Test checking, or sampling, is an auditing technique where the auditor examines less than 100% of the items in a population to make conclusions about the entire population. It is required because auditors do not have enough time for a full examination of all transactions and balances are generally very high. Test checking may not be suitable for things like bank reconciliations, transactions that are few but very large, related party transactions, unusual transactions, items required by accounting standards to be disclosed, compliance with statutes, significant year-end entries, or foreign exchange transactions, especially when internal controls are weak.

1. SAMPLING/TEST CHECKING IN
AUDITING
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MEANING
Test checking means examining less then 100% of items in the population i.e. it refers to the
application of audit procedures to less than 100% of items within a population of audit relevance
such that all sampling units have a chance of selection in order to provide the auditor with a
reasonable basis on which to draw conclusions about the entire population.
WHY IT IS REQUIRED
Auditor usually doesn’t have enough time for detailed 100% examination.
Numbers of transactions/ Balances are generally very high.
Mostly items are identical.
If, on basis of compliance procedures, it is concluded that internal control system is very effective,
there is no need for detailed 100% examination.
EXAMPLES WHERE IT MAY NOT BE SUITABLE
Checking bank reconciliation statement.
Few transactions, very high in amount.
Few transactions with related parties.
Few transactions, having unusual nature.
Disclosure requirement of accounting standard.
Compliance with statutory provision.
Significant entries near/ at year-end.
Few transactions involving foreign exchange.
When internal controls are very weak.
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