Answer:
"Transactional testing" is the review of actual transactions being addressed in your audit. This allows you to form conclusions about the integrity of the bank’s overall control and risk management processes and its overall quantity of risk.
If you are reviewing lending practices, as an example, you must look at a number of loan contracts to determine if the policies and practices of the bank, as well as Reg. Z are being followed.
The Fed has a Consumer Affairs Exam Manual which provides sample sizes that are appropriate to achieve a certain level of accuracy. The OCC has a booklet on Sampling Methodologies at http://www.occ.treas.gov/handbook/sampmeth.pdf. These will help you review the correct number of files for your audits.
First published on BankersOnline.com 1/6/03
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