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Director's Comments
The purpose of the director's editorial is to highlight information that is relevant to UK.
To comment on this article or to explore one of our services, please contact us at (859) 257-9734
or joseph.reed@uky.edu if you have any questions.
TOPIC: TRANSACTION TESTING
Transaction testing is one of many tools utilized within the internal auditing profession to
provide reasonable assurance to Management, Administration and the Audit
Subcommittee. A transaction test verifies the outcome. It can prove or disprove adherence
to university policies and procedures by substantiating what was done. Through the
examination of data, actual results are compared to desired results.
Please note that there is a clear distinction between control testing (also known as control
evaluation) and transaction testing; control testing evaluates processes, while transaction
testing verifies outcomes. Internal Audit (IA) uses transaction testing for proof of
compliance; it is also sometimes used during IA's Core Review to highlight and define
concerns.
To confirm your unit's compliance with UK's policies and procedures a similar test should
be performed and documented by an independent review function. IA performs this
function using its Compliance Test Summary, or it can use the unit's test results if certain
standards are achieved. Basic standards like: 1) a clearly stated purpose, 2) an established
policy and procedure, 3) an effective testing technique with an appropriate frequency, and
4) appropriate documentation. Adherence to UK's policies and procedures is verified by
IA performing a transaction test or if approved, reviewing the unit's transaction test.
In summary, the value of transaction testing is twofold. The first is to review previous
performance for evidence that the internal control system is working, and secondly to
strengthen the internal control structure by making timely reviews a part of the control
environment.
Joe Reed
Senior Director, Internal Audit
University of Kentucky
Director's Comments
The purpose of the director's editorial is to highlight information that is relevant to UK. To comment on this article or to explore one of our services, please contact us at (859) 257-9734 or joseph.reed@uky.edu if you have any questions.
TOPIC: TRANSACTION TESTING
Transaction testing is one of many tools utilized within the internal auditing profession to provide reasonable assurance to Management, Administration and the Audit Subcommittee. A transaction test verifies the outcome. It can prove or disprove adherence to university policies and procedures by substantiating what was done. Through the examination of data, actual results are compared to desired results.
Please note that there is a clear distinction between control testing (also known as control evaluation) and transaction testing; control testing evaluates processes, while transaction testing verifies outcomes. Internal Audit (IA) uses transaction testing for proof of compliance; it is also sometimes used during IA's Core Review to highlight and define concerns.
To confirm your unit's compliance with UK's policies and procedures a similar test should be performed and documented by an independent review function. IA performs this function using its Compliance Test Summary, or it can use the unit's test results if certain standards are achieved. Basic standards like: 1) a clearly stated purpose, 2) an established policy and procedure, 3) an effective testing technique with an appropriate frequency, and 4) appropriate documentation. Adherence to UK's policies and procedures is verified by IA performing a transaction test or if approved, reviewing the unit's transaction test.
In summary, the value of transaction testing is twofold. The first is to review previous performance for evidence that the internal control system is working, and secondly to strengthen the internal control structure by making timely reviews a part of the control environment. Joe Reed
Senior Director, Internal Audit
University of Kentucky
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