Audit programs describe how the audit approach is to be implemented. Auditors develop an audit program for each material account balance or account balance assertion. An audit program describes what and how much evidence is required to be gathered and evaluated, and how, when and by whom it is to be gathered and evaluated. In other words, an audit program details the nature, timing and extent of the planned audit procedures relating to the various account balance assertions.
Auditors prepare audit programs in respect of evidence gathered and evaluated in each of the control testing, substantive testing and opinion formulation stages. It is prepared, or revised, as part of the operational planning activities of those three audit stages and documented as part of the audit working papers. (However, see Journal of Accountancy article Top 10 Audit Deficiencies.)
For example, the following is an audit program designed to gather evidence in the control testing stage as to the effectiveness of operation of a client's bank reconciliation procedure. Note that the program does not simply list the planned audit procedures, but describes in some detail the nature, timing and extent of the planned audit procedures, as well as the audit staff member responsible for performing each audit procedure.
| CONTROL TESTING: Cash at bank: Bank reconciliation | ||||
|---|---|---|---|---|
| Nature | Timing | Extent | Responsibility | WP Sch. |
1. Observe the client's staff performing the bank reconciliation ensuring that the appropriate staff perform the reconciliation, at the appropriate time, and that it is supervised as planned. 2. Inspect evidence of performance of bank reconciliation by the client's staff, ensuring that the person performing the reconciliation signed and dated the reconciliation, that it was performed by the person proposed at the appropriate time and that the supervisor signed the reconciliation as evidence of his/ her review. 3. Inquire as to the procedures that took place when the persons performing and supervising the reconciliations were on leave or were ill. Ensure that such persons are competent, do not have incompatible duties and are fully aware of how the reconciliations are to be performed and super- vised. 4. Conclude as to the effectiveness of operation of this control procedure. |
Interim and final visits. Final visit. Interim and final visits. Final visit |
December and June reconcil- iations. September and October reconcil- iations. All months |
Audit assistant Audit assistant Audit assistant Audit senior |
A12 A13 A14 A17 |
See another example.
The nature of the planned procedure describes what evidence is required and how it is to be gathered, the timing describes when the evidence is to be gathered, the extent describes how much evidence is needed and responsibility describes by whom the evidence is to be gathered and evaluated. (WP Sch is a reference to the schedule in the working papers where the details of the evidence gathered is recorded by the audit staff.)
Copyright, Australian Educational Research Pty Ltd. Any person accessing this site agrees to the Terms of Use.