Merits Or Advantages Of Test Check
The main advantages of test check can be highlighted as follows:
1. Reduce Work Load
It is a checking of partial records from books of accounts. It examines only certain financial transactions because it is difficult to check all financial transactions included in the books of accounts. So, it reduces work load and task of auditing can be performed quickly.
2. Saving Of Time And Labor
Checking of large volume of transactions takes more time and energy. In test checking, only selected transactions are examined which saves time and labor.
3. Cost Saving
Test check reduces the work load, time and energy. It means audit task can be completed in less time with less effort. So, it lowers the cost of audit.
4. Suitable For Big Firms
It is suitable for big business houses with large volume of financial transactions because it is very difficult to test each and every transactions.
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5. Accuracy And Reliability
Sample transactions are selected very carefully and intelligently with special attention. So, it ensures accuracy and reliability of checking of records.
2. Not Suitable For Small Companies
Demerits Or Disadvantages Of Test Check
The main disadvantages of test check can be highlighted as follows:
1. Chance Of Errors
In test checking, financial transactions are examined on random basis. So, there exists a high chance of frauds and errors undetected in the books of accounts.
Test check is not suitable for small business firms with less numbers of financial transactions.
3. Internal Check And Internal Control
If there is no strict internal check and internal control system in the organization, it is not possible to conduct internal check because it may report false data.
4. Doubtful And Suspicious
Audit report is prepared on the basis of few sample transactions examined by internal check. So, it is always doubtful and suspicious for auditor.
Pros And Cons Of Test Checking In Short
Pros:
- It minimizes time, effort and cost of audit
- It is suitable for big business firms having large volume of financial transactions of similar types
- It reduces the workload of both accounting staff of the company and the auditor
Cons:
- It is not applicable for small business firms having less volume of transactions
- Auditor may fail to detect errors, frauds and loopholes because he/she does not examine all transactions
- Test check cannot be conducted if there is no proper internal check system in the company
