Compliance Testing and Substantive Testing

Determine whether employees follow policies and procedures of senior management and laws and regulations from regulators.

Complience testing

Compliance testing is the process of determining whether employees and organizations follow the policies and procedures set by senior management or the laws and regulations imposed by regulators. It ensures that the necessary controls are in place to prevent any misconduct or non-compliance.

In compliance testing, a sample of changes or actions is taken to assess whether they have been approved and comply with the established procedures. If any non-compliance is found, further investigation is conducted through substantive testing to determine the extent and nature of the issue.

The importance of compliance testing lies in ensuring that organizations adhere to the necessary controls and regulations to prevent any misconduct or fraudulent activities. It helps to identify weaknesses in internal controls and implement corrective measures to mitigate risks.

Substantive testing

Substantive testing, on the other hand, involves a detailed analysis of specific areas to identify any anomalies or irregularities. It is performed when compliance testing reveals a failure or when there is a lack of controls in place. Substantive testing helps to uncover the root cause of the issue and provides a deeper understanding of the problem.

Overall, compliance testing and substantive testing work hand in hand to ensure that organizations operate in accordance with the established policies and procedures, and to identify and address any potential risks or non-compliance issues.