CHAPTER S

AUDIT PLANNING

Preparation before commencement of audit-Audit Planning-Developing an audit plan-SA 200 planning an

audit of financial statements Audit Rrogramme-Advantages of audit programme-Disadvantages of audit
programme-Audit Programme for Cash -Audit note book-Contents of an audit note book--Advantages of
audit note book-Limitation of audit note book-Audit Working Papers-Purpose of working
and content of working paper-Ownership of working
papers-From
papersProcedure of audit-Routine
checking
Advantages and disadvantagesTest checking-Deciding the sample -Organisation of auditor's staff
Audit Risk-SA 220 Quality Gontrol of Audit of financial statements-SA 250 Consideration of Law and
regulation in Audit offinancial statèments-Tutorial Assignment.

PREPARATION BEFORE THE COMMENCEMENT OF AUDIT

Proper execution of any work requires appropriate planning and programme of action. Before
commencing a new audit an auditor should take the following steps:
1. Ascertain the Scope of Duties. First of all an auditor should ascertain the precise nature and
scope of his duties. In the case of a statutory audit the scope of duties can be ascertained
to the statute
by referring
e.g. to ascertain the scope of duty under Companies Act, and auditors should
understand what is expected form him. In other cases, he should discuss the
who is going to hire his services.
things with theperson
2. Procure
Engagement Letter. When auditor decides to accept an audit engagement, he should
procure an Engagement Letter from the client. The letter is for all purposes an audit contract. It
should lay down terms of the audit contract and the
the client. The letter understanding reached between the auditor and
may be a standard letter engaging an auditor for audit of the accounts
in accordance with
established accounting practices. In case the auditor is to
prepared
assignment or tasks, the same should be included in the engagement letter or audit perform
contract. special
Such a
letter or contract is highly desirable to avoid any misunderstanding with the client: The letter will
also prove to be
handy, if he is accused of not performing the work promised by him.
3.
Knowledgede about business. A good audit cannot be conducted by confining oneself to the
accountant's office. An auditor should clearly understand the nature of business. He can make a
Deginning by going through the document available e,g. Memorandum of Association in case of a
mpany and partnership deed in case of partnership firm. It will be desirable for an auditor to visit
u actory site to appreciate the nature of transaction which are recorded in the bookS of accounts
Sucn a visit
will enable him to understand the nature of men, material and
process of production. machinery involved in the
An
auditor should understand the broad economic environment in which the
client operates.
 3.2 AUDIT PLANNING AUDIT PLANNING
3.3
This will require to know the economic policies (e.g. price regulation or import restrictions), tax audit plan shall be based on:

other regulatory provisions applicable to the business. Industry characteristics should also be clo A good
understood. Further, a visit to the plant and office can help him in understanding the layout, phys knowledge of the accounting system in the organisation and its policies and internal control
kn

ical procedures.

facilities and information systems. of the internal control system.

i) reliability
Knowledge of the Accounting System. The auditor should obtain
4.
a
list of all boo. i ) programming of he nature, timing and extent of the audit procedures to be performed.
maintained by the client alongwith information relating to internal control system. The extent of
control and accounting system.
his co-ordination of the work.
work will be greatly influenced by the reliability of internal (iv) good
be made to cover, among other things
5. List to Principal Officers. The auditor should also
obtain
list of the principal officers of h. Plan should
about the extent and scope of authority of each on of the clients accounting systems, policies and internal control
a l acquiring knovwledge
organisation. He should also acquire knowledge ne
procedures;
of them.
about the b)establishing the expected degree reliance to be placed internal control;
of
6. Knowledge of Technical Details. He should
also acquire some knowledge technicl on

details, if of the business. This

any,
enables him to grasp the nature of
transactions which will be cl determining and programming the nature, timing and extent of the audit procedures to be
subject matter of the audit. performed; and
if An auditor should also enquire into special the work to be performed.
7. Enquiry into Special Circumstances, Heany. to be careful about the implication o
(d) co-ordinating
circumstances, surrounding his appointment. is required of audit, if a need is felt for revising the audit plan, auditor should not hesitate
During the course

such speial circumstances. In case, he is being appointed

in place of another auditor, it becomes hit
communicate with the auditor, in whose place
he is being appointed. to do so.
professional duty to
Audit Plan
S. Instructions to the client. After completing
the aforementioned steps, he should issue clear Developing an

plan after
of expected scope of the assignment, a n auditor should prepare
a

instructions to his client on the following lines :

In the light
audit. considering the following
points:
1. should be finalised and kept ready for
Accounts
responsibilities under the assignment.
and made available. The schedules required are (a) The statutory
2. The necessary schedules be prepared
bad and doubtful debts, schedule of fixed
schedule of debtors and creditors, including (b) The term of engagement.
assets, schedule of outstanding expenses, prepaid expenses and income, schedule of rules.
of acquisition and market price, stock sheet,
(c) The applicable legal
investments with details regarding cost and timings of reports.
valuation of stock, a statement indicating the capital (d) The nature
alongwith value and method of in the organisation and changes, if any.
statement of defferred revenue expenditures, if (e)The prevailing accounting policies
expenditure incurred during the year,
a

( The significant audit

a r e a s .

any. audit under

AUDIT PLANNING3 (g) The effect of any
new accounting o r audit pronouncements on the
consideration.
In fact planning
of a n audit; audit planning is necessary. o n specific audit a r e a s .
For effective and efficient conduct
c o u r s e of audit assignment.
The auditor should plan his work (h) Possible rotation of emphasis o v e r a period
should be continuous throughout the and control
) Reliability of accounting systems.
effective audit in a n efficient and timely
manner.
to enable him to conduct an chances of error and fraud are more, areas
The areas requiring special attention eg. where
planning has the goals of G)
:
The first steps in the audit officials of the organisation.
of personal interest of directors and other important
(a) developing time budgets,
(k) The nature and extent of audit evidence to be
obtained.
b)assigning audit staff personnel, audit of branches o r subsidiaries.
(1) The work of internal auditors in the
end audit procedures.
(c) scheduling dates for interim and year
hours expected to complete the work. The budgeted (m) The involvement of experts.
A time budget lays down the number of
6u
involvement of other auditors like branch
auditors.
time c a n be broken down category-wise o r activity wise. For example he may decide to spend (n) The for its
report preparation etc. auditors and the procedures
hours o n work o n cash, 100 hours o n work o n inventories and 20 hours for
(o) The allocation of work to be
undertaken between joint
The staff assignmernt should be according to: control and review.
(a) capability. P) Establishing and co-ordinating staffing reqirements. can be decided by
b) avalability, extent of written plan
in black and white. The
(c) rotstion amongst clients, he auditor should put his plan
him in the light of size and complexity of organisatiO1.
td) opportunity for on
the job training.
 3.4
AUDIT PLANNIN
AUDIT PLANNING 3.5
Advantages of Audit Plan
to:
Audit programme represents an outline of procedure to be followed to support an opinion on
Adequate audit planning helps It provides a plan of the work of examination and a
attention is devoted to important
areas of the audit;
financial statemernts. it
is
the aHaitor s plan offoraction.
each audit.
(a) e n s u r e that appropriate proceaureS. peciticaly designed
a r e promptly
identified ; etof audit
(6) e n s u r e that potential problems According to Megis, an audit programme is a detailed plan of the auditing work to be pertormed
()ensure that the work
is completed expeditiously; eneciying the procedure to be followed in verification of each item in the financial statements and giving the
and estimated time required.
(d) utilise the assistants properly ;
as, outline of all procedures to be followed in order to arive at an

by other auditors and experts. Stettler defines

an
audit programme "an
(e) co-ordinate the work done statements."
c l i e n t s Tinancial
concerning
Statements. opinion
Audit of Financial "a of examination. Thus, audit programme is a
Holmes describes
it
as, flexible planned procedure
SA 300 (Revised) Planning
an
be able to complete his work in a diligent manner and complete
auditor so that may
he
lanning of audit by the
(w.e.f. April 1, 2008) audit of financial statements. An the work without l o s s of time.

with auditor's responsibility to plan Jack. C. Robertson statesspecific programme is a

that, "an audit audit listing of evidence gathering procedures
(i) Scope. It deals of audit. practical objectives"
members of team shall be involved in planning considered necessary to satisty

Activities. At the beginning of current audit, the auditor s Thus the programme
formulation begins with recognition of specific objectives followed by
(ii) Prelinminary Engagement as per SA 220, evaluating compliance
of elhi to produce sufficient competent evidential matter
relevant to the
undertake performing procedures specification of procedures designed
terms as engagement as per SA 210. He sh
as per SA 220 and establishing objectives.
requirement of auditors. written audit programme setting forth the procedures that
are
auditor where there is change
The auditor should prepare
a
also communicatewith predecessor for each
overall audit strategy that sets the SCOpe The programme may also contain the audit objectives
The auditor shall establish an needed to implement the audit plan. instructions to the assistants involved in the
(iii) Planning Activities. of audit plan. have sufficient details to serve a s a set of
the development area and should
timing and direction of audit which guides execution of work. It should act as a guide in arranging and
its scope. audit as a means to control the proper
of the engagement that defines of omissions.
(a) Identify the characteristics to plan the timing of audit and distributing the work and in checking against the possibility
of the engagement with. Preliminary
(b) Ascertain the reporting objectives while to prepare a preliminary audit programme to begin
It may be worth
the nature of communication required. both testing of the internal accounting control systems and
programmes prepared
for compliance
in directing the engagement team's effort. balance.
c) Consider the factors that are significant substantive testing of accounting
and where applicab internal control on which auditor intends to rely
are

(d) Consider the results of preliminary engagement activities the engagemat Compliance tests of the existing system of
control
of internal
on other engagements performed by standard of work. A proper study and evaluation
whether knowledge gained required to determine the auditor observes control
relevant. tests. First is observations test in which
partner for the entity is includes two types of compliance
is detailed tests of transactions. This involves
and extent of resources necessary to perform te trail of documentation. Second
(e) Ascertain the nature, timing procedures that leave no of control procedures.
engagement. examination of documents that indicate performance
each major class
a n audit plan that shall
include a description of done in four-step approach. Under this for
(iv) The auditor shall develop The evaluation of internal control can be
of planned risk assessment procedure and further audi
of transactions and related assets perform the following steps:
(a) the nature, timing and extent
at assertion level. Consider the
1. of errors and irregularities that could
type
occur.
procedure and
to be carried out. that prevent or detect such errors
(b) other planned audit procedures that are required 2. Determine the accounting control procedures
(v) The auditor shall document: irregularities.
(a) overall audit strategy 3. Determine whether
(review phase)
(b) the audit plan (a) the necessary procedures are prescribed
(c) any significant changes made the overall strategy or audit plan and reasons for sun followed satisfactorily (compliance testing phase.)
(b) they are being or non-observance
of control
changes. Decide what effect the absence
Evaluate weakness, if any.

AUDIT PROGRAMME procdures have on

and
(a) the nature, timing, or extent of other auditing procedures,
Proper implementation of any plan depends upon a good programme. Even a computer gve
client.
good solution, if it is provided with correct and sound programme. Therefore, auditor should cnal (6) suggestions to be made to the
weaknesses of the internal
information about material
programme according to the requirement of each case as to what work is to be done by
senu results of these tests may reveal to give it the
n e w
out a
he the preliminary audit programme
or junior stal and the lime by which the work is to be finished. While preparing audit programn
system. After this, the auditor should change
contol
the auditor must keep in mind size and composition of the organisation and nature and extent
internal control.
final shape.
in columnar form providing
information regarding
the

a r e generally prepared
Audit programme
 3.7
AUDIT PLANNING AUDIT PLANNING
3.6
completion. and
Even of Audit Programme result into
date of commencement work, which may
doing the work, the type of work, its monotony in the
Disadvantage
name of clerk the responsibltY of the same ternds to introduce
him so that he owns programme
audit assistant signs the audit work performed by An audit the staff without
any s e n s e of responsibility.
by
A proforma of the audit programme is given. mechanical performance Audit Programme a r e
listed below
disadvantages of an effected.
The possible mechanical, as a result initiative and efficiency a r e adversely
Advantages of Audit Programme audit programme accoraing
to pre 1. The
task becomes
it within the scheduled
time.
be finished hurriedly complete
an to
Some of the important advantages
of conducting The task may organisation.
2. in the audit of a small
not serve any purpose a s the nature
of work
determined audit programme are and it, in 3. It does can not be applied extensively,
will cover the whole
of
the ground of the audit programmes
The auditor be certain that the audit staff they can see the 4. Uniformity can not be exactly
the s a m e .
1. can
staff are engaged upon
the
aualt, of different organisations
different members of the to pertorm. in the audit
future years, what work they
are required
tends to
introduce rigidity.
rererence to the programme exactly 5. It
assistants may also
take shelter behind the programme.
clear cut duties. Inefficient audit his staff that the programme
2. Audit assistants know their 6. auditor should impress upon
disadvantages a n in mind the objectives
these and they must keep
the audit assistants increases. To overcome which the audit is
to be conducted
3. Efficiency of Progress of the in itself, surprise checking
work done and general basis upon an objective
in touch with the Suggests the should not become
the impact of
4. It enables the
auditor to keep Execution of
audit programme
will also help
in minimising
of an audit. programme he should
work.
outside the predetermined
audit on one
standard audit programme,
in the
should not depend entirely
easier.
of audit assistants becomes The auditor from time to time
alleging review the audit programme
5. Fixing of the responsibility action is brought against
the auditor disadvantages.
audit staff and

s e r v e s as an
evidence, if at any time
an
receive suggestions
from
the management.
nature of business
or
6. It
of his duties. variation of
negligence in the performance light of PROGRAMME
7. The routine gets systematic.
of certain important
items requiring verification EXAMPLES OF AN AUDIT
a check against the possibility for cash
8. It provides Audit Programme and paymernt.
which being omitted. of cash receipts
are
for numerical sequence
o n duty is changed. 1. Account
niot lost e v e n if the person cash book.
9. Contirnuity is instructions to the
staff repeatelly. Check posting of
botheration ofissuing
chief auditor is saved from book and Petty cash book,if any.
10. The 3.Check Rough Cash/Receivables.
PROGRAMME review system for
SPECIMEN OF AUDIT 4. Examine and received.
of cheques
Name of client: .. 5. Check the banking
the vouchers for cash transactions.
Date of Commencement of Audit.. 6. Check
reconciliation statements.
7. Check bank
account.
Date of Completion of
Audit out of the bank
into the bank and payments
. .

Check direct receipts

information from previous audit 8.
. . .

Any special 9. Check

accounts.
posting into personal
Nature of Organisation... of Cash book.
Check arithmetical accuracy book.
10.
and vouchers having bearing on Cash
BouSales uSales Trial Gene
doledger ral Gene-otBal

& 11. Check other important

files
Bou-| Bouaht00KS Jour- Stock ral ance Return
Purchases/Purchases
Audit Programme for
ance ledger
I a l e d g e r ledger tlons Book h Balan-anca Wc
Che
YEAR BankBoK Che Che
review system for purchases.
& Post. Che
o Vou CE Checked CKed KEu
1. Examine and
ced ched ched cked goods. Inward
and authoristion for ordering
chers chers CKea Goods
Ings and
cked
2. Check authority with order book
invoice clerk and compare
3. Check invoices
checked by
January
Book. it.
Februey the department ordering
March 4. Check the approval of goods by cross casts of
the day.
Book check costs and
Apn 5. In case of columnar Day
May in Stock Register.
6. Check the entries the provision for
losses. with
Jure transactions check return and compare
forward
Juy 7. In case of concerned department
for purchase
note of the
Augus 8. Check the advise
Septemu on consigment.
invoice. for goods sent
Octaber Outwards Journal'
9. Check the 'Consignment
NovemDer
Decemuer
 3.8 AUDIT PLANNING AUDIT PLANNING
3.9

Audit Programme for Sales/Sales Return Audit Programmes

orders to the ultimate recoi- Types of
1. Review and check the system from the stage of customer's eipt of Broadly, there are two types of audit programmes, namely
cash. 1. Fixed audit programme
into sale ledger:
Check a representative number of entries in Sales Day Book and cashing 2. Flexible audit programme
invoice with sales accountt.
the absence of Sales Day Book check cashbook copies of sales be:
of classification
can
Another type
3. Check the entries for sales tax, if any.
for independent audit
with goods outward record. 1. Audit Programme
representative number of sales invoices
Check a
Programme for internal audit
excluded from stock. 2. Audit
5. Check that goods sold but still in possession
are
for Independent Audit
6. Check the valuation of goods. Audit Programme features like existence, valuation,
for independent audit will emphasise
on
Check the
accouting for of
7. Where goods are sold under Hire Purchase System. system An audit programme
treatment of interest element,
if any, and amount
of and disclosure, cut-off and compliance.
recording of instalments received, accounting principles salaries will focus on:
for audit of key officers' expense
unrealised profits. For example, a programme
for sales return, where Day Book is kept. properly employed.
S. Check the casts and posting to impersonal ledger 1. All officers are
General Body as the
of Directors or
with gate keeper's record. authorised by competent authority (Board
9. Check a representative number of entries 2. Salaries are

10. Check that credit notes are approved and

initiated by a responsible officer. case may be).
recorded in the expense account.
debts. all paid and
provisioning for bad and doubtful 3. Salaries were
11. Check the accounts.
other
the system of accounting for goods sold
on sale or return basis.
4. Salaries w e r e
not improperly classified in
12. Check
w e r e properly paid or accrued and properly classified
Other forms of compensation, if any,
Audit Programme for Salary Expenses of Key officers 5.
commission, bonus etc.
e.g. stock options, in accordance with legal
list of officers. particularly
current organisation chart and make
a
a r e complete,
1. Obtain a
Disclosures concerning compensation
directors meeting 6.
authorisations in the minutes of board of
or
Vouch this listto salary provisions of company law)
requirements. (e.g with their respective duties
under
general body meetings where law requires. 7. Individual officers and the company complied
3. Observe the individuals and their office locations. employment contracts.

salaries.
4. From the steps 1 to 3 above, list authorised for Internal Audit
Audit Programme as well as
sample of entries in the expense
account and vouch to («) payrToll journal (b) planning programmes audit is
5. Select a
audit staff is well advised to develop long-range
record (c) cancelled cheques Internal internal audit unlike independent
employee earnings individual assignment
audit programmes. The matters and management.
A long
account balance.
6. Add up the authorised salaries and compare to the expense ongoing, everyday
association with company
staff personnel,
assignments, assigning
characterised by an

7. Retrace payroll journal entries to posting in the expense account.

programme
is necessary for scheduling involves top management
range planning for the internal audit function. This
8. Inquire about the existence of any stock options or bonus plans. supporting the funding allocation
with management's operating
plans. Also the long
and co-ordinating This will also help in
9 Scan stock issue records for issue of shares to officers requests for audit assignments staff to evaluate performance
of themselves.
enables internal audit auditor.
10. Conform with stock register any reservation of shares for such plans. range plan auditor and internal the
of independent a m e a n s of aligning
i1. 1f there is a bonus plan, recalculate the bonus amount and determine that it has been paid co-ordinating the activities audit objectives a s
attention to their
The internal auditors pay
particular
or accrued.

audit with the needs of management. Internal Auditor.

12. Review detailed disclosures about salaries, compensation, stock options, bonuses with basic Auditor and
of Independent
evidence. between Audit Programme and internal audit is the
Distinction auditor
of independent is the
between audit audit the ultimate objective
programmes
13. Determine the legal cut-offs-for salaries etc. The main difference
audits. In c a s e of independent
to
e v a l u a t i o n designed
the respective internal audit, it is
a n
14. Obtain and read employment contracts, if any, and determine whether their terms have ultimate objective of the c a s e of dominance over
in takes
s t a t e m e n t s . However, efficiency
been satisfied. opinion o n financial the question of
enhanced managerial efficiency. Thus,
15. Determine whether there are
any unrecorded expense report o n the audit. auditor and
Contracts.
liability amounts based on
tn the practical objectives
of the independent
at the approach
of independent
clear by looking
be made
more

16. Workung papers should fully document all evidence

obtained by the above procedure The distinction c a n
c a s e of
salaries of key
officers.
in the
including evidence of errors and deficient disclosure. internal auditors, say
disclosures should be recommended and Corrective adjustments a n
documented.
 AUDIT PLANNING
3.10
AUDIT PLANNING
3.1
Independent auditor's approach in the of flexible audit programme.
to: auditor himself. However, difficulty
there is no such case

1. Review internal checks

designed and the prompt deletion.
#he
will need attention.
to the payroll an audit programme, following points
additions of names
of While modifying audit.
(a) Prevent improper from the rolls. 1. Any change
in the ownership of the organisation since previous
those separated in the authority or
in the organisational structure resulting into changes
n a m e s ot

of the hours
worked. 2. Any change
(b) Assure the accuracy and net salary.
responsibilities of employees.
mechanics of calculating gross of
Utility or otherwise of the working papers previous
year.
(c) Control the 3. audit
and its implication for the
d) Protect against
misuse of cheques 4. Any changes
in the books and records being
maintained

various deductions.
Review legislation concerning
programme.

or overhead areas.
in the internal control system and its' implication
for the audit programme.
distribution of labour costs to operating if
5. Changes, any,
3. Analyse
matters defined in the union agreement. notable change in the business due to
introduction of new products, entry into n e w
Examine wage rates and related 6. Any
4. diversification etc.
territories or

to any
Internal auditor's approach 7. Need for changes in the reporting due reason.

assignment of duties, organisation, staffinoand the evidence produced by

of the payroll departments of audit programmes will depend upon
1. An examination
loads followed in by sharp dip a activity. This Essentially, the modification of the procedures followed. Nature, timing
work flow. Payroll work is subject
to peak can This will also explain the relevance
the earlier programme. modification in the audit programme.
lead to inefficiencies. of audit c a n also force a
behind them. Is there poor and extent
The incidence and factors
2 An analysis of overtime payments. AUDIT-NOTE BOOK doubtful queries
by audit staff to note either clarified
errors,
planning? register maintained
with the
Audit Note Book is diary
a or
low as per the
industry trends ? be
3. An evaluation of labour
turnover. Is it
high, or average
The purpose is to note
down various points which need to to be
turnover? and difficulties.
book is also used for recording
important points
What assigned, if there is high
reasons are
chief auditor. The
audit note
the work during daytime? client or the record of doubts and their clarification.
work. Was it possible to complete Auditor's Report. It is a complete
Any overtime due to right be
which are to followed while included in the
1. Fixed Audit Programme.
It is a set of standardised instructions, Audit Note Book
procedures, although alof Contents of an
work performed
includes all possible audit information about the audit
conducting the audit. A fixed audit programme to take care of every possible
audit situation. An audit
note-book usually contains the following
situation. It attempts
them may not be applicable in a with this kind of the audit staff :
followed in each situation.The problem by
therefore, it prescribes procedure to be maintained.
1. A list of books of
team. Further, it is accounts
to the initiative of the audit
it is very rigid. Nothing is left officers.
programme is that over the years, as the duties and responsibilities of principal
even in the same organisation 2. The names,
difficult to follow the same audit programme and vouchers.
conditions in the enterprise are likely to undergo changes. 3. The particulars of missing receipts
detected.
does not prescribe the exact audit 4. Mistakes and errors
2. Flexible Audit Programme. A flexible audit programme for clarifications and explanations.
outline of the nature and limitations of the audit 5. The points calling
proced ure to be followed. It prefers to give scope,
an

the nature of work to be performed by each person

of the audit the attention of the auditor.
6. The points deserving
assignment. It does not predetermine
staff. Most of the things are decided as the work proceeds
and the reliability of procedures and 7. Various totals
and balances.

intemal control system becomes known to the auditor. Extracts from the minutes and contracts.
8.
flexible audit programme allows the auditor to develop, adapt and modify
the
9. The points to be part
of the Auditor's Report.
Thus, a
audit.
according to the needs of the situation. It also leaves scope for some initiative by the and completion of the
programme 10. Date of c o m m e n c e m e n t
audit staff if the situation so warrants. However the danger is that some important audit procedures
Note-Book
not be followed. Advantages of Audit below:
may
audit note-book a r e given
Some of the advantages ofan
Modification of Audit Programme the amount of work performed.
and helps in knowing
1. It e n s u r e s uniformity
An audit programme laid down and followed during a year acts as guide for next year's audit be easily recalled.
to the audit work may
the audit of the same organisation is to be 2. Important matters relating
programme. Understandably, even
if repeated, it may not
be possible to repeat the same audit programme. The changes since the last audit may call for 3. Facilitates the preparation
of the audit report.
the incomplete
is faced in continuing
is changed, n o difficulty
modifications. 4. In c a s e the assistant incharge
Modifications in a fixed audit programme are not work.
easy. Usually, the senior audit clerk 15 undetected can be fixed on clerk concerned.
authorised to mäke minor changes in the for errors
programme and major changes will require the of 5. The responsibility
approval
 AUD PLANNING
3.12 3.13
of the interest and pains taken by the as2dit stafí. l AUDIT PLANNING
book shows the extent
6. The audit note
(g) Copies of continuing
contracts.
helps in their appraisa. followed. Deviations can be of the company, its products markets.
audit programme has been sincerely 0h) A brief history
7. It ersures that the balance sheets of earlier years.
if an auditor has to defend himslf. () Copies
of
8. Itis a reliable evidence
in the court oflaw, that the permanent file is brought upto date at appropriate
time.
It is important to ensure
Note-Book
Limitations of the Audit
Administrative Papers (Current File)
the staff of an auditor, the audit note-hosl Audit
the audit work is conducted negligently by audit. Usualy these
In case
it is a document whose advantages Can Administrative records contain the fruit of early planning phases of the
evidence against the auditor himself. However, out do All the work done in the
current year's audit evidence papers.
act as an
papers are
bound together with the
of staff, evaluation of internal control and
audit programme
its limitation.
course of audit planning, assignment in the working papers.
AUDIT wORKING PAPERS of audit administration and is documented
preparation is a part
the following items may appear in
the print of each year's current'file:
files of analyses, summaries, comments Generally,
The term audit working papers designate the
of the field work of an audit engapem 1. Appointment letter
correspondence built up by an auditor during
the course

which are under audit.

ement 2. Memoranda
of meetings with the management
These papers contain essential facts about accounts
client.
are the written private materials, which an audite
of meetings with the audit committee of the
Amold. W. Johnson defines that "Audit working papers 3. Memoranda

prepares for each audit. They describe the he receives from his client. th
accounting information which financial 4. Memoranda of
review notes and unfinished procedures.
and the statements."
methods of examination used, his conclusions (and reasons thereof) 5. Audit time budget.
According to-Jack. C. Robertson, "Working papers are the auditor's own evidence of compliance with
standards and of the decisions respecting
all procedures necessary in tha 6. Internal control questionnaire.
generally accepted auditing control questionnaire.
ci:rcumstances unique to the audit engagement 7. Management
entrie, accounts analysis, schedule of
adjusting 8. EDP control questionnaire
They consist of draft copies of trial balances,
debtors and creditors, summaries of data reconciliation statements, certificates of official comments and flow charts.
9. Internal control systems
copies of correspondence between auditors and debtors, creditors and bañk, detailed schedules of 10. Audit programme.
item like depreciation, inventories, previous audit reports, important queries with explanation, audit
balance of general ledger accounts.
11. A working trial
programme and other important materials. of preliminary adjusting and reclassifying entries.
12. Working paper record
Classification of Working Papers
Audit Evidence Papers
Working papers can be classified into three categories contain the record of the procedures followed,
The current year audit evidence working papers in the course of audit. These
1. Permanent file papers evidence obtained and the decisions made
the tests performed, the these must be clear, concise,
2. Audit administrative papers, and themselves are communications of the quality
of audit. Therefore,
papers
well-indexed and informative.
3. Audit evidence papers. complete,
so that this may be removed
from the working
Each separate working paper must be complete,
Permanent File Papers cross-references should be available to show, how the
paper file and
considered on its own. Paper
The permanent file contains papers of with other working papers.
continuing interest over many years audits of the same paper co-ordinates
client. The file can be used year after year. It is a
ready source of information for the first time audit evidence papers in the requirement that they
The most important aspect of the current audit
familiarisation with the client for the staff sent for the audit. The matters contained shall be conclusions. Thus the paper's must record the
suitabily show the auditor's decision problems and their and the
indexed. These should normally include: the evidence gathered for the purpose
issues being addressed or the problem being probed,
(a) Memorandum and articles of association and other narrative or pictorial. The form will
statutory documents (e.g. final decision. These records can take many forms-numerical,
deed.) partnership and the type of report rendered.
depend upon the decision, problem, the circumstarnces
(b) Copies of other documents and minutes of the meetings having a
continuing
description of the type of business carried on and places of business. importance.
Purpose of working papers
(c) A short
The working papers serve the following purposes:
(d) Lists of account: records and in
responsible officials and plan of organisation. the auditor and his staff, which helps
(e) Statements showing a note of 1. They represent the volume of work performed by
any accounting matters of preparing the report.
Tegarding valuation of inventories, policy importance e.g, the policy standards.
(f) The clients regarding charge of depreciation. 2. They show the extent of adherence to accounting principles and auditing
internal accounting
instructions. instructions and internal audit 3. They are useful as evidence against the charge of negligence.
instructions or stock taking
3.14
AUDIT PLANNING
AUDIT PLANNING
. They act as guide for subsequent
examinations. 3.15
internal check tem in opera
system
5. They enable the auditor to know the
weakness of the operation as Cackockinsky vs Bright Grahm & Co (1938) and Chantrey Martin & Co vs Martin (1953). In the
also the accounting sy'stem. c e it was held that the working papers belonged to the auditor because they were independent
of audit
organising the
work clerks. and not agents of the clients. n second case it was held that the working papers prepared
assist the auditor in co-ordinating and
6. They
theaudit work. bu the accountant for the sole purpOse ot producing a balance sheet belonged to the accountant and
They assist in planning and performance of
nat to the client. The coulrt opinea that where the accountant merely acted as agent of the clients like
case of correspondence between accountant and income tax authorities, the papers belong to
n the
Form and contents of working papers not to the accountant.
the Institute of Chartered
Accountants of India i n July the client and
Standard on Auditing (SA 230) issued by contents of working papers: On the basis of these judgement it can be said that generally, an auditor as an independent
the form and
1985 makes the following suggestions regarding aud professional is entitled to the working papers prepared by him. However, wherever he corresponds
the nature, timung and extent of
1. The papers should
working
record the audit plan,
conclusion drawn
from the evidence obtained. iting wfhanv third party as an client, the papers rightfully belong to the principal. But, where
agent of the
can retain even such
Procedures performed and the a1ditor has not been paid his fee, he papers as he has a right of particular lien
affected by various matters like books of accounts and other documents.
papers are the
2. The exact form and content of working upon
Working papers are the property of the auditor. The auditor may, at his discretion, make portions
(a) the nature of the engagement. in the opinion of the Institute
extracts from his working papers available his clients. Further,
to
of or
(b) the form of the audit report. an auditor should adopt reasonable procedures for custody and confidentiality of his working papers
(c) the and complexity of clients
nature
business.
reliance on intem and should retain them
for a
period of time sufficient to meet the needs of his practice and satisfy any
or professional requirements of record retention.
and degree of
the clients' records ernal pertinent legal
(d) the nature and condition of
controls.
and review of PROCEDURE OF AUDIT
circumstances for direction, supervision Work
the need in particular what method of work should be adopted.
(e) After preparation for the audit, it needs to be decided
performed by assistants.
no hard and fast or method can be laid down. The method of work adopted by
and properly organised to
meet the circumstances of Truely speaking, rule
3. Working papers should be designed The standardisation of working paper any auditor
will vary with the individual training, experience, likes and circumstances. Still the
each audit and the auditors need in respect
there of. pers should be taken care of:
of working papers) improves the following points
check lists, specimen letters, standard organisation 1. Use of Special Ticks. The auditor should use special ticks for each class of transactions
(eg. reviewed. It also facilitates the delegation of
a r e prepared and
efficiency with which they its quality.
checked. The following are the classes requiring special ticks
work while providing a means to control
and detailed tor an auditor to obtain an posting (ii) casting (ti) carry forward (iv) bank statement and () vouching
4. Working papers should be sufficiently complete
of special ticks some precautions are needed. These precautions
are:
In use
Overall understanding of the audit.
transaction in all the firms.
exercise of judgement, together with the auditors (a) The same tick should not be used for the same
5. All significant matters which require the
conclusions thereon, should be included in the auditors' working papers. (b) The system of ticks adopted should not be explained to the clients' staff.
and utilises schedules, analyses (c) Different colours should be used to distinguish periods.
6. To improve audit efficiency, the auditor normally obtains
otherwise the
and other working papers prepared by the client such as analyses of important certain
revenue
E a c h section of the work should be completed upto a points
that such have
accounts receivables etc. The auditor should satisfy himself workin8 papers chances of mistakes increase.
been properly prepared. All important totals, balances and other noteworthy points should be noted in the
7. In the case of recurring audits, some working papers may be classified as permanent audit audit note book.
files as distinct from current audit files relating primarily to the audit of a single period.
Vouching should generally be done by two audit clerks together..
Ownership of working papers written
The auditor should not accept any figures or casting.in pencil. The figures
An important and pertinent question arises as to who is the owner of these with pencil can be tampered with very easily. Therefore he should insist on figures.
working papers. l
claim of he auditor is that it is he who has collected the information for the of being written in ink.
his duties,
purpose dischargmg
therefore he
is entitled to the
possession of these papers. On the other hand client
clau In the case of continuous audits, the work should be performed up to a certain
that since auditor is his agent he should surrender these
papers to him as every other agent does. date.
auditor argues that in case he is
an evidence in his delence.
charged
by his client of negligence,
he can produce
these
pape I n the of small concerns, auditor is generally asked to
balance the books. In
Therefore, he wants to retain the case
with him. He also contends that as a possession of this important evide such cases, he acts as an accountant and not auditor.
over these professional etiquette retiring
a or
outgoing
auditor hand such common records and books
papera to new appointee, to enable him to plan his future work.
has been settled in the
should
Sy Routine Checking. Routine checking involves checking of
2.
of light However, the controvc
two
important Engish judgements namely. which is carried on by the auditor as a matter of routine.
3.16 AUDIT PLANNING
AUDIT PLANNING 3.17
The functions included in routine checking are
the above following points need special attention of the auditor-
in the book of In addition to
a) Checking of cass, sub casts, carry forwards and other calcualtions oripins should be used in such a fashion that the staff of
entry.
1. Test
understand
checking
it. Frequent changes in the pattern of test checking can ensure
theclient
this.
can not

) Checking of postings in the ledgers. checking applied during year should be kept in mind while preparing the
2. The test
one
cover the different block of
c)Checking of balances in the ledgers and audit programme of the next year. The effort should be to
over a period of 3 to 4 years.
(d) Checking of transfer of balances from ledger to the trial balance. period
each section and period must be covered under this kind of scrutiny.
Routine checking helps the auditor in finding out certain errors and frauds. However, it can 3. Over the years
discdose only clerical errors and some simple frauds. Only occasionally it may help in detecting erTOs be a pre-decided sample in forms of size. It should be decided after taking
4. There cannot internal control
of principle. For detecting clever frauds and errors of principles an auditor has to 8o beyond routine
into consideration of requirement of the assignment and reliability of
system in operation.
checking. be aPPlied in deciding the sample i.e., larger
number or items
5. The materiality concept may smaller
Advantages of Routine Checking account, smaller number of transactions
from transactions involving
of higher
() Usual errors are revealed quickly. amounts.
where the risk of fraud
(i) Arithmetical accuracy of most of the entries is verified. of error of fraud is another consideration. The areas
6. The relative risk
(ii) A thorough checking of books of original entry takes place, which minimises the carry attention.
is higher definitely deserve greater
the sample size
of the evidence produced for the decided sample,
forward of many mistakes. 7. In case of lower reliability
(iv) Checking of postings and castings is helpful in preparation of
trial balance. for test check should be increased.

(v) It is easy and which be done even by untrained audit clerks.

simple job can Deciding the Sample
such method is
to be included in the sample. One
There number of ways for selecting the items
are
the sample is
Disadvantages with auditors because of its simplicity under this method
It suffers from following disadvantages block method. This is favourite week or mornth or on the basis
entries will be covered for a block of period i.e.,
(i) It can reveal only arithmetical and clerical mistakes or simple frauds. selected as a block. The be covered. The main
the ledger heads with B to F alphabet may
of index of ledger, for example of being included. It is
() Errors of principle are hardly detected in routine checking. that every item does not get equal opportunity
disadvantages of the method is statistical
11) Compensating errors are also unlikely to be detected. not a true representative
of the population in sense.

method each item

is random selection method. In this
(iv) It is too mechanical and monotonous. Another method for deciding the sample items to be included in
of random numbers is used to select the
) I n self-balancing system of account its utility is further reduced. should be numbered and then a table to be
However, a truely random selection is likely
not minimise the of routine checking in the work the test. The method is surely more representative. of systematic or
However, these disadvantages can importance items may be selected by the use
cumbersome and difficult. To simplify the process,
of an auditor. the item, an item appearing at a given interval may
interval selection of items i.e., without numbering
3. Test Checking. The main objective of audit is to formulate an overalil opinion on the accounts be included in the sample.
and financial statements so as to enable an auditor to give a report that books of accounts give a true used. A breaking point, say 5,000 may be decided and
and fair view regarding the profit, assets and liabilities of the business. In large organisations the Alternatively Stratified sampling may be
be examined.
number of transactions which are the subject matter of an audit are too many.to handle. It is virtually all items of an amount equal to or larger than R 5,000 may
these and With effect from April 1, 1998, the statement of
Standard of Auditing (SA) 530 of the Institute of
impossiblefor an auditorfo physically verify all entries.n such asituation, if a satisfactory to both statistical and n o n -
effectire system of internal check and controlis in operation, itia not necessary for theauditor todo has become operative. The SA 530 applies
CharteredAccountants
of India
detailed checking The usualpractice is that a representative number of entries of each classis
elected and checked and, they aretound correct,
statistical sampling methods.
jf the remaining entries are also taken to be
correct.
Test checking is an accepted substitute of detailed checking, which in most of the cases from the Some important notable points of SA 530 are: auditor should design
methods, the
economic point of View is unwarranted. The justification for
accepting test results in lieu of complete
1. When using either statistical or non-statistical samplingthereon, and evaluate sample results
verification of each item lies in the theory of audit sample, perform audit procedures
and select
probability. If the "sample" is truely representative or
an
evidence.
the "population" the test
checking will give reliable results. provide sufficient appropriate audit
so as to
audit objectives,
The reliability of test
checking will greatly depend 2. When designing an audit sample, the
auditor should consider the specific
control system. In test upon the efficiency
and reliability of internal wishes to sample and the sample size.
checking the detection of error demands
further the population from which the auditor
auditor satisfied that the mistake
is
was unintentional and chance of investigations only if the auditor should consider sampling risk, the tolerable
with the test audit. If further repetition is nil, he can 3. When the sample size, the
determining
investigation indicates fraud, matter must be taken proceed
eriousness. up with requisite error, and the expected error.
3.18
AUDI PLANNING
can AUDIT PLANNING 3.19
. The auditor should select sample items in such a way
that the sampie expected be to

representative of the population. This requires that all items i n t h e population havae As per SA 200 overall objectives of independent Auditor and the conduct of
an in
audit
an
the auditor should obtain sufficient audit evidernce to reduce
opportunity of being selected. accordance with btandards on auditing,
that are aPpropriate to low level to express whether financial statement give true and fair view.
those audit procedures o the audit risk to acceptable
S.
Having carried out, on each sample item,
particular audit objective, the auditor should: Audit Risk
errors found in the sample off the Types of
detected in the sample (b) project the On the basis of their nature and
their inter-relationship, audit risks are discussed as follows:
(a)analyse any errors

risk.
Population; and (c) reassess
the sampling 1. Inherent Risk
is be influencedby misstatement which
Organisation of Auditor's Staff When a n account balance o r class of transactions likelyto

and economy in conduct of audit, the

auditor's staff properly organise shall be
could be material, assuming
that
there is n o internal control, is known a s inherent risk. External
For
efticiency experienced and efficio also influence inherent risk. Various factors which may
affect inherent risk at level
audit clerks. needs
The auditor nt circumstances may
Thework shall be carried on by and knowledge of
two or more

senior and junior assistants. However, the

number of financial statement
a r e management integrity, nature of business, experience
statt which shall consist of supervisors and of transaction,
of work. The auditor shall ensure that At transaction level these factors may be accounting system, complexity
the volume and character management. at management's level.
required depends upon
Persons there The juniors shall be trained so they may ocun
ccupy
that
stock valuation easy misaPPropriation
of asset. This risk arises
is understaffing overstaffing. nor
neither 2. Control Risk
the next position later on.
misstatements. This risk is
that will not detect and prevent material
India :
used in
Usually the following categories of audit staff are
The risk of internal control management. The auditor
and implementation of internal control system by
1. Supervisors. They perform the following
duties : affected by effectiveness risk separately o r combined depending o n
assessment of inherent risk and control
staff o n work. may make level.
(a) To remain in touch with the audit methods o r techniques
of audit applied. This risk arises at management's
the in work.
(b) To assess progress 3. Detection Risk
with the auditor.
()To discuss the work completed and queries. non-detection of material e r r o r s and
frauds by the analytical reviews and
o n important points This risk is related to at auditor's level. This risk is inversely
To take advise from the auditor
(d) used by the auditor. This risk arises
job to another.
the audit staff from one substantive procedures inherent risk and control risk lower will be the
(e) To rotate
risk and control risk. Higher the
the folowing duties related to inherernt
2. Section Audit Assistants. They perform detection risk and vice
versa.

and the client.

i) To keep contact between principal Assessment of Control Risk
audit programme. Preliminary
(i) To prepare and review the to be weak o r auditor does
not
when internal control systemn appear
thejuniors and clerks. The control risk is high when there is evidence of
(ii) To check the work done by effectiveness of internal control system.
The control risk is low
m o v e s smoothly. assess the the
(iv) To e n s u r e that the work internal control system. The auditor should perform
compliance procedure by checking
instructions and guidance to juniors. strong control The final assessment of control risk
(v) To give and continuity of internal system.
of valuation of assets and contingent
liabilities.
designing, effectiveness shall review his previous planning and
if it low
(vi) To verify the basis risk or low risk. If it is high the auditor
structure assets and liabilities. may be high
(vii) To assess the capital are met. then he shall proceed with detection
risk.
accounts
(vii) To review whether legal provisions affecting of inherent risk and control risk
the following duties: Relationship between Assessment
3. Junior Audit Assistant. They perform and internal control systems to prevent
or detect

instructions given by the seniors. Generally managements design accounting control risk a r e interrelated. If inherent risk and
i) To carry out the misstatements.In most c a s e s inherent risk and
schedules and reconcile the statements. in such situation. The
(i) To carry out checking of assessment thereof may not be appropriate
control risk are assessed separately,
documents and papers. of inherent risk and control risk for appropriate assessment
(iii) To examine the supporting data, auditor shall make combined assessment
4. Audit Clerks. They perform the following duties: of audit risk.
i) Routine checking and comparison work. Assessment of Detection Risk
(i) Checking of posting, casting and carry forward. The substantive
of detection risk is directly to substantive procedures.
related
The degree risk and control risk which will reduce the
assessment of inherent
AUDIT RISK procedures are influenced by remain detection riskk
at low level. There will always
in relatiorn to audit detection risk, thereby the audit risk is accepted transactions is applied.
Audit risk means chances of wrong judgement on the part of
while giving opinion on financial statement audited. It is risk of auditor giving wrong
auditor evidence to same extent e v e n if full
examination of account balances or class of
control risk is inversely related
on to
opinion concluded that combined degree of inherent risk and
certain information which is materially mis-stated. The auditor may give clean audit report on It c a n be
financial statements which are materially mis-stated without his knowledge. Audit risk includes risk detection risk.
of non detection of material errors and misstatements
 AUDIT PLANI
3.20
PLANNING AUDIT PLANNING
Risk
3.21
Materiality and Audit if misstated it could influer 5. Monitoring. This process is designed to provide the firm with reasonable assurance that its
means the
information is material,
In auditing, materiality the nature and size of the item whhe policies and procedures with regard to quality control are adequate and operating effectively.
on
statement. It depends
decision of user of financial are inversely related.Genis
circumstances. Materiality
level and audit risk 6. Documentation.
evaluated in particular
items in detail, thereby the
risk is low that fraud and error in high t
value )
auditor examines high value
the materiality level
lower will be audit risk and vice The auditor shall document issues identified with respect to compliance with relevant
ethical requirement, independence requirement and conclusions reached regarding
items may not be detected. Thus higher acceptance and continuation of client relationship and audit engagement.
Statements
Audit of Financial
SA 220 Quality Control of (i) The engagement quality control reviewer shall document the procedure for engagement
number of persons at various The
levels. auditor has to den
Audit work is performed by
other auditors. A large part of his w quality control review performed, completion engagement quality control review on or

certain experts as well as the work performed by

before the date of audit report and the reviewer is not aware of any unresolved matters.
and review the wo
and assistants. He must carefully supervise work
performed by his subordinates satisfied that work performed by experts SA-250 (Revised) Consideration of Laws and Regulations in an Audit of Financial Statements
subordinates. The auditor must be and
.

performed by his
standard. 1. Laws and Regulations. Certain laws and regulations have direct impact on financial
other auditors is of professional statements. In this way it is required to determine reported amount and disclosures in financial
control procedures at the engagement level
The objective of the auditor is to implement quality
that statements. If there is any non-compliance of laws and regulations it may lead to fines, litigation etc.
that provide the auditor with reasonable assurance which will have a material impact on financial statements.
standards and regulating and legal requirements.
(i) The audit complies with professional 2. Non-compliance. It may be intentional or unintentional, the omission or commission of
in the circumstances.
(ii) The auditor's report issued is appropriate provisions of any law or regulation.
shall take responsibility for overall quality of Management. The management shall ensure that various operations
are
1. Leadership ResponsiBbilities. The engagement partner 3. Responsibility
of each audit engagement to which that partner is assigned. conducted in accordance with the prevailing provisions of laws and regulations which determines
All this is the responsibiliy of
shall remain alert for non-compliance of relevant amount and disclosures in financial statement
2. Ethical Requirement. The engagement partner
the reported
team wherever he comes across such non- management.
ethical requirement by the members of engagement
compliance, the appropriate action shall be determined in consultation with others in the team. 4. Auditor's Responsibility. helps the auditor to identify material misstatement of
This SA
financial statement due to non-compliance with laws and regulations. But auditor is not responsible
form a conclusion on compliance with
3. Independence. The engagement partner shall of all laws and regulations. This SA
shall the circumstances that create threat to independence. for preventing non-compliance and detecting non-compliance
independence requirement. He identify auditor's responsibility in regard to compliance two different categories of laws and
of
He shall take action to eliminate such threats or reduce them to an acceptable level or distinguishes
appropriate
regulations:
withdraw from audit engagement amounts and
(a) The laws and regulations having direct effect on determination of material
4. Engagenuent Performance disclosures in financial statements, the auditor is responsible to obtain
sufficient audit
shall be satisfied
i) Reviews : On or before the date of auditor's report, the engagement partner evidence about compliance of provisions of laws and regulations.
and audit
that sufficient appropriate audit evidence has been obtained to support the conclusions of amounts and
(b) Laws and regulations which do not have direct impact on determination
to be issued. is fundamental to operation of
report disclosures in financial statements but their compliance
(i) Consultation. The engagement partner shall take responsibility the engagement team taking of auditor is limited to take specified audit procedure
business. In this regard responsibility
effect on
appropriate consultation on difficult matters and be satisfied
nature and scope of and conclusion
that non-compliance
to determine of laws and regulations which may have material
resulting. He shall a determine that such conclusions have been implemented. financial statements.
(ii) Quality Control Review. 5. Consideration of Compliance with Laws and Regulations:
framework applicable
(a) The engagement partner shall determine that an
engagement quality control review na (a) The auditor shall have general understanding of legal and regulatory
is complying it.
been appointed, discuss significant matters with him and shall not date the audit report t
to the business and industry and to what extent entity
the completion of such review. evidence in regard to compliance of provisions
of laws
(6) The auditor shall obtain appropriate in financial
and disclosures
(6) The such reviewer shall, discuss the significant matters with engagement partner, view
and which have direct effect on material amounts
regulations
the financial statements and auditor's report. He shall also review selected audr statements.
have material
documentation. He shall evaluate the conclusion on auditor's report formation wneu other laws and regulations which may
such report is C) To determine non-compliance with
appropriate. effect on financial statements the auditor may inquire
from management and inspect
(C) Such reviewer shall also consider engagement team's evaluation of firm's indepenueence authorities.
correspondence with the relevant
whether ins tances of
aPpropriate consultation has taken place and conclusions arising therefronm. (d) The auditor shall obtain written representation
that all known or suspected
(iv) Diference of him.
opinion. If difference of opinion arises between those
non-compliance have been
disclosed to
consulted or between the engagement team w
engagement partner and quality control reviewer, the team
shall tollow firm's engagenme
policies and
procedures for dealing and resolving such differences.
 AUDIT PLANNINO 3.23

auditorshall:
AUDIT PLANNING
the

3.22 is
identificd orsusppectea, occurred
and
and Objective Type Questlons
non-vomplianw it has
Short Answer
Procedure.
1\hen
underwhich 100 words on:
.
Audit
of
circumstances

with gove 1. Answer in

understanding of working papers.
statements. (a) Ownership
an
obtan

inancial charged
and those
3
adviconce
the possible eftort
on
management O b t a l n i n g legal ice. Audit note book.
b)tialuate

the matter
with consider
or
(b)
auditor shall discuss
the auditor
shall (c) Auditor's working papers.
che not provided, (d) Test Checking
r
suttiaent
reply is
charged With governan
statements
of Audit of financial
Non-compliance: Quality control
7.Reporting of communicate
with managemen (e)
() Suprise checks
1he aud:tor shall
and regulations.
shall
communicate cate to those
t
financial statements.
a non-compliance of laws the auditor Law and regulation
in audit of
egardinE
intentional
and
material, (g) statements are right or wrong:
is State whether following
b i t n a 7 - c o m p i a n c e

with govermance
when practicable. are
olv
mvoived
n non-complian
ance the 2.
Audit programme
is not necessary for audit of account.

charged with governance (a) the audit work expensive.

and those charged Audit programme
makes
shall (b) in the court of law.
with higher authority
auditor
ctmanagement

matter shall be
communicated

on
financial
statement,
the
express (c) Audit note book serves as evidence
for all types of
business.
material
effect
his audit report. audit programme
is suitable
has statement in from obta: (d) A single
(d

ddierse
nnrompliance

oT qualitied opinion
on
financial

with governance
preclude
the

an
auditor

opinion.
otaining
those charged disclaim
qualified opinion or
or
the management
to regulatory auth
shall give
Eit
auditor communicated

3udit
eidence the shall be
regulation
of laws and
The n a n - o m p l i a n c e under arny
law.

it is required
r the auditor if
Questions

disadvantages.

? What are its advantages and audit ? What is the obierto

programme commencing
.What s a n audit before
make from his client
auditor
equines should a n
What
2 audit programme? useful to an
auditor?
making an
its contents ? How is it
? What are
3. What is audit note book of these papers?
auditor ? Who is the owner

papers of an
4. Vwhat are the working
Comment.
should be flexible:"
audit programme
5. A good
audt programme
for inventory
6. Draw an
transactions.
audit programme
for cash
7. Draw an

Wte Shon notes on

8.
aFoutine checing
b)Tes'checking
cUse o special tks
these can be made
Discuss their functions and how
9. Wha' do you understand by audit committee ?
successu
?
10 Explan venous obyects of audit programme and how should it be kept
11. Oraw up an auat programme for an educational institution.
his client before starting an audit ?
12 Bnetiy expian, whiat enquines should an auditor make from
13. Is 'audt programme essential in the conduct of an audit ?
14. Wrat s& Current fie' and a 'permanent file' ? Who has got the legal ownership of audit worklng
papers and audt note book ?
15. Explain quality control ot Audit of financial transaction as
per SA 220.
16. Wnte a note on consideration of
law and regulation in audit of financial
17.
statements.
Discus vanous types of audit
programmes. What are the points to be kept in mind while
audt programme ? moauy
18. What considerations
go into sampling ? What are the notable points SA 530?
in