AUDITING

NAME :- J.JEROM EMMANUAL

INDEX NO :- EU/IS/2007/MS/94

REG.NO :- MS/914

ASSIGNMENT NO :- 02

FACULTY OF COM & MANAGEMENT

EUSL.

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1. BRIEFLY EXPLAIN AN AUDIT PROGRAMME

 An audit program is a written plan containing exact details with regards to the conduct
of a particular audit work to be carried out. It is comprised of a set of techniques and
procedures which the auditor plans in the audit of accounts of his client to achieve his
objectives in an adequate and timely manner.

 An audit programme cannot be drawn in vacuum. The programme of work involved

in the audit of any particular concern should be drawn in the light of the books
maintained, the accounting procedure adopted, the transactions involved, the internal
check in operation & other similar factors.

 An audit program guides in arranging and distribution of work and in checking

against the possibility of any omission. It is essential that an audit program should be
chalked out in such a manner that if the need arises for revision it can be carried out
without any difficulty. It should be changed in the light of experience gained during
the course of the work of audit.

2. WHAT ARE THE MATTERS SHOULD BE CONSIDER BY THE

AUDITOR, WHEN PREPARING AN AUDIT PROGRAMME?

 The programme of work involved in a particular business organization should be

drawn up in the light of internal check & internal control in operation, records
maintained, accounting procedures, type of transactions involved & similar factors.

 During the first audit, the work should commence with open mind & every step of
work performed is noted down.

 In the light of work & knowledge gathered about the system of recording & in
operation, the programme could be perfected.

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 b) WHAT ARE THE MATTERS SHOULD BE CONSIDER BY THE
AUDITOR, WHEN DEVELOPING AN AUDIT PROGRAMME?

 The audit programme must be developed with due care & skill, particular attention
should be given to the following,
 Exact scope of the duties of an auditor.
 Books of original entry & ledgers in use.
 The system of bookkeeping employed, & its weaknesses (if any).
 System of internal check & the extent of its reliability.
 Special provisions contained in the legal documents( Partnership deed; Memorandum
an articles of association, etc) affecting the duties of the auditor.
 General nature & routine of the business.

3. STATE ADVANTAGES AND DISADVANTAGES OF AUDIT

PROGRAM

 ADVANTAGES OF AUDIT PROGRAMME

The advantages of audit program are as under:

1. Every essential part of the work of audit can be duly carried on and there
is less chance of its being overlooked or omitted.
2. The auditor may easily know about the progress of the work done at any
point by simply looking at the program.
3. Complete coverage of audit work without any duplication.
4. Responsibilities can be fixed.
5. Division of work among the juniors can be easily made.
6. In case of any junior going on leave or leaving the work, there will be
minimum dislocation of work.

7. It serves as a guide for future references.

8. Audit work can start immediately and the work can be easily planned and
phased out.

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 9. It serves as a ready check-list of procedures to be applied and the work
already finished..
10. Audit program is very useful for final review, especially before signing
the audit report.
11. Audit program acts as a good evidence for the work performed during
the course of audit.
12. It can be presented in the court of law if and when necessary to prove
that there has been no negligence and the work has been completed.

 DISADVANTAGES OF AUDIT PROGRAMME

The disadvantages of audit program are given below:

1. The audit work conducted becomes too mechanical.
2. Audit program is suitable only for large audits.
3. Audit program cannot be established for every type of business concern.
4. Audit program may lose the initiative and interest, of the audit staff as
they have to do what they are asked to do and not what they feel like
doing.
5. The audit, program, however, thorough may not be completed and certain
items may be left from being checked.
6. It needs change every year and if changes not made it may become too
rigid in nature.
7. Procedures may be adopted which may not be suitable or appropriate to
the circumstances of the client.
8. No rigid audit programme can be laid down for each type of audit work.

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 AUDIT PROGRAMME.
Client:- Delux Manufacturing company.

Year End :- 31st January 2009.

Area:- Purchase.

Tests Signature Date

01 Select randomly 25 invoices & 10 credit notes
for checking in the manner described in the
following paragraphs. The item selected for test
should include the following types of
transaction:
1. Production purchases
2. Production services
3. Capital Expenditure
4. Non- Production goods & services.
5. Imports.

02 Obtain up-to-date specimen signatures & initials

of all officials operating in this area. This should
be obtainable from the permanent file.

03 Prepare a schedule of the items selected together

with the tests to be applied. On conclusion of
each test, the results should be entered on the
schedule.

04 For each item selected (Where applicable.)

a) Verify that each invoice is supported by

a properly signed copy requisition.
b) Verify that each invoice is supported by
a properly signed copy order.
c) Verify that each invoice is supported by
a Goods Received Note (GRN) bearing
evidence that the goods have been
inspected & approved as being in good
condition & order & in agreement with
the purchase order.
d) Verify that invoices for services have
been approved by the person
requisitioning the service.
e) Verify that capital expenditure
requisitions have been made within
authorized limits.
f) Verify that prices are authorized by
examining priced copy, orders, estimates,
tenders or other evidence.

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 g) Verify calculations & additions have
been checked.
h) Check calculations, extensions, &
additions.
i) Check that invoices have been correctly
expense & cost record coded & that
entries in the invoice register & cost
records correctly reflect the coding.
j) Verify that credit notes are supported by
a goods returned note or by other
authority if they are for services or
adjustments.
k) Verify that appropriate
acknowledgements in the form of initials
or signatures appear on each document.
l) Verify that each invoice has been passed
for payment & that invoices on which
cash discounts can be claimed have been
correctly treated.
m) Check posting from the invoice register
to the purchase ledger accounts.
n) Verify correct treatment of VAT.
o)
05) Verify sequence of:
a) Orders.
b) Goods Received notes.
c) Copy orders
d) Invoice numbers applied internally.

06) Enquire into missing numbers.

07) Enquire into outstanding orders.

08) Enquire into unmatched GRNs.

09) Examine pre-lists for control account

10) Test posting to nominal ledger.

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 AUDIT PROGRAMME
Client: Delux company ltd.

Year end: 31st July 1991

Area: Industrial wages

Particular. Number Signature Date

Examined
01 Select one week’s wages sheets from each month
and:
a. Check addition of each column.
b. Trace totals to summaries.
c. Check additions and cross casts of
summaries.
d. Trace summary totals to nominal
ledger.
e. Vouch totals with actual payments
recorded in the cash book.
02 Vouch data recorded on wage sheets for calculation
of gross pay with.
a. Time clock cards.
b. Piecework records
03 Vouch gross pay with tax records.
04 Vouch employee’s names with personnel records
and contracts of employment.
05 Select 20 employees in one week of each quarter
) ( all department should be covered) and vouch:
a. Hours worked with time records.
b. Piecework with records.
c. Overtime with authorities.
d. Other gross pay with authority.
e. Rates of pay with union or other
agreements or with authority.
f. Check calculations of gross pay and all
deductions.
g. Trace deductions through to separate
records of each deduction (eg income
tax, national insurance, pension
contributions, union dues, savings
schemes)
h. Inspect receipts where these were given.
i. Inspect authority for non-statutory
deductions.
j. Investigate any advances of pay

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 06 Select five employees at random and vouch holiday
) pay paid to them.
07 Investigate five payments of sick pay.
)
08 Investigate statutory sick pay records.
)
09 Verify that the procedure for dealing with unclaimed
) wages has been applied correctly by vouching the
unclaimed wages book.
10 At intervals averaging three years witness wages pay
) out procedure by.

a. Attending at the pay out of wages.

b. Inspecting the application of physical
controls over to identify workmen.
c. Verifying that wage packets are handed
over to identified workmen.
d. Counting the cash in some selected wage
packets and verifying with net wages
recorded.
e. Verifying treatment of unclaimed wages.

Overall tests

1) Select two dates some three months apart and compare wages sheets to identify new
employees and leavers.
a. Verify correct employment of new employees by examining tax records,
personnel records, and other documentation.
b. Verify procedures have been correctly carried out when employees have left
including a test of redundancy pay, correct notice, etc
2) Compare wage payments in total and by department with budgets and costing records
and obtain explanations for differences.

Internal control

1. Do the procedure as investigated by the above audit programme:

a. Prevent employees being paid for work not done? Yes/No
b. Allow the payroll to be inflated in any way? Yes/No
c. Prevent errors occurring in the wage calculation?
2.
a. Is there adequate evidence of time worked and piecework performed?
Yes/No
b. Is there adequate evidence for rates of pay? Yes/No
c. Are there adequate independent checks on the arithmetical accuracy of
the payroll? Yes/No

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 d. Is that payroll presented to check signatories as support for the cheque?
Yes/No
e. Can “dummy” men be paid? Yes/No

REFERENCES..

1) AUDITING BY:- LESLIE R. HOWARD.

2) SRILANKA AUDITING STANDARDS.