PREPARATION FOR THE AUDIT

taufikur@ugm.ac.id
 Preparation of the Audit

 According to Standard for Planning the Audit,

preparation comprises the following parts:
 Establishing audit objectives and scope of work
 Reviewing audit files and other materials
 Selecting the audit team and other audit resources
 Preparing a preliminary audit program
 Informing the auditee that an audit is to be performed
 Determining how, when, and to whom the audit results will
be communicated
 Obtaining approval to do the audit
 Establishing Audit Objectives and Scope

 Based on the Standard, “scope of work”

the scope of internal audit should encompass
the examination and evaluation of the
adequacy and effectiveness of the
organization’s system of internal control and
the quality of performance in carrying out
assigned responsibilities
 Establishing Audit Objectives

 Examination
 2 primary types of examination:
 Review  describe and help understand the auditee
 Determine the auditee’s level of compliance with established
policies, plans, procedures, laws, and regulations
 Evaluation
relating to findings from examination
 The audit objectives should be committed in writing
in order to helps formulate a clearer understanding of
what needs to be done
 Establishing Audit Scope
 Audit scope identifies what the auditors are examining
and evaluating
 Pertaining to standard, the scope of examination includes
the following:
 The adequacy of organization’s system of internal control 
design of internal control system
 The effectiveness of the organization’s system of internal
control  degree of compliance with key control procedures
 The quality of performance in carrying out assigned
responsibilities  how well management is accomplishing
established objectives and goals
 Establishing Audit Scope

 The scope of audit refers to the primary objectives

of internal control systems, as stated as follows:
 Ensure the reliability and integrity of information
 Promote compliance with policies, plans, procedures,
laws, and regulations
 Ensure the safeguarding of assets
 Promote the economical and efficient use of resources
 Ensure the accomplishment of established objectives and
goals for operations or programs
 Reviewing Audit Files and
Other Materials
 2 types of files
 Permanent files  provide basic information about
auditee
 Examples: organization charts, description of operations,
information on management personnel, periodic financial
reports, and budgets
 Files from previous audit  descriptions of previous
audit work
 Include: auditor working papers, previous audit reports, and
auditee’s response to audit findings and recommendations
 Selecting the Audit Team and
Other Audit Resources
 Selection of the audit team
 Audit executive  audit director
 Audit coordinator  manager
 Auditor-in-charge  team leader  senior auditor
 Audit staff  junior staff auditors
 Skills necessary to complete the audit:
 auditing, accounting, economic, finance, statistics, electronic
data processing, engineering, taxation, management, laws, etc
 Allocation audit hours, computer support, and travel funds
 Preparing a Preliminary
Audit Program
 The audit program  the written plan for conducting an audit
 Preparing by audit team leader and approved by audit director
 Audit program identifies the objectives and scope of the audit
and the procedures to be employed, and record what was done
 3 approaches in development of audit programs:
1. Writing the program during the preparation stage of the audit
2. Writing the program as the audit progresses
3. Using standard audit programs for specific operations
 Preparing a Preliminary
Audit Program
 A program usually includes the following sections:
1. Audit preparation
2. The initial survey
3. A description and analysis of the auditee’s internal control
4. Expanded audit tests
5. Instructions concerning the audit report
6. Wrap-up procedures
 Program format (Exhibit 7-3)
 Identifies the auditee and the date of the audit
 Identifies the document as an audit program, and shows the approval by audit
management
 Columns for audit procedures to be performed, assigned auditors, date of completion,
cross reference to working papers, and comments
 Informing the Auditee

 Before an audit begins, auditors should inform the

auditee that an audit is to take place, when it will
begin, and what its purpose are
 The auditors should provide a list of schedules and
documents and other information that the auditee
should have available for the audit
 The auditors also inform the auditee’s executive
management and the audit committee about timing
and purpose of the audit
 Determining How, When, and to Whom
Audit Result will be Communicated

 How will be communicated  presentation

and a written report
 When will be communicated  interim or
the end of field work
 To whom audit result will be communicated
the auditee, executive management, board
of directors, the audit committee
 Obtaining Approval to Do the Audit

 3 ways in approving audit work

1. After the auditors complete the audit schedule for a
particular budget period, the audit committee generally
reviews the schedule and approves the audits for the
period all at once
2. Approval for audit work may be given for individual
audits by either management or the board, depending
on to whom the auditors report
3. Approval for audit work is given within the internal
auditing department itself