Walk-Through Test

What Is a Walk-Through Test?

A walk-through test is a procedure used during an audit of an entity's accounting system to gauge its reliability. A walk-through test traces a transaction step-by-step through the accounting system from its inception to the final disposition. However, walk-throughs aren’t required for accountants but can be instrumental in addressing weaknesses and problems. 

Understanding Walk-Through Tests

A walk-through test is only one of many tests performed by auditors during their evaluation of an organization's accounting controls and risk management measures. The test can reveal system deficiencies and material weaknesses that would need to be rectified by the organization as soon as possible.

In conducting a walk-through test, an auditor will study how a transaction is initiated and moves through a company or organization's accounting system to completion. This involves identifying how a transaction is authorized, recorded — manually, by automated means, or both — and then reported in the general ledger of the books. The auditor will want to know how controls for accuracy are applied at each step in the process and how follow-up steps are taken to improve controls. 

A good walk-through test will also document the personnel involved in transaction entries in the accounting system. Checklists and flowcharts are helpful in conducting thorough walk-through tests. The American Institute of Certified Public Accountants (AICPA) recommends walk-through tests on an annual basis.

Walk-through tests don’t have to be a formal process, as many small businesses will perform a walk-through test without keeping detailed records or assessing a company’s accounting records. That is, the auditor will observe and make inquiries without requesting detailed documentation or reviewing the paperwork or paper trail of the transaction. 

Special Considerations 

A walk-through test can be done by simply asking employee questions, although this isn’t recommended. This is because an employee’s description isn’t always what happens in practice. The better method of a walk-through is actually observing employees — how they process transactions, etc. As well, actually analyzing paperwork and documents is a step further in analyzing the company’s accounting process. 

Example of a Walk-Through Test 

A walk-through will look differently depending on the company and auditor, but broadly, the process should include a visual assessment of how the staff operates when recording a transaction. Next, the auditor will talk with anyone who handles the transaction and then review the documents related to the transaction. An auditor may also test the accounting controls if any are in place. 

At the end of the walk-through, the auditor will outline the weaknesses in how the transaction was handled. The idea is that these weak points can then be corrected to improve a company’s accounting system.