The checking of such common records and books which is approved on by the auditor as a substance of routine is known as routine checking in auditing. It is easy to execute and ensures that a business is operating to its full prospective. If errors are detected, it could also potentially save a company money, particularly if fraud is involved.
On the other hand, it can be costly for the company, and it’s monotonous for the employee who must execute it. Major errors or fraudulent changes in books and ledgers can be overlooked as well.
Advantages of Routine Checking
Following benefits can be obtained from the routine checking:
- All the original entries will be checked; so all the errors and frauds can be detected easily.
- All the entries and posting will be tested. It ensures the accuracy of books to a large extent.
- Routine checking helps to conduct a final audit because all the balancing and totals have already been checked. The system is helpful in encouraging internal control.
- Separate and specific staffs are not needed because it is a regular process. It helps the auditor in completing audit work in a short period and thus is cost-effective.
- It saves time and energy of the auditor and thus enables him to devote more time and energy on important matters.
Disadvantages of Routine Checking
Followings are the limitations of this :
- Routine checking is a mechanical test, so the staff who performs this work does not have inspiration. So, there are chances of leaving errors and frauds. It may result in failure to detect the errors or frauds as the samples taken for test checking may not include them.
- This checking can only detect small errors and frauds but not the planned frauds. The auditor may not be able to get the corrected position of the financial state of affairs of the business concern.
- Routine checking is not needed where a self-balancing system is applied. It increases the responsibility of the auditor to a large extent.
- This checking cannot detect principle and compensating errors. It is not of any use of a proper and effective system of checks and controls are not being adopted in the business.
- Only minor cases of fraud can be detected by this checking. Major items of fraud cannot be brought to light. There appears to be a lot of difficulty in tracing out compensating errors and errors of principle.