Types of Audit Programme | Contents | Diff. with Audit Plan

The concept of an Audit Programme is quite useful in the auditing process. An audit programme is a collection of instructions that must be followed by the auditor in order for the audit to be carried out properly. After the audit plan has been prepared, a complete audit programme is formulated and written. In this blog, we throw light on how an audit programme is prepared and its types. There are two major types of audit programme: fixed and fexible.

What is an Audit Programme?

An audit programme is an overview of procedures to be followed in order to form an opinion about a company’s financial statements. It is a process of planning, overseeing, and controlling the audit performance.

In other words, an audit programme is a systematic plan of audit methodologies to be adopted and used in order to achieve audit objectives. It defines the work to be done and how it should be performed within the projected time frame.

It outlines the tasks to be undertaken as well as some pertinent instructions to the audit staff regarding the level of checking to be done for the examination of evidence.

As part of audit planning, it is always recommended that the auditor prepares a written schedule of audit tests to be undertaken in relation to the company under audit. As soon as the work is finished, he should tick and sign the appropriate portion of the programme. Thus, in a way, the audit programme helps to check the progress of the audit work from time to time. Further, since it records all the audit procedures performed in respect of different areas of verification and examination, it also serves as evidence of work done, the dates on which it was completed, who did it, and how it was done.

Types of Audit Programme

An audit programme should normally have two parts:

1. Detailed Audit Programme outlining all of the work required to form an opinion on the reliability & dependability of the books of account; and

2. Balance Sheet Audit Programme outlining the work required to be done for the verification of items appearing in the Profit and Loss Account and Balance Sheet of the client.

Another possible classification can be fixed audit programme and flexible audit programme. Let us discuss these two types of audit programme.

Fixed audit programme:

It is a collection of standardized instructions that must be followed while conducting the audit. A fixed audit programme covers all potential audit techniques, however not all of them may be suitable in a given context. It strives to cover every possible audit situation; hence it defines the audit procedures to be followed in each situation.

The issue with this type of programme is that it is extremely restrictive. Nothing is left to the discretion of the audit team. It may upset the level of efficiency of audit assistants who are competent and like to take initiative, as they would have to follow the strict parameters of the audit programme. They might not be able to recommend changes in the audit procedures even if they feel it is required. Furthermore, it is difficult to maintain the same audit programme over time, even within the same firm, because the conditions in the enterprise are likely to vary.

Flexible audit programme:

A flexible audit programme, on the other hand, does not specify the exact audit techniques or procedures to be used. It prefers to provide an overview of the scope, nature, and constraints of the audit assignment. It does not predetermine the sort of work to be conducted by each member of the audit staff. The majority of decisions are made as the work progresses and the auditor learns about the dependability of procedures and the internal control system.

As a result, a flexible audit programme enables the auditor to create, adapt, and alter the programme to meet the needs of a particular situation. It also allows for some initiative on the part of the audit personnel if the situation calls for it. However, there might also be a risk that some critical audit procedures will not be followed.

Hence, even if the audit is repeated for the same company, it is usually recommended that the audit programme should be flexible and should be reviewed from time to time to account for any changes that may be prevalent.

Contents of Audit Program

While drafting an audit programme, the following points should be incorporated therein. These are some of the basic contents of an audit programme:

• Name of the company/client
• Nature and scope of the company’s operations
• The date of commencement of the audit
• The duration of the audit process
• Accounting system being adopted by the company
• The effectiveness of the internal control system operating in the company
• Any points of caution or concerns raised by the auditor’s report of the previous year
• Schedule of checking of books relating to 1) cash, bank, and petty cash, 2) purchases and purchases returns, 3) sales and sales returns, 4) bills receivable and bills payable, 5) journal book, 6) ledger accounts, 7) statutory requirements and legal compliances, 8) assets and liabilities, etc.
• The detailed and systematic steps of all the audit work to be performed
• Classification of audit work among the team members and the estimated schedule of completing their tasks 

In addition, given below are some factors that should be considered in preparing an audit programme:

• The efficiency with which the company’s internal control system operates
• The adequacy and dependability of the company’s accounting procedures
• The significance and dependability of the evidence available in the firm
• The likelihood of errors and fraud in the company
• The procedures and approaches that may be appropriate for the purposes of verification
• The timing of the audit work in reference to the balance sheet date
• Any unique aspects of the audit pertaining to the specific company
• The company’s size, nature, and scope of operations

As a result, it is evident that separate audit programmes must be developed for different companies.

Given below is a specimen of an audit programme for your reference.

How is an Audit Programme different from an Audit Plan?

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. 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.

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 of disclosure requirements in financial statements, etc.

Takeaway

Audit programs lay down the foundation for performing an audit as they consist of a series of steps needed to verify the books of account of the client. To sum up, some of the major aspects of an audit programme are as follows:

• An audit programme should describe complete details of the work to be done.
• It must be in writing.
• It is preferably drawn by the auditor himself (or senior audit staff).
• It should result in a clear distribution of work responsibilities among the audit team.
• The audit programme, as well as performance, should be periodically reviewed to provide adequate opportunities for making changes in the programme. Hence, it should be flexible.

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