Your internal controls provide the confidence you need that your processes will ensure compliance with regulations, legislation and best practices. Controls testing is the way you audit these controls.

Controls testing should form an integral part of your audit process, which in turn is central to your wider governance, risk and compliance (GRC) strategy. Here, we delve deeper into what controls testing is, its role in an increasingly strategic approach to audit and why automation plays a key part in your success.

Controls testing (sometimes referred to as tests of controls or internal controls testing) is a procedure used in audit to determine whether your internal controls are sufficient to detect material errors as well as to detect potential fraud. As a result, controls testing aims to prevent misstatements in your financial reporting.

Controls testing can be done as part of the audit or in preparation for an audit, providing confidence that all controls will be working as they should when audited. With internal audit recognized as the third line of defense in risk management, it’s vital that auditors verify the effectiveness of internal controls.

Whether you are auditing to comply with SOX requirements or other sector-specific regulations, or to meet audit best practices, testing controls is an essential part of the process.

Internal controls testing typically has two objectives:

1. To make the audit process shorter and more efficient. Testing controls can evidence that your internal controls are effective in preventing fraud or error, and as a result, negate any need for additional audit checks.
2. To shore up your compliance processes. Specific regulatory compliance requirements may demand that you can demonstrate effective internal controls. Even if you’re not subject to these, your own and your board’s confidence in your governance, risk and compliance processes will be enhanced via robust controls testing.