The Audit Programme: Meaning and Factors
Chapter Twenty-Two
Syllabus topic 2, "Audit Program – Meaning, Factors, Advantages and Disadvantages, Overcoming Disadvantages, Methods of Work, Instruction before commencing Work, Overall Audit Approach."
Pages 58 to 60 of 98
In one line
An audit programme is a written list of the procedures to be performed in each area, showing who is to perform each, to what extent, and by when.
The meaning
It is the plan turned into instructions. Where the plan says "revenue is a significant risk and the control over cut-off is weak", the programme says "examine the last twenty despatch notes before and the first twenty after the year end and trace each to the sales invoice and the sales ledger; assistant B; by 12 April."
| Every line carries | |
|---|---|
| The procedure | Stated so that it can be performed without further instruction |
| The extent | The sample size, or the basis of selection |
| Who | The assistant assigned |
| When | The date by which it is to be finished |
| Space for the doer's initials and the date | Which is how completion is evidenced |
| A reference to the working paper | Where the result is recorded |
The last two turn the programme into a control over the audit itself, and that is the second reason it exists.
The two forms
| Form | What it is | Suited to |
|---|---|---|
| Fixed, or predetermined | A standard programme applied year after year with little change | Small clients, routine work, a firm with many similar clients |
| Flexible, or progressive | Drawn afresh, or substantially revised, for each audit and each year | Larger clients, changing businesses, any client where the risks move |
The flexible form is the better practice and the fixed form is the one whose disadvantages the next chapter is about. A programme copied from last year is the single commonest criticism of an audit.
The factors that shape a programme
| Factor | What it changes | |
|---|---|---|
| 1 | The size and nature of the business | Which areas exist at all, and which dominate |
| 2 | The strength of internal control | The balance of compliance and substantive procedures, which is the approach of the previous chapter |
| 3 | The type of audit: statutory, internal, continuous, interim | The scope and the timing |
| 4 | The scope agreed and the statutory requirements | What must be covered |
| 5 | The accounting system, manual or computerised | The procedures available and the evidence trail |
| 6 | The risks identified in planning | Where the effort concentrates |
| 7 | Materiality | The sample sizes |
| 8 | The experience of the staff available | Which work can be assigned to whom |
| 9 | The previous years' experience | What went wrong before, and where |
| 10 | The time available | The timetable and the sequence |
Factor two is the largest, as it was in planning, and factor nine is the one students omit: last year's difficulties are this year's instructions.
What a programme looks like, in one area
An extract, on debtors.
| Procedure | Extent | By whom | By when | |
|---|---|---|---|---|
| 1 | Obtain the schedule of debtors and agree the total to the control account and the ledger | All | Assistant A | 10 April |
| 2 | Cast the schedule and check the ageing | All | Assistant A | 10 April |
| 3 | Circularise debtors and follow up non-replies by examining subsequent receipts | All balances over Rs 2,00,000, and 20 others selected at random | Assistant B | 18 April |
| 4 | Examine credit notes issued after the year end for evidence of overstated sales | All over Rs 50,000 | Assistant B | 18 April |
| 5 | Review the provision for doubtful debts against the ageing and the recovery record | All balances over six months old | Senior | 20 April |
| 6 | Verify that debtors are properly classified and disclosed under Schedule III | All | Senior | 22 April |
The rest of this chapter
Module one is free. The rest of this chapter comes with the B.Com. (Accountancy) Semester 3 notes.
You are reading a chapter from a later module. Everything in module one of every subject stays free, and so does the syllabus.
Notes: ₹499 Already bought it? Sign in
Free either way: the syllabus, and module one of every subject.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.