What does dual-purpose test mean on the CPA exam?
Last reviewed
Dual-purpose test. One procedure that tests a control and substantively tests the transaction at the same time, on the same sample.
Defined against AU-C 330.A23.
Worked example
An auditor plans to rely on a control requiring a department manager to sign every vendor invoice before it is paid, and also needs substantive evidence that recorded cash disbursements are accurate and properly classified. The control test alone would need 40 items and the substantive test alone 60. The auditor selects vendor payments from the full year and, for each one, looks for the manager's signature and agrees the payment to the invoice, the receiving report and the expense account charged.
What makes this a dual-purpose test, and how many items does the auditor examine?
- One procedure on one sample serves two objectives: whether the approval control operated, and whether the amounts and coding are right.
- Each objective must be met in full on its own terms. A deviation in the signature is evaluated as a control failure, and a wrong amount or account is evaluated as a misstatement.
- The sample has to satisfy both designs, so it takes the larger of the two sizes and is drawn across the whole period the control is relied on.
Answer: It is dual-purpose because a single sample tests the control and the balances together. The auditor examines 60 disbursements, enough for the substantive test and more than the 40 the control test needs.
The trap: Picking the smaller sample of 40 because the procedure is efficient, or treating a clean signature as evidence that the amount is right. Combining the tests saves effort only when each objective is still fully met.
Based on AU-C 330.A23; AS 1105.14.
Which CPA exam sections use dual-purpose test?
Dual-purpose test appears in the AUD section of the CPA exam.
Other terms defined against AU-C 330
- further audit procedures: The work done in response to assessed risk: tests of controls and substantive procedures.
- nature, timing, and extent: The three dials on any audit procedure: what kind of test, when it is run, and how much of the population it covers.
- operating effectiveness: Whether a control actually worked across the period, as opposed to whether it was well designed.
- selecting specific items: Choosing particular items to examine because of what they are, such as large or unusual ones, rather than at random.
- substantive procedures: Work aimed directly at detecting misstatement in a balance or disclosure, as opposed to testing whether a control operated.
- tests of controls: Procedures that check whether a control actually operated as described throughout the period.
- tests of details: Substantive procedures aimed at individual transactions, balances or disclosures, rather than at the relationships between numbers that analytical procedures examine.
Related terms
- penetration test: An authorized simulated attack that tries to actually exploit weaknesses, as opposed to a vulnerability scan, which only lists what might be exploitable.