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Audit Program & Procedures
Prepared by
Marzanur Rahman
Audit program
Audit program are lists of audit procedures to be performed by audit staff in order to obtain sufficient appropriate evidence.
Purpose of Audit Programs A set of instructions to the audit team. Assist with planning and performance of
the audit. A means to control and record the proper
execution of the audit work and also to review the audit work.
A record of the audit procedures to be adopted, the audit objectives, timing, sample size and basis of selection of each criteria.
Audit evidence to support the auditor opinion.
Areas Covered by Audit Program
- General Information- Existence- Valuation- Completeness- Cut-off Test- Presentation and Disclosure- Conclusion
Format of audit programName of Client: Prepared by: Date: Ref:Year end: Reviewed by: Date:
Particulars Test requiredY/N
Result satisfactoryY/N
WPRef.
Comments
Initial & Date
Audit Program – Tangible Fixed Assets• General
- Agree the opening balance- Prepare lead schedule and reconcile to nominal
ledger- Examine material journal- Carryout analytical procedure
(a) comparison of the current figures with prior periods;
(b) review of key ratios or other performance indicators.
- Review large or unusual transaction.• Existence
- Carry out physical inspection • Ownership
- Confirm title of freehold property- Inspect property leases or obtain direct
communication from bank or other custody
Audit Program – Tangible Fixed Assets• Depreciation
- Compare bases and rates depreciation- Review the appropriateness of methods- Check calculation- Ensure that no assets have been depreciated by more than
cost• Valuation and disclosure
- Vouch addition to purchase invoices- Vouch disposal to available evidence- Consider the indicator of impairment- Check consistent application of revaluation for a class of
assets- Check addition or revaluation treatment of investment
property• Conclusion
- Consider whether there are any items which need to be included a letter of representation
Audit Program – Investment• General
- Agree the opening balance- Prepare lead schedule and reconcile to nominal ledger- Examine material journal- Carryout analytical procedure
(a) comparison of the current figures with prior periods; (b) review of key ratios or other performance indicators.
- Review large or unusual transaction.• Existence
- Carry out physical inspection • Ownership
- Confirm title of freehold property- Inspect property leases or obtain direct communication from
bank or other custody
Audit Program – Investment • Income
- Check the income from investment and approved income have been correctly accounted for
• Presentation and disclosure- Consider the nature of assets held- Decide whether the investments have been
correctly classified and their treatment is consistent
• Conclusion- Consider whether there are any items which
need to be included a letter of representation
Audit Program – Stock and WIP• General
Same as before
• Ownership- Enquire if any of the stock is held on behalf of third parties and
ensure that such items are excluded from stock. - Where stock is held by third parties on behalf of the company,
obtain certificates where amounts are material.
• Existence- Complete the stock take attendance program- Trace all items selected at the stock take to the final stock
sheets, and internal stock records- Obtain explanations for any differences
Audit Program – Stock and WIP • Valuation
- Test the additions and extensions - Ascertain the method used for valuing stock and consider
whether: (a) it has been correctly applied; (b) it is an acceptable basis of valuation under applicable
accounting standards; (c) it is consistent with previous years and with the company's
accounting policy.
• Provisions- Obtain details of the basis for making provisions and
determine if it is both adequate and consistent- Review the stock sheets and ensure that any items identified as
damaged, slow moving or obsolete have been correctly written down
- Review all items of stock and work in progress and consider whether any further provision is necessary.
Audit Program – Stock and WIP Cut-off
- Review the results of the tests on cut-off carried out on debtors and creditors
Presentation and disclosure
- Ensure that payments on account are properly presented in accordance with applicable accounting standards
Conclusion- Consider whether there are any items which need
to be included a letter of representation
Audit Program – Debtors & Prepayments
Cost/Existence- Obtain or prepare an aging schedule - Agree the aging schedule balances to the control
account. - Obtain explanations for all material adjustments- Perform a debtors circularization- Where circularization has not been carried out select a
sample of trade debtors or where unsatisfactory results are obtained carry out alternative procedures.
a) examine the ledger for cash after date; b) for unpaid items inspect proof of delivery or
despatch; c) review correspondence files for items in to
determine whether any disputes exist;d) Check transaction history from key customers.
Audit Program – Debtors & Prepayments
Valuation- Review ledger accounts and obtain a list of any
debts with balances
Cut-off- Review credit notes after the year end and consider
whether these have been accounted for in the correct period
- If the company has despatch records, examine sales and despatch records before and after the year end
Presentation and disclosure- Ensure that there is evidence on the file to support
the disclosures made such as long term debtors.- Review transactions and balances with directors
and ensure they are properly presented as related party transactions
Audit Program – Bank Balances & Cash
Valuation and Existence- Obtain bank letter for all bank accounts open at any
time during the year.- Obtain or prepare bank reconciliations for all
accounts and verify- Ensure that bank balances and overdrafts are only
netted off where a formal right of set-off exists- For businesses receiving cash income, ensure
unbanked takings before and after the year-end have been accounted for in the correct period
- Obtain certificates for all cash balances not counted.- Conduct year end cash counting
Presentation and disclosure- Ensure that there is evidence on the file to support
all disclosures made- Review the bank letter and ensure that all necessary
disclosures have been made.
Audit Program – Creditors & Accruals Existence
- Obtain or prepare a list of trade creditor balances- Agree the list to the control account- Obtain explanations for all material adjustments to
the control account.
Completeness- List all debit balances over Tk _____ and obtain
explanations. Ensure they are correctly treated in the accounts
- Perform a creditors circularization- Where a circularization is not carried out, or the
results are unsatisfactory, test creditors for completeness as follows:
a)obtain the year end creditors listing;b)compare to prior year to identify obvious
omissions;c)review purchase day book during the year and
payments after the end to identify main suppliers;
d)enquire to major suppliers not in the list.
Audit Program – Creditors & Accruals
Cut-off- If the company retains goods received records,
examine the goods received/ purchased records immediately before and after the year end
Presentation and disclosure- Ensure that there is evidence on the file to support
all disclosures made.
Audit Program – Long Term Loans Existence
- Obtain third party verification for all material loans.- Review loan agreements and consider the
implications of any breach of covenants- Calculate the apportionment between long and
short- term loans.
Presentation and disclosure- Ensure that there is evidence on the file to support
all disclosures made.
Audit Program – Liability Charge Obligation
- Review the obligation of recognizing labiality.- Review the policy and practice of the company - Review the customer claim procedure.- Review the litigation process
Completeness ˉ the previous year’s provisions and ingent liabilities; ˉ items recorded on the bank certificate;ˉ minutes of meetings;ˉ major contracts;ˉ correspondence
Presentation and disclosure- Ensure that there is evidence on the file to support
all disclosures made.
Capital Reserve & Statutory Records Completeness
ˉ Check all statuary records ; ˉ Any changes in director and their interest;ˉ minutes of meetings;ˉ Director report;ˉ Share register ˉ Share issue procedure ˉ Dividend declaration and dividend distribution
record
Presentation and disclosure- Ensure that there is evidence on the file to support
all disclosures made.
Audit program - Profit and Loss Account Occurrence
- Check the transaction occurred are related to the entity
Completeness - All transaction are supposed to be recorded have
been recognized in FS Accuracy
- Transactions have been recorded accurately at their appropriate amounts
Cut off - Transactions have been recognized in the correct
accounting periods. Classification
- Transactions have been classified and presented fairly in the financial statements.
Presentation and disclosure- Ensure that there is evidence on the file to support
all disclosures made.
Audit Program – Taxation Ensure profit before tax used in the computation agrees to
draft profit and loss account. Verify movements on CT account to Tax Returns. Recalculate the amount paid as advance income tax; Obtain schedule of Tax Deduction at Source (TDS) and
check its accounting in the books; Observe Treasury Challan for advance income tax; Observe certificate for TDS; Recalculate the provision for taxation and compare it with
the records of the company; Identify the temporary differences for deferred tax
calculation; Review filing of relevant return to NBR for Income Tax;
Audit Program –VAT Review VAT registration Certificate. Review VAT registration according to the nature of
business Ensure VAT is recorded on applicable transaction as per
VAT Act 1991. Verify the VAT calculation. Verify VAT current account transaction; Observe Treasury Challan VAT; Observe monthly VAT return
Audit Program – Related Party Transactions
General Checking- review prior year working papers for names of known
related parties;- review the company's procedures for identification
of related parties;- enquire as to the affiliation of those charged with
governance;- review shareholder records to determine the names of
principal shareholders;- review minutes of the meetings of shareholders;- enquire of other auditors currently involved in the
audit, or predecessor auditors, as to their knowledge of additional related parties;
- review the company's tax returns and other information supplied to the tax authorities;
- Enquire as to the interest of the directors in other companies.
Audit Program – Related Party Transactions Transactions Checking
- Review the accounting records for large or unusual transactions or balances. For example: a) transactions with abnormal terms; b) transactions that appear to lack a logical business
reason; c) transactions processed or approved in a non-routine
manner; d) high volume or significant transactions with certain
customers or suppliers as compared with others;
Disclosure- Obtain sufficient appropriate audit evidence as to
whether identified related party transactions have been properly recorded and disclosed.
Obtain a written representation from management concerning:
a) the completeness of information provided, and b) the adequacy of related party disclosures in the
financial statements
Calling Over Sheet And Typing Instructions
Check and record call and cast of accounting figure
presented in FS
Opening Balance and Comparative Checklist
This checklist should be used in circumstances where an audit is being undertaken for the first time. This could either be because the client has been taken over from another firm or because the previous period's accounts were unaudited.
Planning Part- Was there an audit in the previous period?- Confirm that the prior period's closing balances have been
correctly brought forward to the current period.- Summarize the main balance sheet opening balances and the
main accounting policies.- Consider the risk of material misstatement in the current period's
accounts due to errors in the brought forward figures.- Detail what steps will be taken to mitigate those risks.- Have the current period's accounting policies been
correctly applied in respect of the opening balances?
Opening Balance and Comparative Checklist
This checklist should be used in circumstances where an audit is being undertaken for the first time. This could either be because the client has been taken over from another firm or because the previous period's accounts were unaudited.
Completion Part- Have the accounting policies been consistently applied?- Are the results and ratios consistent and in accordance
with the audit evidence obtained?- Were the results of the audit work undertaken on
opening balances and comparatives satisfactory?- Have management been informed where there is a
misstatement of the opening balances that could materially affect the current period's figures?
Post Balance Sheet Events Assess whether the initial materiality, risk assessment or
extent of reliance on controls should be revised in view of the audit evidence obtained.
Review that nothing has occurred since the year end which should be disclosed
Discuss with management and ensure that all material items have been identified
Consider whether:- all events up to the date of the auditor's report that
may require adjustment of, or disclosure in, the financial statements have been identified;
- there are any indications that the going concern basis may not be appropriate;
- matters have been properly presented and disclosed in the accounts;
- there are any points which need to be included in a letter of representation
Going Concern Concept An entity prepares financial statements on a going
concern basis when the entity as continuing in business for the foreseeable future.
The auditor’s responsibility is to obtain sufficient appropriate audit evidence about the appropriateness of management’s use of the going concern assumption
Following situation can be happen regarding going concern assumption:
use of the going concern assumption is appropriate but a material uncertainty exists (include matter of emphasis paragraph in audit report)
use of the going concern assumption is inappropriate (give adverse opinion)
Going Concern ChecklistFinancial Issues Does the company have net liabilities or net current
liabilities? Has the company defaulted on any loan agreement or
breached any covenant? Does the company have serious liquidity or cash flow
problems? Has the company sold a substantial number of fixed
assets which it is not intending to replace? Has the company experienced problems in obtaining
and/or retaining normal terms of trade credit by suppliers?
Is the company experiencing problems paying debts as they fall due?
Going Concern ChecklistOperational Issues Have there been any fundamental changes in the market
or technology to which the entity is unable to adapt adequately?
Has the company lost any key management or staff? Is the company experiencing any labour difficulties? Is the company relying on a few product lines and
operating in a depressed market?Other Issues Is the company involved in any major litigation in which
an adverse judgment could imperil the entity's continued existence?
Are there any other factors which could adversely affect the appropriateness of the going concern basis?
Post Balance Sheet Events• General
- Agree the opening balance- Prepare lead schedule and reconcile to nominal ledger- Examine material journal- Carryout analytical procedure
(a) comparison of the current figures with prior periods;
(b) review of key ratios or other performance indicators.
- Review large or unusual transaction.• Existence
- Carry out physical inspection • Ownership
- Confirm title of freehold property- Inspect property leases or obtain direct
communication from bank or other custody
Post Balance Sheet Events• General
- Agree the opening balance- Prepare lead schedule and reconcile to nominal ledger- Examine material journal- Carryout analytical procedure
(a) comparison of the current figures with prior periods;
(b) review of key ratios or other performance indicators.
- Review large or unusual transaction.• Existence
- Carry out physical inspection • Ownership
- Confirm title of freehold property- Inspect property leases or obtain direct
communication from bank or other custody
Post Balance Sheet Events• General
- Agree the opening balance- Prepare lead schedule and reconcile to nominal ledger- Examine material journal- Carryout analytical procedure
(a) comparison of the current figures with prior periods;
(b) review of key ratios or other performance indicators.
- Review large or unusual transaction.• Existence
- Carry out physical inspection • Ownership
- Confirm title of freehold property- Inspect property leases or obtain direct
communication from bank or other custody
Post Balance Sheet Events• General
- Agree the opening balance- Prepare lead schedule and reconcile to nominal ledger- Examine material journal- Carryout analytical procedure
(a) comparison of the current figures with prior periods;
(b) review of key ratios or other performance indicators.
- Review large or unusual transaction.• Existence
- Carry out physical inspection • Ownership
- Confirm title of freehold property- Inspect property leases or obtain direct
communication from bank or other custody
Permanent Audit File Index
General Information
Background Information Details of bankers and professional advisors Know Your Client Checklist Register of laws and regulations Details of related parties Significant accounting policies Copy of current detailed risk assessment
Permanent Audit File Index Statutory information
List of shareholders Details of mortgages/charges Directors' interests in shares and debentures Copy annual return Memorandum and Articles of Association
Taxation (If no separate tax permanent file) Tax certificates Copy of Tax Return Advance Corporation Tax details
Permanent Audit File Index Assets
Details of freehold/leasehold properties Details of intangible assets Investments in subsidiaries and associated
undertakings Details of professional valuations Details of insurance values and cover
Contracts and agreements Details of contracts and agreements with index Details of share options Bank overdraft or loan facilities, security and
covenants Accounts
Signed copies of full accounts Company accounts disclosure checklist
Thank You