Question

Assume that you are planning to test a client’s account reconciliation. You could test either by inspecting documentation of the reconciliation or by reperforming the reconciliation. Which procedure is more rigorous? What factors would cause you to choose reperformance instead of documentation inspection?

Answer 1

Reperformance would be stricter than documentation inspection. The auditor does not always want to carry out the strictest procedure, as it is probably the most costly. However, the auditor tends to choose reperformance if more persuasive evidence is required. The requirements for taking this test decision include: the inherent risk standard, the sophistication of the transactions establishing account / acknowledgement, the background of misrepresentations and management tests outcomes, and these are considered in relation to account disclosure, or declaration that this is applicable to monitoring. The more relevant the review (as it mitigates the risk), the more stringent the checking will be done by the auditor.