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What are the general issues related to deciding whether to use a test of controls approach...

What are the general issues related to deciding whether to use a test of controls approach or a substantive approach?

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Test of controls approach and substantive approach are all part of audit procedures. Test of controls refers to an audit test to test the issue related to effectiveness of the client's internal system of control. On the other hand, substantive approach refers to an audit test to test the issue related to reasonableness of items in the financial statements. Thus when there is effective internal control, then the auditor is likely to use less substantive tests and more test of controls. If the internal controls are less effective, then the auditor is likely to use less test of controls and more substantive tests. The test of control includes issue related to observation, enquiries, inspection, and re-performance; while the substantive approach includes issue related to re-calculation, confirmation, analytical procedure

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