[I)

Audit Programme

Meaning of Audit Programme

Audit programme means orderly and systematic plan for adopting
th audit procedure. In other words, it is a pre-determined written plan in
:ich complete outline is provided for entire auditing work, so that
wuditor can ensu~e himself regarding compliance of accounting standards
~d nothing left in the scope of audit work.
Audit Programme can be defined as follows :
1. According to Arther W. Holmes, "An Audit programme is a
flexible plann~d procedure of examination."
2. According to Horward Stettler, "The Audit programme is an
outline of all procedures to be followed in order to arrive at an opinion
concerning a client's financial statements."
3. According .to E.L. Kohler, "Audit programme, a description,
memorandum or outline of the work to be done in an audit and often of
the time alloted and personnel assignments prepared by a principal as a
definition of audit scope or by an auditor for the guidance and control of
assistants."
Conclusion : Audit programme is a programme prepared by auditor
to complete the audit of accounts of clients within a prescribed time limit,
in a systematic and flexible manner, to bring uniformity in working and
to decide whether auditing of entire accounting system is done or not.
Based on above mentioned interpretation (discussion), following
are the characteristics of audit programme :
1. It is a written plan prepared by auditor.
2. It includes description of working to be done by auditor.
3; It shows division of work among audit staff. ·
4. It provide description regarding ti.me allocation to individual
task.
5. It provide description regarding auditing methods and audit
procedure to be adopted.
6. Obtain written consent and written represen.t ation from
management.
7
8· Systematic plan for adopting audit procedure.
-1 It is a process of planned checking of books of accounts.
~~1.~-:.~~~-:.-:.~-:.-:..-=..$.... ~----:~-
~....::r.:r.-:......~:--:.-:.--:,'
~-z;::;~ __.,.._ ...- :.•· - ~
Audit Programnie . programme 2.3
ftlldtl
2.2
Objectives of Audit Programme
conttl.··:~·., orrv forwards of bala hecked
The primary objective of audit programme is to provide a
framework to complete the audit within prescribed time limit. To achieve · ") cash in nano coumeo
(fl . .
this primary objective, secondary and other objectives are as follows . (vii) security for anticked items ·
1. To obtain information regarding accounting system and polici~s
~ C a s h Book:
of the client.
2. To ascertain the Internal Control Techniques of client. (Jl) (i) payment vouched
3. To determine the extent of reliability of Internal Control System (ii) Receipts compared with Cash Book
4. To lay down nature, timing and extent of audit techniques t~
(iii) Totals checked
be adopted.
5. To coordinate the total audit work. (iv) Posting to ledger of Cash Book checked
Construction of Audit Programme ~ o k Account :
Critical point in construction of audit programme is to distribute the (i) Bank Pass Book/Statements checked
audit work among audit staff, "Who will do which work in how much time
(ii) Reconciliation statements prepared and
and in what manner." Thus, during construction of audit programme, compared with Bank Pass Book and/or
auditor should keep in mind the knowledge, skills, ability and experience accounts relating to suceeding year
of staff while allocating the work. Apart from that focus should also be
given on equal allocation of work among audit staff in a view of their (iii) Certificates for confirmation from Bank
interest so that work may be performed in time and each person is obtained
responsible for their part of work. (iv) Bank Pass Book/Statements scrutinised
Though printed audit programme regarding every aspect of for unticked items
accounting are available in the market. But no two businesses can have
identical situations or circumstances. So, either auditor avail it as a (IV) Sales Book :
framework with necessary modification as per requirement of business or (i) Invoices/Counterfoils checked with
construct his own audit programme keeping in view the circumstances of entries in the sales book
particular business of employer. (ii) Totals checked
..-,S-p-e-c1-·m-e_n__o_f_A_u_d_it_P_r_o_gr_a_m_m__,e1
(iii) Posting to ledger checked
[AUDIT PROGRAMME] (iv) Scrutiny for discounts, commissions,
1. Name of the Client ............................................................................. ..
etc., if any, allowed
2. Name of the Client's Representative ................................................
(v) Whether any sales to directors, their
3. Accounting Year Under Audit ........................................................... .. I
relatives or companies or firms in which
4. Language in which Accounts are Maintained .................................. .
they are interested
5. Audit work done by : (vi) Scrutiny for unlicked items
(a) .................... (b) .................... (c) .................. (d) (V) Purchases Book :
Particulars of Work Date I Checked By (i) Purchase bills and invoices checked with
Cash Book: purchases book
(i) Receipts vouched (ii) Whether purchases have been authorised
(ii) Payments vouched (iii) To compare purchases with contracts, if
(iii) Totals checked any
(iv) Posting to ledger checked (iv) Totals of Purchases Book checked
Contd..... (v) Po!:tino rhPrlrPtl with Ledger Contd. .....
..,,,,,,,
2.4

,.
Audit Progra,n'1ie dit programme 2.5
Contd..... . ,411 -r-Lc-:'.I'.'-:S:::T:-O=F;-;B;;:-O~O:-;K:::S~A~N;::D:-::::0:::TH=E:::R::--,,
(vi) Whether any purchases from Directors, RECORDSPRODUCEDFORAUDIT
EI:
their Relatives, or from Companies or
finns in which they are interested
(vii) Scrutiny for unticked items
(VI) Main Journal :

~ k s and Records:
t. Cash Book
INo~;~~=ks \1nitialsI
(i) Entries vouched with relevant vouchers 2. Sales Book
(ii) Posting checked with Ledger 3. Purchase Book
(iii) Scrutin_r for unlicked items 4. Petty Cash Book
(VIl) Salary and Wages Book : 5. Rent Registers
(i) Calculation, additions, rates, signatures 6. Journal
of workers and staff, test checked 7. Ledger : (a) General I
(ii) Overtime payments, if any, checked (b) Debtors
(c) Creditors
I
(iii) Analysis checked and entries in Cash
Book tallied with_salary_and wages books 8. Stock Books
(Vill) Ledger (General, Debtors, Creditors) : 9. Bank Pass Book
(i) Opening Balances checked (a)
(b)
(ii) Posting from original books of entries
(c)
(iii) Balance of Control Accounts, if any,
tallied (d)
(iv) Closing Balances checked with trial balance 10. Salary and Wages Book
11. Voucher Files and other Records \\\
(v) Scrutiny for unticked items
(a) Payment Voucher Files
(IX) Stock List :\
(b) Counter-part of Receipt Books
(i) Test Checking/FuJJ Checking entries (c) Counter-part of Rent Receipts
with Stock Books where kept
(d) Purchase Bills File
(ii) Mode of valuations examined with (e) Duplicate of Sales Invoices
Purchase and Sales vouchers
(t) Journal Voucher Files
(iii) Whether allowance made for old
(g) Minute Books and other
depreciated goods and goods on
consignment etc. Statutory Books
'/ (h) Other Records : (i)
(iv) Stock list compared with that of previous
(ii)
I year for prices mode of valuations etc.
and for variations, if any (iii)
(v) Stock list compared -
Signature of Client's Representative
(vi) Charges, if any created, examined
(vii) Calculations, additions, rates etc. test
checked (Il) Duration of Audit : Date on which
(viii) Certificate of stock obtained from Date on which Audit was started ···················
Director or Managing Director completed .................... . For Final Work
Total Hours Four Routine Work
Name of Client·········-···································· Year ....................
Mi!"f ;-,~x,:::
p;)iiL5"'.-, o/-' , , , .;,. . .
~ n'A~ ·-~ · .,•J, • .1\:-,'··)·'·1•f :'-Ah'.
 2.7
. p,ograrnrne
Audit Prograni.lrte ;.udit Essentials of a Good Audit Programme .
2.6
' • n of audit programme has certain purpose/objective behmd
formauo · · mm· d
\(Ill)
1.
Special Remarks : ed by Shri ........................
F;nal Accoun ts. Prepar
I Balance checked
p N
age o.
Worlcing of
st,.,
. . certain that audit programme is prepared keepmg m
jt. But itdis •rcumstances of organisational work. But still some common
an c1
(i) Final Tna ement checked , nature should be considered. .
( .. ) Depreciation S~t , 's or Directors rnatters di'ng to SA-230, A good audit programme must contam
(n...) Managing. . DJrector . . if any, Accor
d Comm1ss1on, f nowing principles .
111 Remuneration an 0
t. Written.: A~d1t Essentials of a Good Audit Programme
calculated ..
me must be m wntten
. Prov1s1on s pro gram . . ff 1. Written
(iv) Taxation and outstanding expense from, so tJiat auditor, h1sdsta 2. Easy and Explicit
(v) Prepared expenses
and other partners shou1 n?t 3. Accounting System
provided for . prepared and have any conflicts/dispute m 4. Attentions of Objects
. SChedule and - Grouprng
I
(VI)
f ture regarding any work. 5. Division of Work
(vii) examined
Draft of Profit and Loss Account and Balance
u 2. Easy and Explicit : 6. Relating Rules and Regulation i •I
Audit Programme should be 7. Nature of Bus1ness
Sheet prep~e~ and compared with the so clear and simple that audit 8. Logical Flow of Accounts and
11/
(viii) Item_s scrut1~1_sefid res explanation obtained staff can easily understand (or Documents
previous year s. igu ' easily understandable to audit
for variations, if any 9. Certain Planning
staff). Also it must be explicit, 10. Elastic
(ix) Verification of : otherwise staff will need to S t c O1 f D t d
(a) Title Deeds communicate the auditor 11 · S~parta e umn or a e an
. d . . . 1gna ure
(b) Investments agam an a~am resu1tmg m 12 _ Work and Liability
(c) Cash wa~tage. of ~1me and. efforts. 13 _ Programme According to Scope
(x) Draft letter to Board of Directors This require auditor to 14 Best Evidence
(xi) Final queries, if any - communicate his staff well in 15 : Review
2. Certificates : advance all relevant ' - - - - - - - - - - - - - - - - - ~
information and areas having more chances of fraud and error.
(i) Stock certificate obtained
. 3. Accounting System : Audit Programme should be in accordance
(ii) Certificate of cash in hand
with accounting system resulting in smooth functioning of audit procedure
(iii) Certificate of good and doubtful debts and no risk of skiping any transaction.
(iv) Certificate of outstanding liabilities 4. Attentions of Objects : Primary objective of Audit Programn\e is
(v) Confirmation of Balance of Loan Accounts to provide a framework to complete the audit within prescribed time limit.
Debtors and Creditors - For _a good Audit Programme, auditor must consider the objectives of
3. Minute Books and Statutory Registers : Audit Programme.
(i) Minutes of Board and other meetings 5. Division of Work : For a good Audit Programme, division of
(ii) Minutes of General Meeting of Shareholders Work among audit staff should be based on departmentwise such as cash,
(iii) Minutes of other Meetings wages and salary, purchase and sales, creditor etc. Similarly accounts of
(iv) Register of Members_ each de partment should also be considered so that related m,onnauon
b . . can
e obtained easily and facilitate fixation of responsibility.
(v) Register of Directors and their Shareholdings
(vi) Register of Charges auct· 6• Relating Rules and Regulation : For a good Audit Programme,
llor should have knowledge about related rules and regulations such
(vii) Other Registers maintained by the company : qualification-disqualification of company auditor, ceiHng limit, partners
lI
- (a) (b) (c) a firrn. etc. ;I I'.
r•:fw a .... ', /1..
./·',h, .
 ,,....
I
Audit Programme . programme
AUdI1
7. Nature of 'Business : Auditor must obtain knowledge about nature
z. Adherence to Principles,,----- 2.9
·ons and Instructions : It Advantages of Audit Prog
business and types of transaction in business of a client. This facilitate pjrec tl . J G h. ramme
es that auditor has complied · rowt m Business
ocation of work based on related party transaction. ensur d d d • 2 • Adherenc
'th principles an stan ar s m an . . e to Principles
0 trections and I
S. Logical Flow of Accounts and Documents : While formulating w1 . '
fficient manner. 3. Pro ress nstruct1ons
good audit programme it must be considered to check all the activities, e 3 Progress of Work : 4 0 . ~. of Work
'rom beginning to end, of a transaction. Like, in case of purchases, begin • • 1v1s1on of Work ..
·tor can come to know, how 5 Proof . C as per Ab1hty
with purchase permission and end with receipt of invoice and payment /IU d1 · m ourt
JllU Ch
work is completed, how much •
6. Complete E . . xammatJon
made against the purchase.
9. Certain 'Planning : There must be a certain plan for audit wo rk is yet to complete and llme 7. Determination/ p·1xat1on . of
required to. c??1plete. R~sponsibility
\')rogramme, for this a c\ear frame-work should be framed (formed) to
com\')\ete the entire audit work. Auditor better know comp\etion of audit
4. D1vts1on of Work as per 8. Time Saving 'I
Ability : Audit Programme enable 9. Uniformity in Working 'j
work within \'>rescribed time \imit through audit staff. So, plan must be auditor to divide audit work among 10. lnc~~ses Efficiency of Staff
c\ear. audit team member as per their skills 11. Fac1htate Review
10. E\astic : Audit Programme should be flexible enough to facilitate and ability. It facilitate smooth 12 - Change won't effect work 11
ado\')tion to changes/modification easily. In reality, flexibility of Audit
functioning and increases efficiency.
Programme make it useful: 5. Proof in Court : If their is dispute between client and auditor and
11. Separate Column for Date and Signature : In relation to work
done by audit staff, audit programme must contain separate column for matter refer to court against gross negligance, then Audit Programme can
date and signature, their visit at client place for the auditing purpose etc. be used as a proof.
6. Complete Examination : Audit Programme, once made, serves as
(and so on). aguide in performance and so there would be no fear for omission of any
12. Work and Liability : Clearly determine work, role and
responsibility of audit staff while preparing audit programme. item.
13. Programme According to Scope : It is must for a good audit
programme to design it according to scope of audit to reduce/save time
and cost
14. Best Evidence : Auditor must obtain sufficient, appropriate

7. Determination/ Fixation of Responsibility : Every individual

made responsible for their part of work because it determine well in
advance responsibility of each individual. This result is discharge of their
responsibility with a caution.

lt 1
audit evidences regarding every accounting transaction of the business. 8. Time Saving : Since it is prepared in a systematic manner, and ii j
15. Review : Audit programme should be reviewed at regular intervals work accordingly, resulting in effective and efficient working. Hence saves
to modify it as per requirements and circumstances of the situation at that time.
time. 9. Uniformity in Working : While formulating Audit Programme
Advantages of Audit Programme and .working accordingly, defects can be corrected timely. For preparing
Aud,.t Programme of same organisation in future, existing Audit Progr~e
. Generally audit programme express validity of instructions and
provide basis for same. This result in uniformity of work and in an efficient
audit methods and techniques in such a way that Staff can come to know
. manner.
how much is checked and in what manner. ·
Thus.' it play .an important role in providing guideline, also . IO. Increases Efficiency of Staff : As work is assigned as per their
skills
· ' ab't• I lty, knowledge and experience. It leads to specia · 1·isat'100 and
d~umentauon regardmg work done by auditor which is helpful in various 1ncreas f .
circumstances. es e fic1ency.
Following ~e the _advantages of Audit Programme : 11 · Facilitate Review : Auditor is able to review the work
!lerfonnance of 1s . employees easily with help of ~ud"it programme . · des
. 1. Grow~ m B~1_ness : Audit Programme may result in growth in
busmess
. of auditor.. This 1s, because. he coordi·nate h'1s work 10
· sue h a waY w0 k 12• Change won't effect work : Since Audit Programme mclu
th~t 1t become easy for him to manage the audit work of other enterprises r of auct·tI b d If by any reason,
e~istin staff, work already done, yet to e one. . ult
also. g staff is substituted by new one, they do not face any diffic y.
&?,
-B\'',,,,
""-"'11Wl~i.'~ '
 2.\0
Disadvantages of Audit Programme
Audit Progra
•
tn11ie A11dil p
,ograrnrne
E"pensive : Very expensive for small organisation, ~ecause
tO, ~ery work allocation among staff and review at regular mterval

2.11
arauon, .
Though Audit Programme facilitate advantages to commer . '" preP enourmous ume.
establishment, auditor, audit staff and establishment employees. But 1 iovoh'e ~? ,~ •
Flexible Audit Programme 111
it can't escape from limitations. Following may be considered as limitatio' 11 11
disadvantages: r-------------ll/ O
r Fie,i:ible Audit Programme :
r,{eaning 'ble audit programme is one which can be modified in course
1. Mecbanis~tion °_f Disadvantages of Audit Programme flext y be required in different circumstances. As a result it is not
Work : After framing audit 1. Mechanisation of Work
of audit aslmtaO all, but also able to use talent and intelligent of staff and
programme, the audit work runs 2. Lack of Creative/ Constructiv usefu ·
~echanically. Then sp:cific Thinking e onlY es efficiently.
circumstances of the particular 3. Lack of Flexibility employe res to make Fle,i:ible Audit Programme : Following measures
employer can not be _attended, 4. Wastage of Time
Measud pted to make Au d'1t Programme fl ex1'ble :
thus, abnormal s1~ns or 5. Lack of Self Decision Making maY be a ~t should be clear among audit staff that work assigned or yet
develo~ments may be ignored. 6. Limitation of Purview J. to assigned is not final. Discussion and suggestion to be
(Pecefic Exepatence 7. Unaware of Error and Frauds considered in beginning.
Corporation Ltd. Vis Warisith 8. Lack of Ethical Behaviour z. Regularly updating of Audit Programme on the basis of
and Others) . 9. Proof Against auditor in Court experience.
2. Lack of Creative/ IO. Very Expensive 3. Training facility to staff should be provided in such a manner
Constructive Thinking :
so that transfeffrom one department to other should be possible.
Because staff do not get opportunity to show their intelligence and
4. Inclusion of any good and ethical suggestion in Audit
qualification, they are required to work according to pre-determined
programme. Programme suggested by staff or employees.
3. Lack of Flexibility : From practical point of view, it lacks 5. If suggestions are not implemented, still intimate the employee
flexibility. Reason being inclusion of all facts in the beginning make the about importance of his suggestions and may refer in future.
Audit Programme difficult to modify as per the circumstances. 6. Auditor should review the entire system related to Audit
4. Wastage of Time : Although auditor may modify Audit Programme Programme.
in the beginning only, to certain extent, but due to difference in nature, 7. Even a simple suggestion should not depict as if their suggestion
accounting techniques of every organisation. New Audit Programme has was not good.
to be made. This result in wastage of their valuable time. 8. Staff must be encouraged toward sudden external inspection
5. Lack of Self Decision Making : Since staff has to work according and make changes accordingly.
to pre-determined Audit Programme. This situation reduces the enthusiasm Advantages of Fle,i:ible Audit Programme : Only a flexible Audit
level of able and intelligent employees. They fails to make independent Programme is meaningful and useful. In this regard, it is said that to make
decisions even in unusual circumstances. the audit programme more fruitful it must be flexible.
6. Limitation of Purview : Due to written Audit Programme, Audit Following Advantages :
staff may assume to be their maximum working limit. Due to this, even in I. Staff and employees can get opportunity to constructive
unusual circumstances, they will not put their efforts beyond a limit. thinking.
7. Unaware of Error and Frauds : In a Mechanical process, common ' 2. Must be interesting.
frauds may come into light but frauds planned by cun"ing employees
through well-planned method shall remain undisclosed. 3. Facilitate independent decision making among employees.
4. Facilitate easy transfer of staff.
8. Lack of Ethical Behaviour : It is noticed that members of
organisation are aware of their scope of work in audit programme. In this S. Staff can utilise their qualification, skills and knowledge.
6
situation auditor and his staff has no influence on Members of organisation. · Increase employees morale through considering their suggestion
9. Proof Against auditor in Court : If auditor is held grossly and consultancy.
7
negligent and client has filled case against him, them Audit Programme, · F~cilitate modification in existing Audit Programme as per new
prepared by him, may be use as a proof in court. ci~cumstances and situations.
8
· Discourage mechanisation of work.
L
 ~r 2.13
gramme h h Iders and
'..\1 Audit Progral'lt'>le A Jil pro • hts and duties of directors, s are 0
" 11 . Name, ng
(vi) takeholders.
Commencement of Audit s hnical knowledge. . rt
'Before starting audit work of any organisati?n, audi~or ~as to tnakc (vii) rec . s year's financial statement and audit rep_o · . s
l_)\an regarding commencement of work. _Under th1_s planning it has to be (viii) pret:t of Audit : After obtaining knowledge about bu~i_~~s
decided that why how and when the audit work will be commenced. 'th·18 4, Time d of audit should also be decided. Generally au i mg
, ffi . d . ganisation, pe;o But in certain circumstances, auditing of accoun.: ~y
-p\anning helps the auditor to allocate t~e wo~k to e 1c1ent an expenenceq
staff properly and within the appropnate time. . ?' done for a ye · r less period. Time limit of audit must be deci e m
1s for more o
The process of commencement of audit includes fo~lowmg steps : be done · te audit. . • f d ·t
I. Preparation before the commencement of audit. case of pnvaes of Audit : It must be obtained in wnttmg what type O au i
II. Construction of audit programme. 5· 'fy~o conduct statutory, internal or any other type. .
Ill Commencement of audit work. client want e of Auditor : Before appointment, auditor muS t t
IV. Work procedure of audit. 6 •. Cbar~th previous auditor in writing to know reason of removal
V. Audit working paper. co~ un1cate . WI •
If auditor fails to do so, he will be held gm·1 ty of pro1ess10n
& • al l:1
VI. Audit note-book. or res1gnauon. I
These steps of audit process are described as follows : nus· conduct.
• Obtaining Appointment. Letter.: Audit~r · must obtam · an
I. Preparation before the Commencement of Audit . 7 nt letter in writing from chent. Which contain all the matters as
appointme .
The auditor has together knowledge regarding many preliminary ecided by them in agreement. .
• Remuneration : There must be clear agreement between auditor
aspets of commencement of audit under this first step. If it is not the first d
r
I
8
audit for the auditor then previous audit working paper will be helpful in and client regarding remuneration before starting audit. t
preparation but when auditor is starting fi~st audit of any organisation, II. Construction of Audit Programme
then following informations are to be required : i/:1 I
1. Object or Audit : Auditor has to find out why employer want the Construction of audit programme is done after obtaining various I
accounts to be audited? Main object of statutory audit is to make opinion information of organisation by auditor. It requires that auditor distribute I
about financial statements, that whether they are reflecting true and fair work among audit staff as per their skills, knowledge, ability, experience and i:
condition of business or not. other considerations so that they will be responsible for their part of work. (,
It may have other objectives also : Compliance of statutory
requirement, for the purpose of appropriation, to detect error and frauds
III. Commencement of Audit i
,,
Ii
'
and for acceptance and deposits of loan, etc. After preparation of .audit programme, following steps are taken by
2. Determination or Operational Area : In the state of public auditor to start audit work : .
auditor/ statutory auditor, scope of work of auditor is determined by the 1. Instructions to Client : Instructions are given by· auditor to client
ac! which c_a~ be furth~r extended by an agreement. But scope of work of on following matters in relation to audit work :
private audit 1s detenmned as per agreement. It must be decided in written (i) Totalling of primary books of accounts and closing balance of
. agreement. all the ledgers.
. ~- Knowledge about Business Organisation : After knowing (ii) Vouchers of all the transactions are arranged in chronological
obJect~ves of audit and scope of work, complete information about order.
followi~g matters of organisation should be obtained : (!ii) Preparation of trial balance and final accounts.
(1) Nature of business, such as items of income and expenditure, (iv) L!st of all debtors and creditors of business.
.. nature of p~operties and other technical matters, etc. (v) List of all investments containing face value of each security
Book-keepmg and Accounting system. . opportunity cost or market value, etc. '
(~u) ~ternal Control Techniques.
(iv) List of Books. (vi) Pre~are list of closing stock alongwith method of valuation of
(v) bInformation about busmess
· .. closmg stock.
documentation like-return filed
1 List of certain adjustments. .
y co~~any, Memorandam of Association (MOA) Article of <v111) List
th . 0 f existmg
· · 61xed assets of business organisation, showing
Assoc1at1on (AOA) . • .
firm. ' partnership deed in case of partnersh1P eir p~r~hase cost, book value, market value and accumulated
depreciation thereon.
L
2.14

- Audit Progra111"1, . programme . . . .

2.15
,411d11 • functions are involved m routme checking • .
(ix) List of contingent liability. foUoWtng . f st sub-cast carry forward and other calculauons
(x) List of differed revenue expenditure. Cheekmg o co ' ' I'
I• . the books of original entry.
(xi) Certification in relation to cash balance and bank balance and
preparation of bank reconcilation statement.
in kin of postmg . .
mto 1ed ger.
2. Check. g of costs and balances of various accounts m ledger.
. I,
(xii) List of all books of accounts kept at registered office and nallle
3. Chee k'mg of transfer of balances from ledger to tnal · bal
ance.
of the person who prepare these books. 4. Chee mg h work is done by audit staff and it is also called
(xiii) List of name and addresses of directors, managing director and Generally, sue transactions and act1V1t1es
· · · are cons1'dere d b Y putti ng 11
, various
manager.
2. Sending of Audit Staff : Before sending audit staff to organisation
for audit work, following two matter must be considered :
(i) Size of Staff : Auditor must estimate the quantum of audit staff I·
•rick-wor~ ;s orresponding to them. It is of mechanical nature. So,
different ~1c. s c monotonous work. But it is very essential/important. It
gener .
ally 1t 1s a
tant role in audit planning, thus, should be done ID
. I
·I
required for audit work. For this following factors should be Jays impor .
P h nsi·ve and sap1ently manner. .
considered : Nature of business, size of business, measures of co(llpreObjects
e •
of Routine Checking ·
: Followmg are th e ob'~ects o f rou u· ne
internal control, type of audit (internal or statutory), time taken
for audit work etc. cbecking
1. :To check mathematical
· and structural accuracy o f b oo k s o f
(ii) Division of Work : Audit work must be divided among staff as
per their skill, knowledge, ability and experience. Thus, lower accounts.
clerk should be assigned with easy task and upper clerk with 2. To ascertain proper posting from opening balances and whether
technical task. or not closing balances are computed correctly.
3. Use specific symbols to ascertain whether figures are altered
IV. Working System of Auditor
after audit.
Audit work of an auditor is based on various system (routine check Advantages of Routine Checking : Following are the advantage~
test check, surprise check). Also use symbol/sign in checking. So, befor~
starting audit work, auditor must not only clarify to his staff about uses merits of routine checking :
1. It is a simple checking. So, it can be conducted by person of
of specific symbols but also notify signs in writing.
Different symbols are used for different type of work. Like normal qualification.
r .r \ Y 8 L o r 1, L- '\,.,.
2. It facilitate quickly checking of mathematical accuracy of
opening balances. If any irregularity is left, than it is corrected
Following precautions should be taken while using them :
in initial stages only.
I. These symbols should be simple, clear and small in size.
2. Different types of symbols to be used for different purposes. 3. It also help in finding whether proper posting of opening
3. Specific instructions must be given to organisational employees balances into ledger done or not.
not to use these signs in books of accounts. 4. We know that routine checking involve use of various symbols
4. Symbols must be kept confidential. and coloured pencils. Hence, it helps in ascertaining any
5. Use different types of colours and pencils for symbols. alteration done in figures after audit.
6. Place where internal auditor has used the sign, external auditor 5. Routine checking easily depict the normal fraud and error.
should not use the same place for putting sign. 6. It is very helpful in final checking.
7. Specific sign to be used if figure is not clear, altered or deleted Disadvantage of Routine Checking :
to detect fraud easily. 1. Routine checking is mechanical. As a result audit staff feel
8. Try to complete one work is one sitting. If not possible, then monotonous and they do not work efficiently.
note the same, the level or extent till the working done. 2. Theoritical irregularities are not easily identified because such
Following two basis are used in work-procedure of auditor : testing is done by person with normal qualification or article.
(A) Routine Checking 3. Normal fraud and error are depicted by routine checking but
Meaning of Routine Checking : Every organisational institution Unable to ascertain (find) international error and planned frauds.
1ave books of accounts in any perscribed form. Checking of these books 1
4. ~uch testing is done in quickly and negligence manner resulting
f Accounts by auditor on daily basis is called routine checking. m presence of error.
 ·_..,...t*,;., .. .1., .+,-·,~t,·:a·aststttr)l,,.;aa
...._......-..;.u .. ·-•:,- ···········•.:,=.,-
. _.,,-~ ,:';,,:.:-fr-~
2.17
. programme
'2.\6 Audit Prograrn,ne J,rtdtl suit in cost saving since audit work completes in shorter
z It re .
To prevent from \imitations of the Routine Checking, following tw 0 · an of time.
• tssured/correct results are obtained provided sample represent
suggest\Ons may be adopted : 3· . an efficient manner. . .
Routine checking should be done (i) under the supervision or
~uditor can utilise saved ~ime and efforts in other core areas.
trained staff and (ii) provide training to them. 4· It facilitate improvement m Internal Control System (ICS) of
(B) Test Checking 5.
audit. ·
Meaning of Test Checking : Test checking means checking of a few It facilitate continuous ethical improvement among employees
6 because who knows which work and when to be included in
·
representative items among the similar nature items. In other words, in test
checking auditor select a few sample from the entire population (or test checking.
selection of few accounts by auditor every year). These selected items1 . dvantages of Test Checking : Following are the disadvantaged
D1sa .
accounts represent the group from which they are selected. There after in. of Test Checkmg :
depth examination of those selected items is done by the audit staff. If Result of test checking is comparatively less reliable because
1
samples are correct then entire working is considered correct otherwise · correctness/validity depend upon sample.
consider wrong or defective. Such checking is called test checking. . Auditor may hide his part of negligance with the help of test
2
Determinant factors for the use o( Test Checking : In determining checking.
extent of test checking, Diksy stated that, "While selecting items for test 3. Increases responsibility of auditor because he is responsible for
checking, samples should represent the entire group to be audited means those areas also which are not covered in test checking.
selected items must be out of (i) different types of transactions, (ii) different 4. It fails to detect planned frauds.
type of workings, and (iii) transactions of whole year." 5. Auditor's report is not much benefitial to organisation as
Following should be considered by auditor while determining the conclusion are drawn based on samples (or sample basis).
extent of test checking : 6. Employees of organisation become irresponsible and careless
I. Test checking should be done keeping in mind the purpose of as they think auditor will check only selected accounts.
checking. 7. Not benefitial for small enterprises having limited number of
Z. Detailed checking of important business transaction should be transactions.
done. But test checking may be adopted for large sized business. Auditor's Position Relating to Test Checking : It is observed that
3. If audit is done in preceeding financial years also, then it may test checking will result in easy working of auditor, saves time, utilising
provide basis for deciding the extent. time and efforts in other areas, and improvement in Internal Control
4. Auditor must follow the rules and provisions in detailed System. But they must be very careful while test checking because they
checking of certain transactions is required as per the rules are only responsible for any harm through test checking. Although IICA
applicable on organisation. has permitted the test checking by considering is effectiveness, but auditor's
5. In depth examination of every cash and stock· account responsibility is not only upto the sample selected, but for the entire
transaction should be done as these areas have more chances of trans~ctions of the organisation. Hence, test checking will reduce the
fraud and errors. working of auditor but not the responsibility.
6. Items for test checking should be selected in a manner that they
are representing the entire business.
V. Audit Working Papers (Working Papers)
7. Detailed checking is not required if it is proved that managers th Meaning of Audit Working Papers : Audit Working Papers are
0
and t~p. officers are loyal and trust worthy, otherwise due care d~e Working Papers which are prepared by auditor in relation to every
au it and au d.ltor gets from his
. employer. In other words, documentat10n .
and diligence should be required. d
8 - ~etaile~ checking of transactions having doubt or irregularities otne by auditor from his appointment till the conclusion of audit, including
1e ters wo k " . . . ted u,
rs required. Papers.' r mgs, cert1ficat10n and accounts, are called audit rela nork"mg
of Te~t~~::~; ~r Test Checking : Following are the advantages/merits
•A.W. Johnson says, "Audit working papers are the written provide
111a1enals
l. Less time required to comp1ete audit
. of large sized organisauon-
. . aec . • wh"1c h an auditor prepares for each audit.
· They d"1scn'be the
ounting information which are received from his client, the methods of
_.. ......

.\%
Audit Programme
!x.aminations used, his conclusion (with reason therefore) and the financial
statements:•
Documents or papers included in audit working papers are :
\. Agreement regarding appointment of auditor or appointment
letter.
2. Features of audited business.
3. Audit programme.
4. Audit Note Book.
5. Correspondence, knowledge and information regarding audit
programme.
6. Audit sheet containing required detail and calculations done
by auditor.
7. Bank reconciliation statement.
8. List of vouchers missing.
9. Relevant information regarding organisation or business.
10. Statement, information and certificate received in connection
with audit working.
11. Certificate received from employer, e.g. certificate regarding
valuation of stock, etc.
12. Copies of clause and articles of business or their important
portion.
13. Details of debtors and creditors.
14. Details of Investment.
15. Copies of agenda of Board Meetings.
16. Copies of minutes of meetings of shareholders and management.
17. Depreciation related details.
18. Opening and closing trial balance.
19. Copies of documents which auditor wants to keep up with him.
20. Copy of audit report.
Object and Utility of Working Papers : To prepare audit Working
Papers and Safeguard for future, following are the objects :
1. Defensive position : Audit Working Papers provide defensive
position during legal dispute and court proceedings.
2. Complaince of statutory requirements : Statutory requirement
includes deposit of tax, license etc.
3. Work management : It facilitate easy work Management.
4. Helpful to auditor in future : Helpful to auditor in making
audit programme for same organisation in future.
5. Use as a reference : Terms, conditions and agreement decided
between auditor and client can be used as a reference in future.
6. Information about Internal Control System : It provides
information about weaknesses of Internal Control System and
true and fairness of accounting system of the client.
7•
Appraisal of employees working: Auditor evaluate the working
of audit staff through audit working papers.
11111
2.19
d'tI programme
,4u Certify correctness of report : It certify the accuracy of report
8. prepared by au d.1tor.
• of Good Audit Working Papers
1
~sentia s d Audit Working Papers plays an important role to auditor :
Goo . • . •a1
h Id be prepared with due care and consider followmg essent1 s :
fhese ;. ouClarity : All the information in Audit Working Papers should
be clear.
2. Completeness : Audit 'Yorkin~ Papers must contain all relevant
information so that thetr possible use can be made.
3• Relevant Information : Audit Working Papers must contain
only significant and relevant information.
4. Arranged in appropriate way : Audit Working Papers should
be arranged in a manner which facilitate quickly finding of any I/
date.
5. Good quality papers should be used : Papers used in audit
Working Papers should not only of good quality but also of
appropriate size.
6. Leave Space for Comments : Essential for a good audit Working I
Papers to leave sufficient space offer every comment so that /11
auditor cari use that space for writing their decision.
'l
Standard on Auditing Relating to Utility, Ownership and Custody
of Audit Working Papers : Following are the considerations in SA-230
regarding utility, ownership and custody of Audit Working Papers :
1. Utilisation to Audit Working Papers : Audit Working Papers are 11,
prepared by auditor to facilitate smooth functioning of work, to write
down all relevant facts rather than to left them on remembrance power, and
to provide a basis to clarify your position in future.
. 2. Ownership of Audit Working Papers : Here the important question
is who held the ownership of Audit Working Papers. Client and auditor
~ave different beliefs and arguments in this relation. Client content their
,IH
nght _on audit Working Papers, reason being auditor has obtained these
~orkmg Papers to fulfill their responsibilities and it contain confidential
information about business. Auditor may misuse this information if not
:pointed by company in future. So, Audit Working Papers should be in lj
e ownership of company.
'
be Contention of auditor state their ownership on Working Papers
· be cause it is prepared or obtained by auditor to conduct audit, and can
gr used by auditor, in future as an proof to show he is not responsible for
vts~ n_eg!igence. Upswitch Mills v/s case and other case "Soucockinsky
the: nght Grahm and Co." case are relevant in this matter. Decision of
e case were also in the favour of auditor.
3
Safe! • Safe Custody of Audit Working Papers : Generally, auditor keep
of h{s Work.
lhese Working Papers for reference, future guidance and as a proof
_J
 .,
2.21
rarnrne
t.1(.) Audit p,og
J
Audit Programme laced depend on this nature. The extent of reliability on
•:JJlce can be upon Internal· Control System of company.
'Bu\ wha\ is duration or But how long ? Thus, according to Sec. 128
rehdence depe~ are the documentary evidence obtained through
ot Companies A.ct, 2013, Company has to preserve their books of accounts ,vi follow1ng .
for '6 years. So, keep them in safe custody for same period, because may
be required in future in case of any dispute. But as per suggestion/opinion pection : rnentary evidence produced and held by third party.
5
Jo (i) oocu rnentary evidence produced by third party but held by
of lCA.l auditor has to preserve audit and their related records including
(ii) oocu .
routine correspondence and other documents for 10 years. 0
rganisatton.
.• . urnentary evidence produced by organisation but held by
Audit Evidence (AE) (111) 0 oc
) third party.
Meaning of Audit Evidence : Generally evidence means all such . D cumentary evidence produced and held by organisation.
evidences/proof which provides approval of transactions entered in books (iv)Oboervation : It includes observing work done/performed by
of accounts and all such evidences are collected through which books of 2· h:r or not sufficient and proper, and on this basis consider them .
accounts show tnie and fair view. others ~bet_ dences. Like-stock valuation process. It is either adopted by
Audit is a logical process in which auditor express an opinion on as audit ev•or internal control technique adopted by organisation.
working of business and whether financial statement showing true and fair ei!IP10~ee;nquiry and Confirmation : Inquiry includes answering to the
view. To draw conclusion auditor require sufficient appropriate audit . · aire from organisation employees and external parties whether
evidence. All such information, either written or oral, used to draw quesuonn
. r oral, .which prov1"de bas1s
. & 1or ev1"d ences.
conclusion, are called audit evidences. wntteno · · n/ co~ f"mnat10~
· 1s
· obtam_
· ede1or
There are various types and forms of evidences, such as : In confirmation, ~ntten rep~esentalio
authorisation/ sanct.ion by authority, receipt/acknowledgment given by •d'ty of transaction m accounting records. L1ke-aud1tor car dlfectly
vall I • f db
recipient, confinnation issued by store on receipt of material, invoice of · ledger balance conflfmatton rom e tors.
b
otam
supplier, details of accounts, petty books and agreements etc. 4. Computation : I"ld t me u es mat hemat1ca · 1 accuracy of accounting
.
Apart from that, information obtained through discussion with ords and their sources and involve independent computation by himself
management may also treated as evidences. ;check mathematical accuracy of accounts.
Classification of Audit Evidence s. Analytical Review : Here, auditor is required to do ratio analysis
Audit Evidence are classified into two categories : on the bais of significant information provided in financial statement, to
1. Internal Evidence : Internal evidence are those evidence which draw various conclusion. It provide additional information regarding trend
are obtained from within the organisation and not involve external party. of business whether it is progressing or not. This analysis also provide
Such as-duplicate sale invoice, employees time sheet report, stock report, evidences to auditor.
Jabour wages sheet, petty cash book etc. Procedure of Obtaining Audit Evidences
2. External Evidence : External Evidence are those evidences which Following procedure adopted by auditor for obtaining Audit
are obtained from outside the organisation. External Evidence includes Evidences :
balance confirmation/written external confirmation obtained from person 1. Compliance Procedures (CP) : This is a type of checking in
having financial transaction with company, who made payment or who which the methods of internal control which one more reliable in the
received any amount. Like-receipt of recipient, purchase invoice, order of opinion of auditor are adopted by the auditor. For obtaining audit evidences
court, stay order or bank details etc. Auditor may also obtain External ilirough this method, auditor relates to following :
Evidence directly externally, in few transactions, such as-Balance (i) Internal Control System are in existence.
confirmation in bank account, balance confirmation of debtor and creditor (!!) Internal Control System working in an effective manner.
etc. similarly auditor may also obtain evidences directly such as-Bank (Ill) Internal Control System operating effectively throughout the
Statement, Mortgage of securities, debtors, loan amount etc. audit period to ensure that they can be relied upon.
Methods of Obtaining Audit Evidence : e . Thus, Compliance Procedures helps the auditor in determining
In audit standards, methods and execution of audit, any of the ~is,tence _of system, efficiency and continuity of business. After
following can be used to obtain evidence : pementmg Compliance Procedures auditor decides the natural timing
and eu . '
1. Inspection : Inspection includes examination of various System~nt of audit procedure based on reliance placed on Internal Control
documents, intangible assets and records, done by auditor. Examination of '
records and documentation result in obtaining variou~ ~vidences, on which
_____......
 ...
2.22 \ 2.23
Audit Prograni 1
. j .i;r programme bl' . n/d d 1· b"I' f d' t
. l. Substantive Procedures (SP) : Substantive Procedures includ """ ... Name, address, o 1gat10 uty an 1a 1 1ty o rrec ors.
deta1\ed/comprchensive analysis of transactions and analysis of signific es (~JI) Description of accounting system.
ratios to ascertain reasons of major functions or irregularities. As a res~t (iv) Details of Internal Control System.
(v) Financial and Administration Organisational Structure.
it help in determining completeness, accuracy and validity of transactio
Thus, Substantive Procedures are test designed to obtain evidences n~. (v~\ Provisions of memorandum and article of association of a
(vii company and partnership deed of a firm.
ensure the completeness, accuracy and validity of date produced bo
accounting system. y (VIII
... ) Copy of important agreements in which client is a party such
It is of two types : as royalty agreement.
I. Test in details of transaction and balances. 2. Significant Matters :
2. Analysis of significant ratios and trends which includes (i) List of lost vo~chers. . . . . .
investigation of unusual fluctuations. (II") Description ofd'megular1t1es, quahfications and frauds noticed
Extent of Reliance of Analytical Procedures during the au 1t.
Application of analytical procedure is based upon the expectation (iii) Relevant/significant information regarding company, not
of relationship among data exist and will be continue in the absence of disclosed in books of accounts.
known condition to the contrary. (iv) Weaknesses in Internal Control System.
Presence of these relationship provide audit evidences as to (v) Qualification against which sufficient appropriate audit
completeness, accuracy and validity of data produced by accounting
system. However reliance on the result of analytical procedure will depend
evidences were not obtained.
(vi) Significant matters required to be informed/communicate to
II
on auditor's assessment of risk that the analytical procedure may identify employer. ,i
relationship as expected when, infact a material misstatement exist. (vii) Suggestions by audit staff
Extent of reliance placed by auditor on results of critical methods Advantages of Audit Note Book : Following are the advantage of
depend upon various circumstances. Audit Note Book :
Principles for Assessing the Realiability of Audit Evidence : 1. Helpful / Assistance in Audit Work : Audit Note Book is very
Though reliability of audit evidences depend of on those helpful in auditing work because it includes writting of various significant
circumstances within which they are obtained. Still following principles matters. It provide basis for doing audit to auditor and its staff.
may be useful for assessing reliability of audit evidences : 2. Skills and Qualification of Auditor : It helps in recognising not
I . External evidences (like confirmation from debtor) are more only ability and qualifications of auditor, but also skills of auditor.
reli able then internal evidences. 3. Information about Progress of Work : Audit Note Book helps
2. Internal evidences arc more reliable of Internal Control System auditor to know how much work is completed and how much is yet to
is satisfactory. · complete.
3. Written confirmation and evidences arc more reliable than oral.
4. Proof in Court : If dispute arise between client and auditor and
4. Evidences obtained by audit for himself are more reliable.
case is filled against auditor, the Audit Note Book can be used as a proof.
VI. Audit Note Book (ANB) 5. Helpful to auditor in future : In future if auditor is doing audit
Meaning of Audit Note Book : Audit Note Book means a boo~ or of the same organisation than audit note book will be every helpful. I
1.1 register (which includes) in which important information and qualifica~wns
Auditor can gether required information about the organisation by going
required during the audit, information obtained from employer (or cltenl) lhrough the audit note book.
and other relevant facts arc wrillcn by auditor which is helpful during ibe 6. Helpful in reporting : It provide basis for audit report which is
audit. k submi1ted by auditor after completion of audit.
Informations Including In Audit Note Book : Audit Note Boo d .. On focusing the importance and advantages of Audit Note Book,
often includes following information ~ision made by judge in 'London and General Bank case and City
J. General Informations ne ~\ty Ilill Fire ~nsurance Co. Ltd.' is that auditor i_s _not respon~ible for
.
(i) Outlay of business g gcnce. Auditor has appl1'ed his due care '. d1hgence, skills
corn • . .
and
Pehenc1es during work. So, he is not responsible for negligence.
L
(ii) List of Ilooks of Accounts
......
,
2.24 2.25
Audit Program . programme
D" d IIJe ~~d,t . the responsibility of an auditor in test checking ?
. 1sa vantages of Keeping Audit Note Book : Following . Whal ,s . . (Kota University, Kota, 2015)
disadvantages : are the 22
orks are included m routine check ?
I. Audit staff start focusing on shortcomings of others.
2. For preparing Audit Note Book, employer has to plac 23 . Whal w (J.N. V. University, Jodhpur, 2015)
. • e much
re11ance on their employees. It may result in harmful situ r wer Type Questions : ,
3. ~t may ~e misused as a proof in court if it is prepared by a:d•~n. 5bort ,Ans_s Audit Programme ? Discuss merits and demerits of Audit
What 1 • .
m negligence manner. or J. arnme. (Kota U111vers1ty, Kota, 2009)
Often it may arise dispute among audit staff and employees.
4. rrogr charactensucs
G' · · !?f an A ud'tI Programme.
2. ive (M.D.S. University, Ajmer, 2008)
IQUESTIONS l 3·
Discuss the obje~tives' of ~udit Prog~amme.
(University of Ra1asthan, Jaipur, 2013; M.D.S. Umversity,
. .
Very Short Answer 'fype Questions : Ajmer, 2010)
I. What is Audit Programme ? (Kota University, Kota, 2015; Draft a Audit Programme for a business concern.
4 · (Kota University, Kota, 2013)
University of Rajasthan, Jaipur; 2009, 2015)
2. What is meant by Audit Programme ? Write five essential element of a Good Audit Programme.
5
3. Define 'Audit Programme'. (University of Rajasthan, Jaipur; 2004) : What do you mean by Audit Programme ? Discuss its advantages.
6 (J.N. V. University, Jodhpur, 2012)
4. Write the characteristics of Audit Programme.
(M.D.S. University, Ajmer; 2008) 7. Discuss two advantages and two disadvantages of Audit Programme.
5. What are the objectives of Audit Programme ? (University of Rajasthan, Jaipur, 2010, 05)
(M.D.S. University, Ajmer; 2012) 8. Write note on Audit Programme.(M.G.S. University, Bikaner, 2010)
6. Discuss two advantages of Audit Programme. 9. What do you understand by 'Flexible Audit Programme'.
(University of Rajasthan, Jaipur; 2007) 10. Discuss the Audit Procedure in brief.
7. "Audit Programme is a mechanism function." Explain. (J.N. V. University, Jodhpur, 2012)
8. What is Flexible Audit Programme ? II. What are functions of Routine Checking ?
(University of Rajasthan, Jaipur; 2006) (University of Rajasthan, Jaipur, 2009)
9. Routine Checking. (J.N. V. University, Jodhpur; 2012) 12. Discuss four demerits of Routine Checking.
10. What is meant by Routine Checking ? 13. Write four determinant factor to extent the use of Test Checking.
(University of Rajasthan, Jaipur; 2008) 14. What are the differences in Routine Testing and Test Checking ?
11. Give the definition of Routine Checking ? (Kota University, Kota, 2010; M.D.S. University, Ajmer,
12. Discuss the objectives of Routine Checking. 2009;University of Rajasthan, Jaipur, 2009)
(Kota University, Kota, 2013, 2015) 15. What is Test Checking ? (M.D.S. University, Ajmer, 2013;
13. Discuss two merits of Routine Checking. University of Rajasthan, Jaipur, 2012)
(University of Rajasthan, Jaipur, 2009) l6. What are the responsibilities of Auditor relating to Test Checking ?
14. Write four points of disadvantages of Routine Checking. (Kota University, Kota, 2012, 2011)
17 - "Test checking reduce the workload of Auditor, not the
15. Narrate two demerits of test checking.
(University of Rajasthan, Jaipur; 2013) responsibilities." Explain this statement.
16. Audit Working Papers. (J.N. V. University, Jodhpur, 2010) 18 (J.N. V. University, Jodhpur, 2013)
17. Write for objectives of Audit Working Paper. · What are Audit Working Papers ? Why should they be carefully
18. Note Book of Audit. (J.N. V. University, Jodhpur, 2012) preserved by auditor ?
19. What is Audit Evidences ?(J.N. V. University, Jodhpur, 2014, 2010) . (Kora University, Kota, 2015; J.N. V. University, Jodhpur, 2014)
19
20. What is Analytical Review ? : int.e n~te on Audit Note Book. (Kota U~iversity, Kota, 2009)
20
21. If an Auditor is continuous auditor of any entity then what will be istmgu1sh between internal and external evidences.
r
the base for preparation of audit work planning. 4) 21, (J.N. V._ University, Jodhpur, 2013)
(J.N. V. University, Jodhpur; 20l Who had the ownership of Audit Working Papers ? .
(University of Rajasthan, Jaipur, 2014)
111111111