Define Audit Program And Explain Its Merits And Demerits AIOU 5417 481

AUDIT PROGRAMME

The audit programme is part of the audit planning. It means a written programme of audit tests to be applied by the auditor. An audit programme guides the audit personnel in the work of audit to be done. On completion of an audit, it serves the purpose of an audit record, which may be useful for future reference.

An audit programme normally comprises the following: –

  1. Detailed instructions, hints, and guidance to the audit personnel for producing work of a high standard and reliability.
  2. Instructions on how to audit the various books and their
  3. Instructions regarding the extent of checks to be carried out, various grades of persons employed, and how to record the audit queries.
  4. To fix the responsibility for the work done, instructions should be laid down so that the clerk, who has done a certain audit work, should append his initials.
  5. The period of the work checked should be indicated so that another clerk may continue the work without duplication.
  6. The details show the full scope of the work performed and the progress of the audit.

Advantages

  1. The principal (or partner) of the audit firm may know the work performed and the general progress of the audit. It facilitates supervision and control over audit work.
  2. It enables the senior Incharge of the audit to distribute the work according to the abilities of the clerks and to coordinate their work.
  3. Uniformity in the work is
  4. In case the clerk is unable to continue the work, his work may be assigned to another, who will proceed further with the work without any dislocation or duplication.
  5. The duties and responsibilities are clearly
  6. A written programme shows the work performed and yet to be performed, and the extent of work performed. Hence, it is good evidence that may be used if the auditor is accused of negligence.

Disadvantages

  1. A written programme looses its flexibility. It becomes so rigid as to kill initiative of capable persons.
  2. The programme may be followed mechanically year by year, overlooking other important aspects like internal control.
  3. At the conclusion of audit, the auditors may have covered the whole field but it cannot be said with certainly that all the necessary works have been completed, or whether the closely associated accounts have been intelligently examined.

The remedy in such situations is that the programme should be considered as the basis of audit work and it should not limit the actual audit work. It must always be open to amendments and improvements. A specimen audit programme for purchases and purchases returns is shown.

SPECIMEN AUDIT PROGRAMME PURCHASE AND PURCHASE RETURNS

Details of WorkMonths checkedSignatures
  1. Verify that the invoices are supported by copy requisitions, copy orders, and copy goods received notes.
  2. Test to ensure that authorities for requisitions, orders, and passing of payments are within agreed limits.
  3. Verify that credit notes have proper supporting documents, e.g., copies of goods returned notes.
  4. Check extensions and additions of invoices.
  5. Ascertain that purchases other than those for resale are properly allocated to nominal accounts.
  6. Test the numerical sequence of goods received and returned, and enquire as to the missing numbers.
  7. Inspect goods received or returned notes, whether matched to invoices or credit notes, and enquire as to any outstanding for an undue length of time.
  8. Check costs and cross-costs of purchases daybook, and ensure that prelists are prepared for control accounts prior to passing to ledger clerks or the cashiers’ department for payment.
  9. Check postings to the nominal ledger.
  10. Check control accounts.

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