Audit Procedures (IAP) - Directional Testing

Hi Everyone,

On a previous thread, an IAP assessor has flagged up that students demonstrate a lack of knowledge of directional testing in auditing. Directional testing in audit works in such a way that debits (assets) are tested for overstatement, whilst conversely credits (liabilities) are tested for understatement.

I have attached a summary of how directional testing works so that students of IAP can hopefully demonstrate competence in this subject first time!

Kind regards



  • Andypandy
    Andypandy Registered Posts: 526
    Thankis muchly Steve.x
  • AK002
    AK002 Registered Posts: 2,492
    Steve thanks for this.

    Am working on my first audit at work atm and will also be sitting the audit sim soon :)!
  • Glynis
    Glynis Registered Posts: 488
    Wow thanks Steve for this. This makes it much easier to understand.

    Does this come up a lot in IAP?
  • Steve Collings
    Steve Collings Registered Posts: 997
    Glynis wrote: »
    Does this come up a lot in IAP?

    I'm not sure if directional testing would be tested entirely on its own i.e. as a single question as such a technique is better tested using practical scenarios. However, an IAP assessor has stated that students lack an awareness of such an audit technique and often fail IAP simulations because of a lack of awareness so it is important you grasp the concepts. As the artice says, directional testing is considered "best practice" because it provides complete audit coverage of the inter-related assets, liabilities, income and expenses. Though please do bear in mind that directional testing is not THE only audit procedure!

    I think you would be better to view directional testing as an audit methodology in relation to the whole simulation and apply it to scenarios presented in simulations, where you can, as opposed to simply rote learning the way directional testing works.


  • mikes
    mikes Registered Posts: 254
    Thank you for taking the time to do this Steve. I proberbly wouldn't be doing this until next year, but i have printed it off to have a more indepth read and keep it with my other notes. Hopefully when the time comes I will have a better understanding of it.
  • Toffeemadblue
    Toffeemadblue Registered Posts: 102 🎆 🐘 🎆
    Thanks a lot Steve, as usual very concise and readable.
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