operating effectiveness over the period.
Claiming that effective controls remove the need for substantive procedures.
Students over-simplify the idea of reliance.
Fix: Say that substantive procedures are reduced, not eliminated, especially for material balances and significant risks.
Recommending tests of controls when the controls are clearly weak.
Students apply a standard approach without reading the scenario.
Fix: If design is poor or controls are missing, the auditor will not rely on them. Go straight to substantive procedures and report the deficiencies.
Forgetting that tests of controls are sometimes compulsory.
Students think they are always optional.
Fix: If substantive procedures alone cannot give sufficient appropriate evidence, for example in a highly automated system with no paper trail, tests of controls must be done.
Confusing design with operating effectiveness.
Both words describe the quality of a control.
Fix: Design: could the control work? Operating effectiveness: did it work, consistently, throughout the period? Only the second is tested by tests of controls.

Worked examples

Example 1

Mango Ltd sells goods online. Orders, invoicing and receipts are fully automated and no paper records are kept. Explain why the auditor is likely to perform tests of controls and how these differ from substantive procedures. (5 marks)

Show the solution

Identify the situation: the system is highly automated with no documentary trail.
Explain the reason: substantive procedures alone may not give sufficient appropriate evidence, so the auditor needs evidence that the controls over the system operated effectively.
Define tests of controls: procedures to evaluate whether controls operated effectively throughout the period, for example re-performing automated checks or testing access restrictions.
Define substantive procedures: tests of detail and analytical procedures on the transactions and balances themselves, such as agreeing sales to bank receipts.
State the contrast: tests of controls look at the system. Substantive procedures look at the figures.
Add the benefit: if the controls are effective, the auditor can lower the assessed risk and reduce substantive work, although some substantive work remains.

Answer: The auditor will test controls because the automated system leaves little documentary evidence, so substantive procedures alone may not be sufficient. Tests of controls assess whether controls operated effectively over the period. Substantive procedures test the sales figures directly. Effective controls reduce, but do not remove, substantive testing.

Example 2

Which ONE of the following best describes a walkthrough test? (A) Testing a sample of invoices for evidence of authorisation throughout the year. (B) Following a single transaction through the system to confirm the auditor's understanding. (C) Agreeing the year-end receivables balance to customer confirmations. (D) Recalculating depreciation for all non-current assets.

Show the solution

Option A tests whether a control operated across the period on a sample, so it is a test of controls.
Option B traces one transaction from start to finish to confirm understanding and implementation, which defines a walkthrough.
Option C checks a balance directly, so it is a substantive procedure.
Option D recalculates figures, so it is also a substantive procedure.
Only B matches the definition.

Answer: B

Exam tips

Always use the phrase operating effectiveness when defining tests of controls. Examiners look for it.
In a scenario, check the controls first. If they are weak, say the auditor will not rely on them and will use a substantive approach.
In comparison questions, give one clear point on each side: system vs figures, sample over period vs one transaction.
Never write that controls testing replaces substantive work. Write that it reduces it.
For OT cases, read each option for what is actually being tested: a control, a transaction trace or an amount.

Purpose of Tests of Controls in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

CMA FinalGeneral IT Controls and Application Controls

Purpose of Tests of Controls: frequently asked questions

What is the difference between tests of controls and substantive procedures?

Tests of controls assess whether internal controls operated effectively during the period. Substantive procedures test transactions, balances and disclosures directly. Controls testing supports reliance on the system. Substantive testing gives direct evidence on the figures.

When does an auditor perform tests of controls?

An auditor performs them when planning to rely on controls to reduce substantive work, or when substantive procedures alone cannot provide sufficient appropriate evidence. Both depend on the controls being well designed enough to be worth testing.

Is a walkthrough the same as a test of controls?

No. A walkthrough follows one transaction through the system to confirm understanding and whether controls have been implemented. A test of controls examines a sample to judge operating effectiveness over the whole period.

Can an auditor skip substantive procedures if controls are effective?

No. Effective controls lower the risk of material misstatement, so the auditor can reduce the extent of substantive work. Material balances and significant risks still need substantive procedures.