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There is a significant overlap between tests of controls and procedures to obtain an understanding. Both include inquiry, inspection, and observation. There are two pri- mary differences in the application of these common procedures, 1. In obtaining an understanding of internal control, the procedures to obtain an understanding are applied to all controls identified during that phase, Tests of controls, on the other hand, are applied only when the assessed control risk has not been satisfied by the procedures to obtain an understanding, 2.Procedures to obtain an understanding are performed only on one of a few trans- actions of in the case of observations, at a single point in time. Tests of controls are performed on larger samples of transactions (perhaps 20 to 100), and often, observations are made at more than gue petitionann