Advantages of Tests of controls
(1) Tests of controls facilitate the auditor to ascertain
whether a control system in action is effective or not. If
properly designed controls are working as prescribed, auditors can reduce the level of substantive testing required
at the period end.
(2) Tests of controls mean that auditors do not have
to concentrate all of their efforts on substantive
procedures at the period end which would in many cases be impractical, unproductive and not cost effective.
Disadvantages of Tests of controls
(1) Tests of controls are often performed on a
sample basis
(2) Tests of controls are often performed on routine transactions for which there are high quality
automated controls. The very high risk areas in financial
statements are often outside this area and relate to non-routine transactions and more intangible environmental or general controls which are not easy to test.