Definition
The auditor picks one transaction, such as a customer order, and follows it step by step: who approved it, which system captured it, how it reached the ledger. Walkthroughs usually combine inquiry, inspection of the documents produced at each stage and observation. The term is widely used in practice and appears explicitly in the PCAOB standard on audits of internal control. AU-C 315 does not use it as a defined term.
Why it matters in an audit or review
AU-C 315 requires the auditor to evaluate the design of relevant controls and determine whether they have been implemented, and inquiry alone is not enough for that. A walkthrough is the typical way to do both, and it often exposes steps that differ from the narrative management described.
Example
The auditor selects a $14,300 (illustrative) vendor payment and follows it from purchase requisition to purchase order, receiving report, three-way match, approval, check run and posting. Documents at each step are copied to the file. The auditor finds that the approver can also create vendors, which is noted as a segregation concern.
Common mistakes
- Walking through a process using only the narrative and not a real transaction.
- Assuming a walkthrough tests operating effectiveness. One item does not.
FAQ
Is a walkthrough a test of controls?
No. It supports understanding and implementation. Operating effectiveness needs a sample over the period.
Sources
- AICPA, AU-C Section 315 (evaluating design and determining implementation of controls; as amended by SAS No. 145)
- PCAOB, AS 2201, An Audit of Internal Control Over Financial Reporting That Is Integrated with An Audit of Financial Statements (walkthroughs): https://pcaobus.org/oversight/standards/auditing-standards/details/AS2201
Definitions paraphrase AICPA and FASB guidance; read the standard itself before relying on a requirement. Example figures are illustrative. This page is guidance, not professional advice. Report an error