Audit Program – A Detailed Audit Program with Sample Draft

A Detailed Audit Program with Sample Draft for CA Articles Assistance and Professionals. An audit program consists of an appropriate audit procedure to achieve audit objectives. Program planning regarding the nature, extent, and timing of procedures is critical to audit efficiency and effectiveness. A program is an outline of the steps needed to be done to achieve a certain goal or a specific result.

A detailed audit program

• An audit program consists of an appropriate audit procedure to achieve audit objectives.
• Audit programmes are prepared while planning the audit. At the planning stage, auditors will need to prepare audit tests to test the account areas.
• As part of the planning stage, auditors need to prepare audit tests to test the account areas.
• To assist the auditors there are audit assertions for the purpose of Audit.
• Transactions are to be tested in audit with reference to the audit assertions. Assertions will be different for different account areas

Audit Assertions

Assertion	Questions
Completeness	Has the transaction been recorded in the accounting records?
Measurement	Is the transaction recorded at the correct value?
Occurrence	Is the transaction recorded as expenditure in correct year of account?
Regularity	Is the transaction legal and regular?
Disclosure	Is the transaction correctly coded and disclosed?

Stages in an Audit

Stages	Particulars
I	Audit Initiation
II	Vouching of Transaction
III	Statutory Compliances
IV	In-depth Scrutiny of Ledgers
V	Preparation of Financial Statements and Final Reporting

Stage I: Audit Initiation

1. Understanding the Entity and its environment

• The industry in which the entity operates and the internal controls implemented; for example for a manufacturing Concern the following should be considered
  • a) List the products manufactured.
  • b) Narrate the Manufacturing process.
  • c) Brief on Delivery mechanism and invoicing method, PO tracking
  • d) Note on Inventory Maintenance and related records of goods sold, manufactured.
• Studying the incorporation documentation i.e. Partnership deed, Memorandum and Articles of Association

2.Determine the nature, timing & extent of other audit procedures

3. Ensure that Auditor’s Appointment Letters are obtained and acceptance replied

4.Confirmation of opening balances:

Check the current year’s opening balances with the closing balances of audited Financial Statements of the previous year.

Also Check Relevant Parts of This article :- 

Stage 2 and 3- Audit Program for Vouching and verification of Transaction

Stage 4 – Audit Program for In depth Scrutiny of Ledgers

Preparation of Financial Statements and Final Reporting

• CARO 2015 Applicability.
• Tax Audit Applicability
• Prepare Financial Statements based on the final data obtained from the client.
• Prepare Ratio Analysis along-with the possible reasons from management for material deviations.
• Preparing the Draft Computation of Income.
• Advance tax table and Tax issues, if any.

Following should always be a part of your audit file

• Copy of the audited PLBS of the previous year
• Letter of Appointment.
• Summary of Audit Visits
• Printout of all the tables made during the audit visit in the form specified
• Copies of the quarterly bank statements
• Any working papers prepared on behalf of the client
• Copies of acknowledgements of TDS returns
• Copies of acknowledgements of VAT returns
• Printouts of ledger accounts taken during the course of audit
• Any other document obtained during the course of Audit.

Audit Sampling

Audit Sampling Requires auditors judgment.

Statistical Sampling

Simple Random Sampling

This method uses sampling without replacement; that is, once an item has been selected for testing it is removed from the population and is not subject to re-selection. An auditor can implement simple random sampling in one of two ways: computer programs or random number tables.

 Systematic (Interval) Sampling

This method provides for the selection of sample items in such a way that there is a uniform interval between each sample item. Under this method of sampling, every “Nth” item is selected with a random start. Example every 4th item

Stratified (Cluster) Sampling

This method provides for the selection of sample items by breaking the population down into strata, or clusters. Each strata is then treated separately. For this plan to be effective, dispersion within clusters should be greater than dispersion among clusters. An example of cluster sampling is the inclusion in the sample of all remittances or cash disbursements for a particular month.

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• Types of Accounts
• Accounting Standard 13
• What Is Debit Note and Credit Note
• Fund Flow Statement
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