A detailed audit program
An audit program consists of an appropriate audit procedure to achieve audit objectives.Audit programmes are prepared while planning the audit. At the planning stage, auditors will need to prepare audit tests to test the account areas.As part of the planning stage, auditors need to prepare audit tests to test the account areas.To assist the auditors there are audit assertions for the purpose of Audit.Transactions are to be tested in audit with reference to the audit assertions. Assertions will be different for different account areas
Audit Assertions
Stages in an Audit
Stage I: Audit Initiation
- Understanding the Entity and its environment
The industry in which the entity operates and the internal controls implemented; for example for a manufacturing Concern the following should be considered a) List the products manufactured. b) Narrate the Manufacturing process. c) Brief on Delivery mechanism and invoicing method, PO tracking d) Note on Inventory Maintenance and related records of goods sold, manufactured. Studying the incorporation documentation i.e. Partnership deed, Memorandum and Articles of Association
2.Determine the nature, timing & extent of other audit procedures 3. Ensure that Auditor’s Appointment Letters are obtained and acceptance replied 4.Confirmation of opening balances: Check the current year’s opening balances with the closing balances of audited Financial Statements of the previous year. Also Check Relevant Parts of This article :- Stage 2 and 3- Audit Program for Vouching and verification of Transaction Stage 4 – Audit Program for In depth Scrutiny of Ledgers
Preparation of Financial Statements and Final Reporting
CARO 2015 Applicability.Tax Audit ApplicabilityPrepare Financial Statements based on the final data obtained from the client.Prepare Ratio Analysis along-with the possible reasons from management for material deviations.Preparing the Draft Computation of Income.Advance tax table and Tax issues, if any.
Following should always be a part of your audit file
Copy of the audited PLBS of the previous yearLetter of Appointment.Summary of Audit VisitsPrintout of all the tables made during the audit visit in the form specifiedCopies of the quarterly bank statementsAny working papers prepared on behalf of the clientCopies of acknowledgements of TDS returnsCopies of acknowledgements of VAT returnsPrintouts of ledger accounts taken during the course of auditAny other document obtained during the course of Audit.
Audit Sampling
Audit Sampling Requires auditors judgment.
Statistical Sampling
Simple Random Sampling This method uses sampling without replacement; that is, once an item has been selected for testing it is removed from the population and is not subject to re-selection. An auditor can implement simple random sampling in one of two ways: computer programs or random number tables. Systematic (Interval) Sampling This method provides for the selection of sample items in such a way that there is a uniform interval between each sample item. Under this method of sampling, every “Nth” item is selected with a random start. Example every 4th item Stratified (Cluster) Sampling This method provides for the selection of sample items by breaking the population down into strata, or clusters. Each strata is then treated separately. For this plan to be effective, dispersion within clusters should be greater than dispersion among clusters. An example of cluster sampling is the inclusion in the sample of all remittances or cash disbursements for a particular month. Recommended Articles
Basic Principles and Golden Rules of AccountingTypes of AccountsAccounting Standard 13What Is Debit Note and Credit NoteFund Flow StatementAccounting Rate of Return
