Difference between Audit Plan and Audit Programme
In this blog, we have differentiated between an audit plan and an audit programme.
An auditor conducts an audit using a variety of instruments such as an audit plan, an audit programme, and so on. An audit plan specifies the strategies that will be used to carry out the audit. It is the initial step in the audit process.
Following the preparation of an audit plan, the auditor will create an audit programme that includes the instructions to be followed by the audit staff. This assists the auditor in properly supervising the audit.
Let us understand more in detail.
Meaning of Audit Plan
An audit plan specifies the strategies, policies, and methodologies to be used in conducting an audit. It is the initial step in the audit process. It contains information about the client’s business, risk areas, the nature, timing, and extent of audit procedures to be performed, and so on.
Unless an auditor plans his audit work after obtaining an understanding of the client’s business and internal controls, he shall not be able to determine key risk areas and will not be able to carry out his work properly. Hence, planning is very important.
The audit plan is normally made to consider the following:
- How the auditor will acquire knowledge of the client’s business, accounting systems, and internal controls?
- What level of reliance will be placed on the internal control system of the client?
- What will be the nature, timing, and extent of audit procedures to be performed?
- Are there any special areas that require special attention?
- How will the auditing work be coordinated?
Planning an audit will help in developing an overall audit strategy for the conduct of the audit. This will ensure that the audit is carried out effectively and efficiently.
Meaning of Audit Programme
After the preparation of an audit plan, the auditor prepares an audit programme.
An audit programme is a collection of guidelines that the auditor and its team members must follow in order for the audit to be carried out properly. Following the preparation of the audit plan, the auditor assigns tasks and creates a programme that contains the detailed steps that the audit team must follow when conducting the audit. It takes the form of a written schedule.
Some of the advantages of an audit programme are:
- An audit programme assists in ensuring that all critical areas identified are being examined during the audit.
- An audit programme assists the auditor in allocating work among team members based on their abilities and competencies.
- It increases the accountability of the team members for the work they do.
- An audit programme also decreases the possibility of misunderstanding among team members regarding the performance of audit work.
- It assists the auditor in checking the status of audit work, its progress, and how much work is left to be performed for the completion of the audit assignment.
- It forms part of the audit working papers that contain a record of all important audit information and procedures. They also serve as evidence if any charge of negligence is brought against the auditor.
- The audit programme enables the auditor to keep a track of useful information for future audits and references.
Differentiating Audit Plan and Audit Programme
Many people often use the terms “audit plan” and “audit programme” interchangeably, but little do they know that there is a thin line of distinction between them.
We can summarize their difference in the following points:
1. Basic purpose
An audit plan specifies the audit strategies to be used when conducting an audit, such as identifying areas where extra audit attention is necessary, obtaining business knowledge, and so on. But an audit programme is a blueprint for how the audit will be carried out, including who will do what work and when it will be completed.
2. Sequence
Audit planning is the first step followed by the preparation of an audit programme.
3. Scope
It won’t be wrong to say that an audit programme decomposes the audit plan into proper checklists and audit steps to define in detail the actual audit procedures to be performed by the audit team.
For instance, an audit plan may entail identifying the areas where special audit attention is needed, determining the extent of audit procedures required, gathering knowledge of business, etc., but an outline of steps & procedures to be followed to be able to actually check those areas is what is contained in an audit programme.
4. Example
Further, audit planning covers things like:
- Acquiring knowledge of the business and internal controls
- Establishing the degree of reliance to be placed on internal controls
- Determining the nature, timing, and extent of audit procedures to be performed, etc.
On the other hand, an audit programme should cover aspects such as:
- Vouching of transactions
- Ascertaining arithmetical accuracy of books
- Verification and valuation of assets and liabilities
- Scrutiny of the ledger, and
- Checking the disclosure requirements in financial statements, etc.
Key takeaway
Having a proper audit plan will ensure that the audit work will be carried out effectively. Its objective is to plan the audit in such a way so that audit can be performed in an efficient manner and to ensure that no critical area is left unattended.
On the other hand, an audit programme will help to divide the audit work appropriately between the team members. It lays down who is to do what and what steps are to be followed to conduct the audit.
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