Audit Programme
An Audit Programme is a detailed document that lists the individual audit tests planned to achieve an audit plan. These tests verify the integrity and functionality of the accounting system, ensuring that recorded transactions are accurate and follow compliance standards.
Key Components
1. Compliance Tests
Compliance tests ensure that the company’s internal control systems are working effectively. This involves checking for adherence to policies, procedures, and regulations.
2. Substantive Tests
Substantive tests focus on the actual details of account balances and transactions. They are designed to verify the accuracy and completeness of financial statement data.
3. Analytical Review
An overall analysis of the financial statements, an analytical review, helps auditors understand trends, ratios, and financial metrics. This provides a high-level overview to identify any unusual patterns or discrepancies that may need further investigation.
4. Audit Plan
The audit plan outlines the overall strategy and scope of the audit. It includes the timing, nature, and extent of audit procedures, and is the foundation upon which the audit programme is built.
Examples
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Credit Sales Transaction
- Audit Test: Trace a credit sales transaction through its lifecycle—from sale to payment receipt—to confirm it follows recorded procedures.
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Inventory Count
- Audit Test: Verify the accuracy of the inventory count by performing physical checks and comparing them with recorded amounts.
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Payroll Auditing
- Audit Test: Check payroll records for compliance with internal policies, such as approval hierarchies and accuracy of salary disbursements.
Frequently Asked Questions (FAQs)
Q1: What is the primary purpose of an audit programme?
A: The main purpose of an audit programme is to systematically outline the audit tests required to evaluate the integrity of the accounting system and ensure compliance with internal controls and regulations.
Q2: How does an audit programme benefit audit staff?
A: It provides clear guidance on the procedures to be performed, ensuring consistency in audit work and helping to maintain high-quality standards.
Q3: What are compliance tests in an audit programme?
A: Compliance tests evaluate whether the internal control system and company policies are being followed correctly.
Q4: What is an analytical review in auditing?
A: An analytical review involves the comprehensive analysis of financial statements to understand trends, ratios, and identify any unusual variations.
Q5: Why is substantive testing important?
A: Substantive testing is crucial because it verifies the accuracy and completeness of information in the financial statements, thereby ensuring their reliability.
Related Terms
1. Audit Plan
- Definition: A framework that outlines the audit strategy, including the nature, timing, and extent of audit procedures.
2. Audit Evidence
- Definition: The information collected during an audit to support the auditor’s findings and conclusions.
3. Internal Control System
- Definition: A set of procedures and policies designed to ensure the accuracy and reliability of financial reports and compliance with applicable laws and regulations.
Online References
- International Auditing and Assurance Standards Board (IAASB) - Audit Guidelines
- Financial Reporting Council (FRC) - Audit and Assurance
Suggested Books for Further Studies
- “Auditing: A Risk-Based Approach” by Karla M. Johnstone, Audrey A. Gramling, Larry E. Rittenberg
- “Principles of Auditing and Other Assurance Services” by Ray Whittington, Kurt Pany
- “Audit Planning: A Risk-Based Approach” by K. H. Spencer Pickett
Accounting Basics: “Audit Programme” Fundamentals Quiz
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