Audit Programme
Audit Assertions
As part of the planning stage, auditors need to
prepare audit tests to test the account areas.
To assist the auditors there are 5 audit assertions
for the income and expenditure and 5 audit
assertions for the balance sheet.
Transactions are to be tested in audit with
reference to the audit assertions. Assertions will
be different for different account areas.
Audit Assertions (Contd.)
In respect of Income and Expenditure Accounts, the
assertions are:
Completeness, i.e. All relevant transactions have been
recorded.
Occurrence, i.e. All transactions are stated accurately.
Measurement, i.e. All recorded transactions actually
occurred.
Regularity, i.e. All transactions accord with relevant laws and
regulations.
Disclosure, i.e. All transaction are classified and described in
line with relevant regulations.
Audit Assertions in respect of Income-
Expenditure Accounts
Assertion Questions
Completeness Has the transaction been recorded in the
accounting records?
Measurement Is the transaction recorded at the correct
value?
Occurrence Is the transaction recorded as expenditure
in correct year of account?
Regularity Is the transaction legal and regular?
Disclosure Is the transaction correctly coded and
disclosed?
Audit Assertions in respect of Balance Sheet
Items
In respect of Balance Sheet items, the assertions are:
Completeness : All assets and liabilities relating to the period
have been recorded.
Ownership: The assets and liabilities recorded pertain to the
entity.
Valuation: The asset or liability is valued in line with
appropriate accounting policies, consistently applied.
Existence: The assets or liabilities represented in the
statements exist at the Balance Sheet date.
Disclosure: All assets and liabilities are disclosed, classified
and described in line with the applicable reporting framework
Audit Assertions in respect of
Balance Sheet Items
Assertion Questions
Completeness Have assets been recorded in the
accounts?
Ownership Is the asset/item the property of the
entity?
Valuation Is the item recorded at the correct value?
Existence Was the item still in existence at the
balance sheet date?
Disclosure Is the item correctly summarized or
disclosed?
A detailed audit program
An audit program consists of an
appropriate audit procedure to achieve
these 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.
Audit Programme
The audit programmes set out what the auditor
will test in relation to each audit assertion
The auditor should set out in the audit
programme:
the objective of the test;
what constitutes an error;
the population to be covered.
Functions of audit programme
Audit program
Links planning and execution
Provides framework for supervision and accountability
Helps transfer expertise to junior staff
Facilitates Administrative control
Advantages of an effective audit
programme
Efficiency and consistency
Clear instructins for staff
Avoids overlooking or duplicating work
Evidence of work done
Basis for future audits
Quality work results
Types of audit Programmes
TWO TYPES
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AUDIT NOTE BOOK
Audit note book is a diary or register
maintained by staff to note errors.
Purpose is to note down various points which
need to be either clarified with the client or the
chief auditor.
Complete record of doubt and their
clarification.
Audit Evidence
Audit evidences refer to information or data that use by
auditors as part their audit works to conclude their
opinion whether or not financial statements are
prepared in all material respect and in accordance with
the applicable financial frameworks.
Before auditor could make the conclusion on the
financial statements as whole or any part, they need to
make sure that the evidences they obtain are sufficient
enough with appropriate quality to make the
conclusion.
Types of Evidence
Accounting system
Physical evidence
Documentary evidence
Journal and ledger
Ratios
Circumstantial evidence
Oral evidence
Subsequent event
Computerized records
Methods of Obtaining Audit Evidence
Inspection
Observation
Inquiry
Confirmation
Computation
Analytical procedures
Surveys
Interviews
Physical verification
Inspection
Examination of records, documents or
tangible assets.
Generally, an audit team places
considerable reliance on this for both
tests of control and substantive tests.
Observation
Watching a process as it takes place.
Useful in testing controls that leave no audit
trail.
But, its reliability is limited because the
presence of the audit team may influence the
way in which the process in carried out.
Enquiry and confirmation
Obtaining information from knowledgeable
people inside or outside the auditee entity.
Used for both testing of controls and
substantive testing.
Confirmation is a response to an enquiry
which corroborates information contained in
the accounting records.
Computation
Checking the arithmetical accuracy of
source documents and accounting
records.
Central feature of substantive testing.
It is reliable, as the evidence is created
by the audit team itself.
Analytical procedures
The analysis of the relationship between
items of financial data or between items of
both financial and non-financial data.
Its reliability depends on the plausibility of
the relationship examined and the controls
operated over the data used.
Surveys and interviews
Using carefully designed questionnaires.
Independent consultancy firms may be
outsourced for conducting surveys.
Interviews with concerned officers.
