You are a training manager in charge of a course for new audit staff. You have just completed a discussion on the topic of directional testing. One member of the class raises the following questions:

(a) ‘If you only test debits for overstatement and credits for understatement, surely you are only half-testing the statements? What if a debit balance is understated or a credit balance overstated — you won’t find the errors!’

(b) ‘You say that the testing of debtors for overstatement also tests the balance on the sales account for overstatement. What if the client has deliberately overstated sales and forced the trial balance to square by omitting some of the creditors’ balances?

Then he has beaten your system and also made his balance sheet appear more attractive.’

(c) ‘Would it matter if the auditor tested all debit balances for understatement and all credit balances for overstatement?’