What it means
A process manual describes what should happen, while a walkthrough observes what happens for a selected transaction, joining interviews with records and system evidence. For a sale, an auditor might start with the customer order, follow approval, shipment, invoicing and receipt, and locate the accounting entries.
The journey should use the same documents and systems staff use, and the transaction should be one that actually passed through the process being studied. PCAOB audit standard AS 2201 describes following a transaction from origination through a company's processes until it reaches financial records.
Walkthrough procedures usually combine inquiry, observation, document inspection and re-performance, and the standard applies to its specified audit context, not every audit worldwide. ICAEW guidance on audits under international standards also links walkthroughs to understanding information systems and evaluating control design and implementation, and cautions against relying on inquiry alone.
A routine transaction may show standard steps, whereas a higher-risk variant can reveal approvals, manual overrides or unusual handoffs. Ask who initiates, approves, records and reviews each step, and note where data is entered more than once or moves between systems.
A walkthrough also asks what could go wrong at each point, such as an invoice raised without delivery or bank details changed without approval, and tests whether the control is designed to address that risk, since a second signature may not help if the reviewer lacks the supporting evidence. Observe implementation, not only policy wording: if a manager says she reviews a reconciliation, inspect an actual review trail.
Walkthroughs can reveal undocumented workarounds, such as staff exporting a spreadsheet to correct system errors before posting transactions, and automated steps deserve attention too, including system rules, access privileges and changes to configuration. The exercise is not a formula with a fixed number of transactions for every process, because risk, complexity and audit standards shape the procedure.
A walkthrough may provide some evidence about operating effectiveness if the auditor performs enough relevant procedures, and PCAOB guidance recognises that possibility depending on risk and work performed. But a simple conversation about one item does not prove all months were controlled.
Separate design, implementation and operation: design asks whether the control could prevent or detect the problem, implementation asks whether it exists and is used, and operating effectiveness asks whether it worked consistently as required. If the walkthrough finds a gap, record the transaction, missing step, potential misstatement and who owns a response, because the finding may change the planned audit approach.
Managers can prepare by keeping current process maps, system access lists and approval evidence, without staging a perfect example that staff do not actually follow. Remote walkthroughs can use screen sharing, but confirm the evidence belongs to the chosen transaction and period, interview the people who perform the steps across sales, operations, finance and IT, and repeat the exercise after a system change or outsourcing decision.
In practice
Real-world examples.
Example
An auditor follows a customer order through delivery, billing and the final accounting record, checking the controls at each handoff. The auditor starts with the signed order, then inspects the dispatch note, the invoice and the ledger posting, asking the staff involved to demonstrate each step on screen. Any step that depends on one person's memory, not a document, is noted for further work.
Example
A purchasing walkthrough reveals that an employee can edit supplier bank details before payment without independent review. The auditor shows the finding to the finance manager, who confirms the system allows it. The potential misstatement is a payment to a false account, so the auditor plans extra testing of supplier changes during the year.
Example
An internal auditor observes payroll change approval and inspects the actual evidence for a selected change. The chosen change is a salary increase, and the auditor checks the signed approval, the system entry and the first payslip that reflects it. The auditor also asks who can alter the file after approval and finds that access is limited to two named payroll staff.
Case study
Seen in the real world.
This entirely fictional case follows Elm Medical Supplies, an invented distributor whose purchase policy required approval above a threshold. During a walkthrough, the auditor saw one order entered as two smaller purchases, each just below the approval limit. Management investigated the approval design and data trail. The case does not claim a proven fraud or that a single sample establishes how often this happened.
The finance director responded by adding a system rule that flags orders to the same supplier on the same day, and by asking the purchasing team to explain any split orders. The next walkthrough followed a larger purchase from the start to confirm the new rule worked in practice. A good walkthrough provides a map of how financial information flows and where controls sit. It helps auditors plan appropriate work and helps managers spot a gap between policy and practice.
Watch out
Common mistakes.
- Treating an interview alone as proof a control exists and works.
- Using last year's process notes after a system or staffing change.
- Assuming one traced transaction proves year-round operating effectiveness.
Questions
People also ask.
Who performs walkthroughs?
External or internal auditors commonly do; management can also trace processes to understand controls.
Is a walkthrough the same as a control test?
Not necessarily. It primarily helps understand design and implementation; operating-effectiveness evidence depends on additional procedures and risk.
How should managers prepare?
Keep current process records and let staff show real transactions, documents and system steps.
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