Audit Programme

An audit program is a set of directions that the auditor and its team members need to follow for the proper execution of the audit. After preparing an audit plan, the auditor allocates the work and prepares a program which contains steps that the audit team needs to follow while conducting an audit. Thus, an auditor prepares a program that contains detailed information about various steps and audit procedures to be followed by the audit.

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Audit Programme

An audit program provides a basic plan for the audit team regarding the entity’s business, its size, how to conduct the audit, allocation of work among team members and the estimation of time within which it should complete the work.

It contains details regarding the relevancy of evidence, materiality level, risk tolerance, measure of the sufficiency of the evidence. Thus, programs enhance the accountability of the audit team and its members for the work performed by them.

An auditor may revise the audit program if he considers it necessary due to prevailing circumstances. The size of the entity, type of business or services in which entity deals, applicable laws, the effectiveness of internal controls, and various other relevant factors, also affect an audit program.

Thus, an auditor prepares an audit program according to its scope of work. The minimum essential work to be performed is the Standard Programme. However, there is no set audit standard program applicable in all the circumstances.

Audit working papers document the activities that the audit program performs. Audit working papers support the work performed by the auditor for providing assurance that the audit was performed in accordance with all the applicable standards on auditing (SA’s). It helps the auditor in the proper execution of audit work.

An audit program covers various steps of auditing in an audit program like the assessment of internal control, ascertaining accuracy and reliability of books of accounts, inspection, vouching and verification, valuation of assets and liabilities, scrutiny of accounts, presentation of financial statements, and submission of reports and related disclosures.

Know more about Audit Evidence 

Advantages of the Audit Programme

1. An audit program helps in ensuring that all-important areas are considered while conducting the audit.
2. An audit program helps an auditor in the allocation of work among its team members according to their skills and competency.
3. It enhances the accountability of audit team members towards work performed by them
4. An audit program also reduces the scope for misunderstanding among team members regarding the performance of audit work.
5. It helps the auditor in checking the status of audit work, its progress, how much it is left for performance while conducting the audit.
6. Auditor prepares audit working papers which contains a record of various audit procedure applied which serves as evidence against the charge of negligence.
7. Audit program enables the auditor to keep a record of useful information specifically for future audit and references.

Browse more Topics under Tools Of Auditing

• Audit Plan
• Audit Evidence
• Working Papers

Disadvantages of Audit Programme

1. Rigidity: There is no set standard audit program that can be applied in the case of every entity. However, programs differ for different types of entities. Every entity has its own problems. Therefore, we cannot apply for a single audit program in the case of all business entities.
2. Reduces the Initiative of Efficient Staff: – A program reduces the initiatives of efficient and competent staff. Thus, staff members cannot make changes to the audit plan and cannot make suggestions for it.
3. Audit Work becomes Mechanical: The program becomes mechanical when it ignores other aspects like internal control.
4. Overlooking New Areas: A program may overlook the new areas. With the change in time and technology, new problems may arise that an audit program may not consider.

Types of Audit Programs

The two main types of audit programs are:

1. Fixed Audit Program
2. Flexible Audit Program

Fixed Audit Program

A fixed audit program is a set of standardized instructions that need to be followed by the auditor while conducting the audit. It includes all possible audit procedures to be followed during the audit although all of them may not be applicable in a situation. A fixed audit program aims to take care of every possible audit situation that may arise during an audit.

The disadvantage of the fixed audit program is that it is very rigid and nothing is left to the discretion of the audit team. Also, it is difficult to follow the same audit program even in the same organization over the years, as the conditions in the organization are likely to change.

Flexible Audit Program

A flexible audit program is one that does not prescribe the exact audit procedure to be followed by the auditors while conducting an audit. It simply gives an outline of the scope, nature and limitations of the audit assignment to be conducted. Also, the nature of work to be performed by each person of the audit staff is not predetermined under it. The auditors decide most of the things as the work proceeds and the reliability of procedures and internal control system become known to the auditor.

Thus, it allows the auditor to develop, adapt and modify the program according to the situation. Also, there is a scope for some initiative by the audit staff if the situation so requires. However, it is possible that some important audit procedures may not be followed.

Solved Example For You

Question: Write a program for the audit of cash. 

Ans.  A program for cash involves the following:-

• Checking of the opening balance
• The checking of petty cash
• The checking cash book
• Checking cash receipt and payment voucher
• Authorization for cash payments
• Comparison with the bank statement
• Surprise check of cash balance
• Cash summary
• Examination of direct deposits by the third parties