Step-wise guide to audit programme planning

AUDIT PROGRAMME

An audit programme is commonly prepared to allocate work to team members which may include the list of audit procedures and instructions to be followed by the member. It also estimates the duration for completing an audit task.

Formulating an Audit Programme

• The important matters to be considered while formulating audit programme.

  (A) Nature of business in which the organisation is engaged:

• his first appointment, the auditor should examine in detail the financial and accounting organisation of the business by visiting the client’s office; by observing different stages through which documents pass before each transaction is authorised and recorded; the record that is kept and the type of books maintained.
• In the case of an industrial concern, he must also visit the factory to acquaint himself with the different processes of manufacture, the quantitative records maintained and the manner in which statistics are compiled in respect of losses in process.
• The auditor, therefore, should draw up the audit programme after considering the technical, financial and accounting set-up of the company.

(B) Overall plan:

• Audit programme should be drawn up to ensure a systematic approach to the work. If in drawing the audit programme, any divergence from the overall plan becomes necessary, first the overall plan should be modified after due consideration and thereafter, only that specific matter may be taken in the audit programme.
• The framework provided under the overall plan should be strictly adhered to.

(C) System of internal control and accounting procedures:

• The existence of a system of internal control ensures that both financial and statistical records are checked continuously; it also unearths errors, both of omission and of commission.
• The auditor, in framing his opinion on financial statements needs reasonable assurance that transactions are properly authorised and recorded in the accounting records and that transactions have not been omitted.
• The study and evaluation of internal control helps the auditor to establish the reliance he can place on the internal controls in determining the nature, timing and extent of his substantive auditing procedures.
• The auditor’s examination of the system of internal control should have three features - review and preliminary evaluation, testing of compliance and evaluation.

(D) Size of the organisation and structure of its management

• Increase in the size of the organisation enhances the complexity of the examination of its accounting records specially when it has a number of branches, deals in several products or has a very large turnover.