Walk-Through Test
Categories: Metrics, Financial Theory
Ever seen that awesome old Schoolhouse Rock video about how a bill becomes a law? Remember how cool it was that we got to follow that little bill through every step of its journey into becoming a law? Good stuff.
Well, a walk-through test is kind of like that video, except instead of kids following a bill from its beginning to end, an auditor follows a financial transaction on its entire journey through a particular organization. In other words, the auditor walks a transaction through the company’s accounting and financial procedures. They look at every step taken and make a note of every person and department involved. They look at how long it takes and how much it exposes the company or client to risk. And then they issue an analysis.
The main reason auditors do this is for kicks. But the second main reason is because it helps companies see how their accounting system is doing and where it can—or should—be improved.