Chapter 2

AUDIT PROGRAM

Audit program
Audit program can be defined as auditors plan of action
indicating the work to be accomplished, the audit test and
procedures to be followed, the persons responsible for the
accomplishment of the work, and the time within which the work
is to be accomplished.
Following are some authoritative definition:
An audit program is a detailed plan of the auditing work to be
performed, specially the procedures to be followed in verification
of each items in the financial statements and giving the
estimated time required. Given by Meigs.

Cont.
An audit program is a list generally in detail of steps, to be

performed in the course of an examination. It controls the nature,

extent of examination, in arranging, timing and distributing the
work, guard against the possible omission and duplication and
provides part of evidence of work done. Given by Montgomery.
An audit program is a flexible planned procedure of
examination. Given by Halmes

Need and Purpose of

Audit Program
1.

Describe in detail the work to be carried out and its

objective.

2.

Facilitate the prior approval of the planned steps.

3.

Provides continuous control by means of comparison

of actual with planned work.

4.

Facilitate review of work done.

5.

Provide evidence of work done according to

Generally Accepted Auditing Standards.

Cont.
6. Provides a basis for the planning of next year audit
program.
7. Fixes responsibility of audit staff members for the work
done.

Advantages of Audit
Program
1. SUPERVISION OF WORK:
The auditor can judge the efficiency of his audit
team with the help of audit program. He is in a
position to know the progress of the work. He can
see at any time that what part of the work has been
completed and what remains to be done.
2. DIVISION / DISTRIBUTION OF AUDIT WORK:
The division of audit work is very useful for the audit
staff for maintaining the difference of works among
senior or junior clerks according to their ability and
skill so that the work is divided to get better results

Cont..
3. SYSTEMATIC UNIFORMITY OF WORK:
Audit program helps in settling all the things in advance,
so the systematic uniformity of work helps the auditors to
achieved the desire goals.
4. BASIC INSTRUMENT FOR TRAINING:
Audit program is in fact a training instruments for the
audit staff and also very useful for the new auditors. It
provides training and guidance to him. So it is rightly
called the basic instrument for training for the staff at the
time of need.

Cont..
5. PROOF FOR AUDIT WORK DONE:
The merit of audit program is that auditor can use it as proof
for work done. In court of law the auditor can avoid liability for
negligence. Audit program is a permanent record of an audit
process. The audit program shows the work performed datewise. In this way he cannot be held responsible for
carelessness.
6. FIXATION OF RESPONSIBILITY:
Audit program fixes the responsibilities of the staff. If any error
or fraud remains undetected, the responsibility of negligence
will fall on that particular assistant who has performed that job
and no one can blame on each other.

Cont..
7. SEVERAL AUDIT MAY BE CONTROLLED:
The auditor can controls the audit of various companies
at the same time. In the absence of audit program he
cannot supervise them effectively.
8. EASY TRANSFER:
The principle auditor can transfer the audit work to any
other person easily. If one assistant is unable to continue
the work given to him it can be given to another person.
Audit program guides him that what is done and what is
remaining.

Cont..
9. FINAL REVIEW:
Before signing the report, final Review is made and for this
purpose audit program is very useful that any deficiency or
missing in steps can be identified and completed.
10. USEFUL FOR FUTURE:
The audit program is very useful in the future. Or completion
of an audit, it serves the purpose of audit record that may
be useful for future reference. In case if auditor is appointed
for the same concern in any future time the auditor can use
the same audit program with some changes.

Cont..
11. AUDIT STAFF NEEDED:
Audit program is helpful to determine the number of persons
needed to do the work. The staff requirement is essential for
every auditor. The shortage of staff means slow progress. The
exact number of senior and junior audit clerk can be
determined. In this way an auditor is able to handle the audit
work properly.
12. TIMETABLE:
The benefit of audit program is that work is completed with in
stated time period, the saving of time means saving of labor.
The saving of time means saving can control the cost of audit
due to fixed time.

Disadvantages of Audit
Program
1.

Rigidness

It may create rigidity in audit examination if not

frequently reviewed and updated
2. No Initiative
It kills the initiative of capable persons, audit staff may
not have opportunity of showing independent thinking,
intelligence and initiative due to adherence to audit
program.
3. Too Mechanical
Such audit program is mechanical that it ignores many
other aspects like internal control.

Cont..
4. New Problems Over Looked
With the passage of time new problems arise which may
be over looked.
5. Audit Program Increases The Chance Of Fraud
Staffs of the client get information about the audit
program in advance which increases the chance of
committing frauds. Similarly, it harasses the audit staffs
so they perform the work of audit carelessly which also
increases the chance of committing frauds.

Steps to be taken to overcome the

disadvantages
i.) The principal must explain his assistants the objectives
for which a particular aspect is performed. It would make
the work more interesting to the assistants.
ii.) Periodical review and closed supervision would
eliminate all inefficiencies in assistants.
iii.) The assistants must be encouraged to come out with
valuable suggestions and such suggestions must be duly
considered.
iv.) The audit program must be periodically reviewed and
amended whenever necessary. This will not allow the
program to become rigid or obsolete.

Types of Audit
program
1. Standard Audit Program
This type of audit program is preprinted and suitable for all
purposes. It saves time and gives added assurance that no
important procedure will be overlooked while in the opinion of
some others, this type of audit program is too much mechanical.
Due to complexities in the business conditions, system of
accounting and internal control system, it is not possible to follow
a standard audit program.

Modified standard Audit

program
These type of audit programs contains the usual audit
procedures, common to most businesses and provide
space for other specific procedures applicable to the
business under examination. This modification of the
audit steps and the insertion of the steps that are peculiar
to the audit in questions, make the audit program a
modified standard audit program.

Tailor-made Audit
Program
This is individually written program prepared specially for
each audit. It is known as tailor made because a tailor
cuts the cloth according to the body of every person. The
auditor should take care of such a program so that no
important steps is overlooked or missed. It lists the
procedures to be followed on any specific engagement,
indicating any departure from normal practices and
specifying the extent of the test of transaction.

Audit Program with

check list
Some Auditors prepare their own program and in addition
carry a more or less extensive check list of auditing
procedures form which they select those which the think
are most applicable.

Construction of an Audit program

or
Preparing
of
an
Audit
Program
Construction of an audit program is an important job to be

performed by an auditor. Program construction consist of

selection of those procedures which will apply in the given
situation at hand and in determining the time at which they
should be performed and the extent of their application.
A sound understanding of the audit techniques is the first
essentiality in program construction. In addition the auditor
must have familiarity with the business practices.

Cont..
Finally a number of other factors influence the selection of
specific auditing procedures. The auditor must :
a.

Stay within the scope and limitation of his assignment.

b.

Obtain the best evidence reasonable as possible.

c.

Consider all possibilities of errors.

d.

Apply only those tests and procedures that are useful to

accomplish the verification purpose in that specific
situation.

a. Effect of Audit
Assignment

An auditor can do no more than he is

permitted to do by the terns of the
assignment.
The scope of management therefore is
matter of agreement between the auditor
and the company whose records are to be
examined.
The auditor must confine himself to what the
agreement calls, any unnecessary work takes
additional time which means additional cost

b. Obtain Best Evidence

possible
An auditor must attempt to obtain the best evidence
possible in every case. If the procedures in the given
situation do not provide completely reliable evidence then
he must supplement the results with the other tests until
he satisfied that he has collected all the possible
evidence.
But because of consideration of cost and time it is not
always possible to select the best one, however a less
than best evidence may be accepted, if it gives
satisfactory evidence.

c. Consider all
possibilities of Errors
A well constructed audit program will include procedures
that immediately detect errors that fall within the scope
of the examination and which internal control situations
indicates, might otherwise go undiscovered.
This require a sound knowledge of all types and
possibilities of errors.

d. Use applicable
procedures
Most
difficult part of the program

development is drafting of general

procedures to the requirement of the specific
situation.
The auditor must know what the company
transacts, with whom it transacts, who
maintains the accounts and what controls
are in existence to eliminate or reduce the
possibilities of errors.
The review of internal control and
construction of audit program go hand to
hand and must be closely related.

co-ordination of
Procedures
Various procedures used by an auditor should be properly coordinated. This is done in the following manner:
a.

The auditor must organize all the steps to be performed, so

that he is sure that no important steps is omitted and he
can effect the necessary coordination among the
members of the audit team

b.

A well conceived audit program is a real help in achieving

coordination and avoiding duplication.

Cont..
c. The program must be written in such a way as to tell
an inexperience exactly what is required to do.
d. The program should state clearly, definitely and
concisely that what is to be done.