To assess operational effectiveness of controls, which auditing practice is most effective?

Substantive testing is considered the most effective practice for assessing the operational effectiveness of controls because it involves evaluating the actual operation of the controls through direct testing. This method focuses on gathering evidence regarding the effectiveness of the control activities by examining the outcomes of transactions, processes, or events. By performing tests on a sample of transactions, auditors can determine whether the controls are working as intended and achieving the desired level of risk mitigation.

Substantive testing not only confirms that controls are designed appropriately but also verifies that they function as expected in practice. This direct measurement helps assess the overall effectiveness of the controls in reducing risks associated with financial reporting and operational processes.

While control design testing reviews how controls are structured, it does not provide evidence that the controls operate effectively in practice. Inspection of relevant documentation can affirm that controls exist and are designed properly, but it also lacks direct evidence of operational effectiveness. Performing tests on risk prevention typically focuses on identifying potential issues rather than evaluating how effectively existing controls mitigate those risks. Thus, substantive testing stands out as the best approach for assessing operational control effectiveness.