Most audit issues don’t start with bad numbers. They start with controls that look solid on paper, but break down in practice.
That’s why auditors rely on tests of controls. Before deciding how much they can trust financial data, auditors need to know whether the systems and processes behind that data are actually working. A test of controls audit helps answer that question.
In this guide, we’ll explain what a test of controls audit is, why it matters, how it’s performed, and how modern audit teams are improving control testing through better workflows and automation.
A test of controls audit is a procedure auditors use to evaluate whether an organization’s internal controls are properly designed and operating effectively throughout the audit period. The objective is to determine whether those controls can be relied upon to prevent or detect material misstatements in financial reporting.
Rather than focusing solely on account balances or transaction amounts, tests of controls evaluate how processes function in real-world conditions. Auditors assess whether controls are:
Tests of controls are commonly performed during:
The results directly influence audit planning, audit risk, and the extent of further testing required.
Although tests of controls and substantive testing are often discussed together, they serve different purposes in an audit.
Tests of controls focus on evaluating whether internal controls are properly designed and operating effectively over time. Auditors use these tests to determine whether they can rely on a company’s control environment to prevent or detect material misstatements. When controls are found to be effective, auditors may reduce the extent of additional audit procedures.
Substantive testing, on the other hand, is designed to directly verify the accuracy and completeness of financial information. These procedures involve examining transactions, account balances, and disclosures to identify material misstatements, regardless of whether controls are in place.
In practice, the results of control testing shape the overall audit strategy. Strong, consistently operating controls allow auditors to place greater reliance on the control environment and perform fewer substantive tests. Weak or ineffective controls increase audit risk and require auditors to expand substantive testing to obtain sufficient assurance.
Internal controls are foundational to reliable financial reporting. Most organizations design their control environment using established frameworks such as the COSO framework, which outlines five interconnected components:
Tests of controls help auditors determine whether these components are functioning together as intended. A strong control environment supports financial reporting accuracy, reduces risk, and promotes consistent compliance. Weak controls increase control risk and elevate the likelihood of misstatements or audit findings.
Control risk reflects the likelihood that a material misstatement will not be prevented or detected by internal controls. Tests of controls provide the evidence auditors need to assess this risk accurately.
The results of control testing guide decisions about audit scope, timing, and depth. Effective controls allow auditors to focus efforts where risk is highest, rather than expanding procedures unnecessarily.
When controls operate consistently, organizations benefit from fewer errors, reduced fraud risk, and greater confidence in reported financial results.
Control testing often surfaces weaknesses in design or execution. Identifying deficiencies early allows organizations to remediate issues before they impact audit outcomes or regulatory compliance.
Auditors use a combination of techniques to obtain sufficient and appropriate audit evidence.
Auditors ask management and employees how controls are performed and whether procedures are consistently followed. While inquiry alone is not sufficient, it provides valuable context.
Auditors observe controls being performed in real time, such as watching approval workflows or reconciliation processes.
This involves reviewing documentation such as approvals, system logs, reports, or audit trails to verify that controls were executed as designed.
Auditors independently execute a control to confirm that it functions as intended. This method provides strong evidence of control effectiveness.
CAATs allow auditors to analyze large volumes of data, identify anomalies, and test automated controls efficiently—particularly in technology-driven environments.
While control testing varies by engagement, common examples include:
For example, an auditor may test whether purchase transactions were approved according to policy or whether system access is restricted to authorized personnel.
Auditors identify controls that address significant risks related to financial reporting or compliance.
Auditors document how each control operates, who performs it, and how often it occurs. Walkthrough procedures are commonly used to validate understanding.
Appropriate testing methods are selected based on the nature of the control, whether manual or automated.
Auditors typically test a sample of control instances to evaluate performance over the audit period.
Testing results are reviewed to determine whether controls operated effectively or whether exceptions occurred.
Auditors document conclusions, including any control deficiencies, their severity, and recommended remediation steps.
Despite their importance, tests of controls often present practical challenges:
These challenges increase administrative burden and can delay audit timelines.
Many audit teams are turning to workflow automation to reduce friction in control testing.
Audit workflow automation platforms help teams:
By streamlining documentation and communication, auditors can spend less time managing requests and more time applying professional judgment.
A test of controls audit is a critical part of modern auditing. By evaluating how internal controls operate in practice, auditors can reduce audit risk, improve efficiency, and increase confidence in financial reporting.
As audits grow more complex, manual processes make control testing harder than it needs to be. Firms that adopt better workflows gain clearer visibility, stronger documentation, and smoother audit execution.
If you’re ready to streamline your control testing process, check out how Suralink’s audit workflow automation platform helps audit and finance teams centralize evidence, reduce back-and-forth, and maintain a complete audit trail—so your team can focus on what matters most.