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Why Should an Auditor Perform a Systems Walk-Through Procedure?

Jan 16th 2010
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The system’s walk-through procedure is often the most cost-efficient, annual risk assessment procedure auditors can use, and it is discussed for the first time in SAS No.109. It is performed by tracing documents and data through the accounting system from the inception of transaction cycles to their termination.  Its primary purpose is to provide a good understanding of the accounting system and any control procedures or activities for risk assessment purposes.  

The walk-through procedure, documentation of the internal controls in flowcharts or internal control questionnaires, reading the general ledger and consideration of the prior year's control risk assessment may permit an assessment of control risk in the current period that is less than high. Hear me please.  Made clear in the risk assessment standards, performing these risk assessment procedures may provide some of the benefits we may have thought only possible by performing tests of controls procedures.

In other words, when performing tests of balances we may be able to use lesser reliable procedures (nature) for testing small details of an account balance, lesser audit coverage of an account balance (extent) and/or perform some procedures before yearend (timing).  The answer to the question posed in the title is that a systems walk-through procedure, considered along with other risk assessment procedures described in the preceding paragraph, can provide substantive evidence that may enable an auditor to reduce tests of balances, even for some smaller audits!


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