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Audit programme and trail
December, 07th 2009

Audit programme is a document containing the nature, extent and timing of audit procedures to be carried out, and is made a part of the overall audit plan.

Planning is important for successful completion of a task and audit is not an exception. Audit planning is an important phase of an audit. Meticulous planning helps the auditor to minimise the audit risk. Planning offers the following advantages to the auditor: better marshalling of the resources; identification of problem areas and paying due attention to the material items; focus on critical issues; improving efficiency of the audit; professional approach and systematic execution of the audit; ensuring that there are no loose ends at the end of the audit; and completion of the audit in time.

The auditor needs to have a clear idea about the nature and size of the entity's business, significant accounting and other policies, accounting structure, internal control systems, etc.

A discussion with the management about the offices, branches, organisational structure and changes in the structure, if any, would be necessary to understand the extent of audit procedures to be carried out. A visit to all the offices, branches, etc., would be useful to have firsthand information about the functioning of these offices of the entity.

Planning stage

A representation from the management at the planning stage on the following matters would be essential: diversification of business, if any; addition or scrapping of production lines; opening or closing down of offices, branches, go-downs, stores, depots, etc; significant accounting policies and changes in policies as compared to last year; internal control systems; events of a special nature such as change in management, acquisitions, de-mergers, impact of government policies, etc; any circumstances beyond their control (such as recession, flood, earthquake, etc) impacting the volume of business; transactions such as issue of fresh shares, redemption of preference shares or debentures, negotiation with banks for one-time settlements, etc.

It is customary for the auditors to issue a questionnaire at the planning stage to evaluate the internal control and other systems.

Planning for an audit has to be at the office of the auditor. Based on the above and evaluation of internal control systems, the auditor would decide on the extent of audit and control risks.

The auditor assesses the control risk and fixes the materiality levels, extent of test check to be carried out and the nature, extent and timing of various audit procedures to be carried out to minimise the audit risk.

Audit programme

Once he is clear on the nature, extent and timing of various procedures, the auditor proceeds to prepare the audit programme.

Audit programme is a document containing the nature, extent and timing of audit procedures to be carried out. This programme is made as a part of the overall audit plan. This programme is to be made before the commencing of audit.

A systematic audit programme is of immense utility to the auditor. As a measure of quality control, the auditors should have standardised well laid-out audit programmes incorporating all the audit procedures. This helps in ensuring that all the procedures were carried out by the auditor.

Delegation of responsibilities to the audit staff, rotating the audit staff, fixing of time schedules, fixing up of the accountability, etc., would be rendered possible by the programme.

A reasonable time cushion between two consecutive audit procedures should be provided to ensure for extra time required to carry out any additional, extended, amended altered procedures arising consequent to the findings during the course of the audit.

While preparing the programme, availability of audit staff, their skill and competence, division of the work among the seniors and juniors, timing of the release of audit report, etc., have to be considered to avoid placing square pegs in round holes.

Need to coordinate with other auditors, internal auditors, reference to experts, etc., should be built into the programme. In case of joint audits, the audit programme should be drafted in coordination with the other joint auditors, to keep pace with them and ensuring timely completion of the audit.

It helps in monitoring the progress of the audit, review the quality of the work, and ensuring timely completion of the audit.

Also, the audit team would not sacrifice the quality of audit to keep pace with the schedules. Upon commencement of audit, the auditor should look for the audit trail.

Audit trail

Trail is the path left by a transaction. Every transaction passes through the policies of the company, its internal control systems and accounting procedures.

To have sufficient and appropriate audit evidence, the auditor should strive to follow the audit trail.

In case of recording transactions manually, audit trail would be available to the auditor. In case of en-cashing cheque across the bank counter, the details of the date of the cheque, signature matching with the specimen signature, etc., can be checked at a later date since the cheque is available with the bank. But where cash is drawn from the ATM, details are, no doubt, available, but not to the extent of manual recording.

Due to the space constraint in the hard disk, data beyond a certain period is erased in computerised information systems environment. In case of purchase of travel tickets online, the details may not be fully available. Airlines have stopped issuing paper tickets. PNR number received by way of an SMS on a mobile phone would be sufficient to travel. Copies of tickets are no more maintained on file.

Under these, circumstances, the audit trail is partially or totally lost in case of a computerised information systems environment.

The auditor should also look for alternative evidence in support of transactions entered through the Internet. The auditor should incorporate such changes in the audit programme to counter the situation arising out of the audit trail.

Proper documentation of such planning, procedures, programme and performance would be helpful to him to support himself in case he is charged with negligence.

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