What is the Audit Programme?
An audit programme is a comprehensive plan related to the application of audit procedure, in the given situation together with the instructions, for the relevant techniques to be adopted for the achievement of objectives.
It is prepared considering the nature of the business and the size of the company, the existence and reliability of the internal control system, scope of work, etc. It gives significant details that act as an instruction set to the audit team. Also, it helps in the proper execution of work.
The audit programme should be reviewed periodically, to know whether it continues to be appropriate for collecting the required information and evidence relating to the transactions.
It is basically a series of steps as to examination, that is followed and established in a manner that the inter-relationship of one step to another is explicitly indicated and designed.
Concept of Audit Programme
Prior to the beginning of the audit, a systematic programme of the work to be conducted is framed which is commonly known as an audit programme. It is a thorough work plan which the auditor prepares so as to perform the audit. It includes a number of techniques and procedures, which are used by the auditor during the process of audit, to form an opinion regarding the company’s statement of accounts.
To draft an audit programme, the points which are to be kept in view include:
- Audit Objective
- Audit Procedure
- Area, Extent and Timing of the check
- Work allocation among teammates
- Special instructions depending on the previous experience of the auditee.
Matters to be considered while formulating an Audit Programme
- Nature of Business
- Plan prepared for an audit
- Internal Control System and accounting procedures
- Organization size and management structure
- Information relating to the organization of business
- Accounting policies opted by client
Constructing an Audit Programme
- Remaining within the scope and limitation of the assignment
- Determination of the evidence reasonably available and look for the best evidence to obtain the necessary satisfaction.
- Follow such steps and procedures which facilitates the attainment of the very purpose of the verification in the given situation.
- Keep in view all possibilities of errors
- Coordinate the procedures that are to be applied to related items.
Purpose of Audit Programme
- Coordinating audit procedures
- Determining the progress of audit work
- Keeping a record of the work performed during the audit process, to serve as evidence of work performed
- Assigning responsibilities to the assistants/audit staff for completion of work within the given time frame.
Types of Audit Programme
They can be of two types:
- Pre-determined Audit Programme: Another name for this programme is the Taylor-made audit programme. All audit procedures is required to be defined in general, despite the fact that all procedures may not be pertinent in a specific type of audit. It provides procedural guidelines or serves as a check-off list.
- Progressive Audit Programme: Alternately known as the skeleton form of the audit programme. It describes the general scope, character and limitations of the audit. This type of programme is appropriate when the conditions of business change every year.
- Uniformity of work: Uniformity of work can be achieved as a similar programme will be applied for subsequent audits.
- Assurance of work completion: The audit programme ensures that all the essential work is completed without any omission.
- Determination of work in progress: The auditor can check the progress of the work performed by the audit staff.
- Simplification of work: Work allocation can be simplified on the basis of grades of article and audit assistants.
- Review of work: It helps in the final review of the work prior to the report is generated and signed.
- Base of future audit programmes: It acts as a basis for planning the audit programme for upcoming years.
- Need for flexibility: Even when the programme is well-drafted it might not cover each and everything, which may arise during the audit process.
- Rigidity: Every business is different and so does the issues which it faces and a rigid audit programme cannot be formulated for each type of business.
- Lack of initiative: There is a lack of initiative as the clerks are required to follow the programme which is predetermined.
How to overcome the disadvantages of the Audit Programme?
Collection of fresh information and encouraging the audit staff to report deviations from the standards as well as an audit programme, so that the principal can make relevant changes in the programme, can help in overcoming the disadvantages of the audit programme.
Simply put, an audit programme is a thorough plan based on the audit work to be carried out. It states the procedures that should be pursued to verify each item of the financial statement, allocation of the work to the audit staff and the time frame, for the purpose of carrying out an audit. So, it is a formal plan for undertaking an audit that specifies what is to be done, when to be done and who is going to do it.
It comprises a range of verification procedures that are to be applied to the company financial statements, so as to obtain sufficient and appropriate evidence, which facilitates the auditor to give an informed opinion regarding the financial statement.