What is a Dual-Purpose Test?

A dual-purpose test is an audit procedure that is used as both a test of controls and a substantive test. This test improves the efficiency of an audit, since two tests are being combined into one procedure. The use of dual-purpose tests can reduce the labor cost of an audit, and possibly compress the duration of the audit by a small amount.

Example of a Dual-Purpose Test

An auditor is testing the revenue transactions of a client, and wants to verify that sales invoices are properly authorized by checking if they include a manager’s approval signature (a controls test). In addition, the auditor wants to ensure the accuracy of revenue by tracing the amounts from sales invoices to supporting documents, such as customer purchase orders and shipping documents (a substantive test). In this example, the controls test evaluates whether the internal control procedure (manager's approval) is functioning effectively, while the substantive test checks whether the recorded revenue is accurate and supported by valid documentation. This combined approach can provide assurance over both the functioning of controls and the correctness of the financial statement figures.