Definition of test of transaction

auditing procedure related to examining specified transactions and supporting documentation. It is part of the testing process used by the auditor to check internal-controls reliability. It is undertaken to gather evidence so that an audit opinion can be rendered as to the fairness of financial statement presentation. Included in such a test is verifying transaction amounts and tracing transactions to accounts in the financial statements. Transaction tests are of a much more limited scope than analytical review. In transaction tests, a selected number of specific transactions are tested to see if controls are performing properly. A resulting error rate for complying with the procedures is established. Based on the rate of error, auditors determine if they can rely on the information developed from posting or recording transactions. The test helps auditors determine the scope of audit work.