What Is An Audit Program

Accounting situation vary considerably from one from one enterprise to another. The nature of the problems to be dealt with, variations in size of the enterprise, the extent of the internal control in existence, and extent of auditor's assignment involve various types of verification problems. Because of such variations, an audit program to specify what work is to be done becomes a necessity in order to provide and peculiarities of the specific situation and to avoid waste of time on such matters which are not pertinent to the engagement..Therefore, it is advisable to prepare an audit program before commencing any verification problem. An audit program is a planned procedure of examination. It is the list of the verification steps to be applied set out in such a way that interrelationships of one procedure to another are clearly shown.

Purpose of An Audit Program

An audit program is prepared with the following purposes:
 
1. That it serves as a plan of attack on the particular verification problem at hand.

2. That it contains instructions to assistants engaged in the audit.

3. That it serves as a record of the work done during the verification process. Such record is required:

     (a). as a basis for review by a superior of the work done.

     (b). as evidence of the extent of the verification.

     (c). as proof that the work was actually done if such proof ever becomes necessary.

Construction of An Audit Program

An audit program consists of a series of verification procedures to be applied to the financial statements and accounts of an enterprise for the purpose of obtaining best evidence so that auditor can give his opinion about the accuracy or inaccuracy of them. Construction of audit program consists of selecting and putting together the specific audit techniques to be used in a given case.

Construction of Various Factors

While preparing the audit program, an auditor must give consideration to the following factors:
 
1. Scope and limitation of assignment.

2. Obtaining best evidence possible.

3. Using procedures applicable in the circumstances.

4. Covering all possibilities of errors.

5. Coordinating group related items.

1. Scoping And Limitation of Assignment

An auditor can do no more than he is permitted to do by the terms of his assignment. The scope of the assignment is a matter of agreement between the auditor and the enterprise whose records are to be examined. The agreement may call for any thing from a detailed verification of every transaction to a review of a limited number of transactions.

2. Obtaining Best Evidence Possible

Obtaining best evidence possible in selecting the procedures to be applied. the auditor should attempt to get the best evidence possible in every case. He must supplement the results with tests until he is certain that the facts are as stated.

3. Using Procedures Applicable In The Circumstances 

The auditor must know what records the enterprise maintains, who maintains them, and what controls are in existence to eliminate or reduce the possibilities of errors. The review of internal control and the construction of audit program go hand in hand and must be closely related.

4. Covering All Possibilities of Errors

An audit program should provide procedure aimed at detecting any error that may fall withing the scope of the examination agreement. This requires a sound knowledge of types and possibilities of error, plus considerable skill in weaving together the various audit steps.

5. Coordinating Group Related Items 

The auditor should group alike procedure in the most natural manner possible, for example, to verify two groups of asset and expense items, it seems logical to assign them both to the same member of the audit staff.

Types of Audit Program

Some auditors use printed programs which cover special sections of the work such as cash, cash transactions and the detailed or general work. Such pre- established programs require modification to make them applicable to specific situations.
 
Others use their own program for each situation relying on their own knowledge of auditing techniques and experience.

Stages of Audit Program

Broadly speaking, the audit program of a trading concern can be divided in to the following stages:
 
1. Vouching of the receipts and payments.

2. Checking of postings of all receipts and payments to proper ledger accounts.

3. Verification of the opening balances, and closing balances of all books including the Bank Pass Book and Cash Book.

4. Verification of the valuation of assets.

5. Verification of outstanding liabilities.

6. Examination of the rate of depreciation on assets and reserves.