What is a Walkthrough?
During Sarbanes Oxley compliances the auditor should perform a walkthrough against internal control. So what is walkthrough? Michael Ramos in his book about SOX implementation said that basically a walkthrough is a procedure in which trace a transaction from its origination through the company’s information processing system, and all the way to its reporting in the financial statements. Although inquiries of company personnel are a major component, a walkthrough is more than just inquiry. Think of a walkthrough as
- Corroborative inquiry, in which auditor ask questions of client personnel and then obtain corroborating evidence to support their answers
- A test of one, in which auditor take a single transaction and perform detailed procedures to test the operating effectiveness of the controls for processing that transaction
The company is not required to perform walkthrough procedures; however, it is in management’s best interests to do so.
Sometimes, the company’s documentation of its information processing stream does not match the reality of what actually happens on a daily basis. Companies that perform tests of controls based only on what has been documented often run into testing exceptions when they discover that documentation of the information stream and related controls was not accurate.
The walkthrough procedure will allow auditor to confirm their understanding of key elements of the information processing stream and related controls before auditor begin detailed test work. The walkthrough can help auditor evaluate the effectiveness of the design of internal control for each major transaction. While performing the walkthrough, auditor also may obtain evidence about the operating effectiveness of controls.
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