Unit328365329
Unit328365329
Unit328365329
3.6 INTRODUCTION
In Unit 1 and 2 you have learnt the basic concepts of auditing and the role of internal control in auditing. Audit planning is an another important area which is an essential process bf systematic verification and organised examination. In this unit you will learn the concept of audit planning and the basic considerations in getting ready for an audit. You will also learn the method of recording the audit work and the alternative and . supplen~entarytechniques of audit checks.
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3 2 1 Process of Planning ..
Planning is a process of doing a job in a systematic and methodical manner. Planning defines: (a) What to do? (b) How to do? (c) When to do? and (d) Who will do? Planning is an organised approach to complete a task in minimum time at minimum cost and with maximum efficiency. Planning is needed to coordinate the work and complete the assignment effectively. It is schedule of activity prepared in advance so that signifleaat areas receive the required attend or the job'is completed speedily, the work is allocated among the available staff properly. It ensures that something which is relevant does not get neglected. Planning, therefore, controls progress and assists in achieving the target on time. It also helps in enhancing the quality of output. It is thus the way to promptness and perfection in performance.
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Let us now discuss the considerate methods and importance of audit planning in particulat.
3.0 OBJECTIVES
After studying this unit, you should be able to : explain the concept of audit planning
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describe various preparatidns before audit analyse the major aspects of audit programme
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explain the audit note book describe the contents of working papers explain the concept of routine checking and test checking.
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Fundamentals of Auditing
Audit I'lanning
A proper consideration of these factors will enable the auditor to appreciate-the events and transactions likely to have a significant effect on the financial statements. All this helps in designing an appropriate audit approach to the assigned responsibility.
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to ascertain the client's system of internal control, to record it, to corroborate that it is in fact working to evaluate it, and only then to carry out further work in the areas that the evaluation has shown to the weak.
d) e) establishes the intended means of achieving the objectives of the audit; assists in the direction and control of the work ensures that attention is devoted to critical aspects of the audit ensures that the work is completed expeditiously.
Thus the auditor, before taking final decisions about the monner in which a particular audit is to be conducted, should :
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consider the audit approach proposed to be adopted; estimate the extent to which reliance may be placed on internal controls of the company; identify any aspects of the audit which need special attention; and take note of any additional work which has been agreed to be undertaken.
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Letter of Engagement
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Review matters rnised in the audil of the previous year which may have continuing relevance in the current year Assess the effects of any changes in legislation or accounting practice affecting the financial statements of the company Study interim or management accounts where these are available Consult the management and staff of the company about the trading circu~nstances and significant changes in the business, or its management Identify any significant changes in the accounung procedures of the company (i.c. a new computer-based system) Ascortain the timing of significant phases of the preparation of the financial statements See the extent to which analyses and summaries can be prepared by the employees of the company Estimate tho relevance of nay work to be done by the internal auditors of the company Determine Uie number of audit staff required, the experience and special sk.ills they need to possess and the timing of their audit visits Allocate the work to be undertaken and the procedures to be followed between the joint auditors, if any.
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Find Out the Background and Operational System in Theory Discover the Operational System in Practice I I Identify the Strengths and Weaknesses of the System
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Evaluate the Relative Effect of Strengths and Weaknesses in Each major Operational Area
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Determine the Reliability of the Underlying Records as a Basis for Preparation of the Financial Statements
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Ensure that the Financial Statements are in Agreement with the Underlying Records. Form an Opinion on the Accounts - Whether they Give a True and Fair View and Comply with Statutory and Other Requirements.
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Ensure that the appointlnent is in order under the provisions of law Enquire from the retiring auditors the reasons for the changes, if the appoinment is in place of another auditor Obtain necessary information and instructions about the nature of work, scope of duties, expected date of completion of audit, audit fee, etc. Examine the accounting system followed by the company and identify the weaknesses, if any Get a lisl of various books maintained, those who maintain them and their s~ecimensignatures Ascertain the system of internal control from the company and evaluate its effectiveness
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Express Opinion in the Audit Report
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CoHcct n list of ihc diffcrent officers of the company, their duties and powers a n d their specimen signatures
Vwit the work3 and acquirc some technical knowledge t o develop familiarity with the nilture of the operation
Ask !he company to balance the books, prepare the final accounts, arrange the voucllers in urder, finalisc the debtors' and creditors' schedules and file important legal papn, contracts, list of securities, etc.
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If errors continue in accounts owing to a defective system accounting followcd by the company, the auditor is not responsible for the correctness of the financial statements. Major recommendations of the Board of Directors in respect of financial matters of the company need not be seen by the auditor. Adequate preparations in advance of commencement of audit work make the job easier. An auditor is not responsible for negligence in duties shown by his staff in course of checking. by A list of books of account must be ........................ the auditor before commencement of audit. It is ..................... for the auditor to do the entire checking of accounts himself.
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Prcxure a copy of the audited balnnce sheet of the previous year and ensure that tllc opening balances of the current year tally with the closing balances of the last year
See thc auditor's report of the previous year and take note of the state of affairs
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Rcfer to the nccounting and financial provisions of the Article and Memorandum of Association of the company and of its prospectus and
Find out-if some important resolutions have been passed at the meetings of the B w d of Directors and obtain copies of the minutes affecting accounting matters of the company.
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Check: Your P r o g w A
Balancing of books of account is the responsibility of the ........................ An auditor should ..................the effectiveness of the system of internal control before conducting audit. An auditor must be ............... in giving his opinion on the set of accounts which he examines. An auditor must be .....................about the significant changes in the accounting procedures of the company.
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3.4
AUDIT PROGRAMME
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Audit ~ m ~ r a f h m e an outline of proccduns to be followed in order to arrive at an is opinion concerning the financial statements of a company.
The main features of an Audit Programme are as follows: It is a method of planning, supervising and controlling the audit performance. 1
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Why do we by to ascertain the system of internal control in operation before commencing audit?
It is a systematic approach to audit. It is a planned procedure of examination and steps of verification. It is a detailed plan of audit techniques to bei adopted and applied for achieving t the objectives of audit. It specifies the work to be done and the manner in which it shwld be completed within the estimated time. It shows the; tasks to be carried out and some relevant instructions to the audit staff in respect of the extent of checking to be done for examination of evidence.
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mat relevance of ~ f e n i n g the auditor's repofi of the last,year before the to cumnt audit?
As part of audit planning, it is advisable that the auditor prepares a written programme of audit tests to be performed in respect of the company under audit. He should then tick and sign the appropriate section-of the programme as the work is completed.
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A~diKm~ U J S ~ in ~~II~LIltationh the officms of the eompmy. work wi Cehain jmporbn~ d(-JwIIents be Seen by the auditor bfore decides he to accept his assignment.
Balance Sheet Audit programme showing' the work necessary for the verification of the items appearing in the Profit and Loss Account and Balance Sheet of the company,
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t'llck bnltb'.r t f Sy\tall of internal control being followed by the comoanv: (if ~
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Makes the work almost mechanical sometimes the work is done without understanding the objectives behind it.
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Gives rigidity of approach - the required flexibility to devote additional attention to some critical areas becomes difficult.
Discourages personal initiatives or efficiel~cyon matters which demand some, more time or energy.
Disclose lo ille company's staff the tests being pcrforrned and the part of the work which has already been completed.
Yet it must be appreciated that the concept of Audit Programme has enough usefulness ,in the process of audit. A realistic assessment of the situation and a careful planning of affairs, therefore, can very well remove the above limitations of the Audit Programme.
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~ f l ~ h i dl c hlkll ~ g of hl<*s dating m: (pl cash and l ~ n *lrld ~lllr~lla+r rCtumr, (c) suleq and yllFs (bl purrhnle 4m ~'.l).ltlh'. ( V 1 11rnlul. (I) JctiC.cri1ceounl,y, 11 (dl b. 1 s receivable and hills (6) Statutory requirements.
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An rlutl16 Nun Book comhjrles recording of: (i) General Informntion in respect of the
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Special Paints of significant mattcrs observed during the audit of 2 How can you make an Audit Programme flexible?
Bonk usually contains the following information : List of hooks of account in use in the company
Naturc of thc business carried on in the company Names of the principal officers of the company alongwith their powers, duties and rccponsihilitics. Syblcrn of accounting and internal controI in operation Tcccchnical terms used in the business Kelcvant extracts from the minutes and contracts Mojcs provisions of the Articles and Memorandum of Association affecting accounts and audit Financial and administrative structure of the organisation Particulars d financial and accounting policies followed by the company ~oints awaiting further explanation and clarification Queries in course of audit and their disposal List of missing vouchers which need duplicates or certificates of payment 4
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What is an Audit Note Book?
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State whether the following. statements are True or False : An Audit Programme need 'not be in writing.
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IS Dates o f commencement and completion of the audit work 1 Totals or balances of important books of account 6
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Points 'to be included in the auditor's repon.
An Audit Note Book, therefore, takes note of all irregularities identified in course of thc;
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An Audii Programme guides the work to be done and the methods which should be adopted for completing it.
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An Audit Programme serves as an evidence of a true and fair view of the state of affairs of the company,
audit, unsatisfactory arrangements, weaker financial adminishatibn, spcial points of consideration at the time of verification of final accounts and important matter~for futura reference.
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iv). An Audit Programme shows how the financial statements of the company were prepared.
v) An Audit Programme should take note of the effectiveness of the system of internal control foIlowed by the company. An Audit Programme will help in fixing responsibilities and knowing reasons why a pmicular checking was not done effectively.
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Assiru the auditor in assessing the efficilncy of his staff Serves as a reliable documentary evidence in support of the audit work and as a ' defence for negligence Provides guidance tb the audit staff at subsequmt audiu Helps fihnf& of future audit progmmes taking note of fhe weaknesses identified in the system in counc of examination. an Audit Note Book is normally maintained to record imponant points afPecfiqg
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vii) Distributi~nof duties to audit staff for checking of accounts should invariably be made in consultation with the management of the company so that they work together to complete the task in ,time, viii) An Auditor should revised his programme if his staff advises him to make some changes in the time allotted for checking of books of account.
is) An Audit Note Book maintained by an audit staff need not be shown to the
auditor.
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Material errors and frauds discovered during the audit should be recorded in the Audit Note Book.
the audit,
What is an Audit P m g m m e l
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Audit Working Papers are written private materials prepared by the auditor for each audit separately. Such papers indude : relevant accounting information obtained from the company, J 1. 2 methods of examination used in cmrse of audit,
Audit Planning
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>.r: r ,I! n.krrcn~r. 1tlrrrlg the :~ndit well as during the subsequent years of audit as r k i Irk1 rn. Str, I t I I . ~ %:r+ arc prrscrved by the auditor to record the work done and provide tdrl . r l , ,~tln[rn,qr~iftrnrintirinrelev:int to the assignment.
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A copy of the accounts on \ti)' r, the auditors are rcporting, authenticated by directors' signatures An Internal Control Questionnaire or other record designed to ascertain tile adeauacv of the system of internal control
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1,l,tltr,itr1 Wt:rLing IJ:l[vrs ;Ire prepitred and nlaintained for the following purposes :
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An Audit Programme.supplemented by particulars and dates of the work carried out and precise details of audit tests and their result A schedule for each item in the Balance Shcet, preferably including compxative figures showing its make-up and how existence, ownership and value or liability have been verified
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s t kcrp r h cxplanotions ant1 information received and the source through which rtcc,) wcre nhtnlncd; iintl
ra3c~nl Jeclnons takcrr on various points and the persons who took such the cla:t
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( h i t + A ~ r ~ l Wirrhirlg 1':ipers serve as an evidence of the work done by the auditor and rl hr st,rtt
A sclcdule supporting each item in the Profit and Loss AccouL, preferably including comparative figures and such other items in the trading or subsidiary accounts as may be necessary A check-list concerning compliance with statutory disclosure provisibns A record showing queries raised during the audit and their disposal, with notes where appropriate for attention for the following year. of important statistics or working ratios; significant variations will need A to.be exulained
A -- - record or extract of minutes of meeting of the directors and shareholders
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nl.kln 0111ettof tile Audit Working Papers is to record*sod demonskate the steps ~ l t i th .ire tdrn hy tllr i~ulitnr encihle him to form a11 (>pinion i to on the accounts upon K ~ I Ih LC . r~q~~reti to repoit TO ~ichieve object, the working papers provide : this
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u nlc~lnhelf n)n~dling cumnt year's audit work and the basis on which to the plitn the ti)llowing year's audit,
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~chetiuicuIn support of the accounts, and mt<rmiltlonl h W the business whose accounts have heen audited including its rtlccnt h~htory.
Copies of leiters to the company setting out any material weakness or matters with which the auditors are dissatisfied in respect of the accounts or control procedures Letter of representation, i.b. written confirmation of information and opinions expressed in respect of ~natters such as stock value and amount of current and conli;lgent liabilities.
Thus a Current files relates primarily to the set of accounts behg audited.
111~ rllalfl rWhon\ why [he preparation of Audit Working Papers is supported as a
to snt~d'y the ouclitor, through a review of the actions of his subodinates, that the work aklegnted by him has been properly performed:
inr futun nf~rence derails of problems encountered together with evldenes work ~ r f o m e d conclusion drawn there from in h v i n g at the and audlt opinron;
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A short doscription of the type of business carried on and the places of business
List of accounting records and responsible officials with plans of organisation Statements showing a note of any accounting matters of importance such as historv of reserves and bases of accounting methods adopted' The stock-taking. according instructions on internal accounting, internal auditing and
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fb a PcmanCnt R cm
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WOrbng papm should normally be divided between the following two files r'ui-rent Rlc, end
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Thus a Permanent File contains papers relating to some basic information of a conbuous nature, such as the constitution, organisation, management, policies, systems and .~rocedures the c0ITIrany: of r The contents of Audit Working Papers, therefore, include : (a) Audit Programme (b) Details or Queries (c) Detailed schedules (d) Important Confirmations :.Izagement Certificates (f) Relevant Abstraots (g) Re1ating1Comespondence (h) records of Balances (i) Significant Points U) ~ u d i Assessments (k) Major i Conclusions.
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Audit Planning
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Ikmonstrates the facts which were known at the time the auditor reached his conclusion and that, based on those facts, the conclusion was reasonable Krnprnvcs the efficiency with which audit is conducted Helps to instruct the audit staff Facilitates delegation of work Provides a means.10 control the quality of the audit work Serves as a documentary evidence of the care and skill employed by the auditor during his examination Mnintolins confidentiality and safe custody of facts discovered through audit investigation Acts as a basis for weaknesses in the infernal control system being pointed out t o the company and auditor's advice in those areas
Asaisu audit plnnning in succeeding years on the basis of the audit experiences of the current year
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A copy of the Audit Working Papers should also be given to the dompany for their reference. Audit Working Papers maintain a record of work done a ~ l d strength or the wealcnesses of the system obtaini~~g tile organisation. in Any relevant information about the company gathered by the auditor from third parties should be incorporated in tlie Auditor Working Papers. The purpose of Audit Workillg Papers is served as soon as tl~eaudit report for the year is submitted: it need not be retained for the future.
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Identifies points, documents, policies or trnnsactions which need particular attention in the future Outlines the appropriate sequence of audit operations suitable to the organisation aftcr the required changes made in course of verification.
the transaction is supported by relevant and r'eliable evidence; the transaction is authorised in accordance with the system of internal control . . operated by the company; the transaction is consistent with the company's normal course of business; the terms of the transaction appear to be reasonable; the .transaction took place within the per'rod under review; all calculations of cost, discount,..etc. are aritl~meticallycolrect; the income or expenditure has been correctly allocated between capital or revenue; and the lransaction has been in the books of account in accordance with the
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Current
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acoepted of accounting. is by paper tI1erefoie, that the auditor txscertains whether basis for the preparation of accounts,' and tfie records from a show a true and fair view of the state of affairs of the business.
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Decisions in respecb the Dolume or depth of checking to be done for the audit of of particular company are p ~ m a i l y governed by the following factors:
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Audit Planning
P I * " I Q E R * ~ ~ ~~ II ) ! ~I ~ I(! X S , ~ $ ~ T
frauds
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Test checking is a method of examining a selected number of items. It checks a representative sample from a large population of similar items. It is a technique of selective verification of an arbitrary percentage of transactions. The quantum of test checking is determined by the auditor's judgement and his personal assessment of 50% checking of the items selected at random. situation; it may vary from 5
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rlal\t.~ni.cl, iuldit clccisions may also vary from year lo year in respect of the the 6 o;r~p;~riy,
iI+:xtcntof Checking
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Ikc n,iture and extent of checking to be done is ~rimarily matter of judgment of the a
,iuahttrr In the connection, fie is generally guided by the following considerations:
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nriinner in which the audit is conducted should mainly depend upon the cirr.umstnr~ces the company of
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'I'hc cxlent to which reliance can be placed upon the system of internal control utlt)ptccl hy tllc company is n matter of personal evaluation for the auditor 'I'he aud~tor should dctcrmine the nature, scope a n d extent of checking the crrn~plrtrncsl; correctness of accounts in each case separately anti
r'I16 rllt'thod and type of checking required to satisfy him about the correctness of trimu~rctioa~ rccorded in the books of account are also matters of his personal as tle,.ls~nn
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Include in the check entries of every description Select the entries td be checked at random Verify greater number of entries relating to the opening and closing parts of the accounting year Extend the check to the work ef every accounting staff Avoid test check of some important books like Cash Book where the transactions sl~ould checked 100% be Distribute the checking lo different periods and entries at each audit anticipate it Deteunine the size and selection af the sample without basis Take care of the degree of risk involved in ignoring the checking of the substantial number of item Extend the area of checking if the test check discloses some material irregulnritib I or suspicious results Choose qntries for examination keeping in view the nature, size and amount of the transactions.
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In the interest of an effective audit, it is imperative that a systematic approach'is nlade to ol~ccking all accounting records of "611equontun~ technique of checking must be decided on a standard and and recognised hasis 'Ibcrc ire nu legal provisions regarding the volume of work to be done. the methotl of thing it or the extent to which it should be done?he rrialor concern of an audit is to ilscert~inthe rn=-zctntss of accounts through ..._ iIn appropriate method of chccking as a basis of pl-rl?+~ u--.or's opinion on the final izccc,\lnt,s
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It ic thnjuyll this chccking that the auditor is able to determine the extent to which hc can rsly upon: (a) he system of recording and processing &ansaclions as ~IWted the company (b) the adequacy of its accountink system as a basis f o r by the preparation of financial statements (c) the cmectness of entries in the books of accolmt ;md (dl a WUC and fair view of the state of affairs as shown by its financial rlntemcnts which the auditor is going to endorse.
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3.8.3 ~uditor'sResponsibility
In respect of the method of checking applied by the auditor, he should be careful about the following :
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I'hir i\ s drtoilcd checking of all transactions as recorded in fie books oforiginal en*md the suhridiilry books, and also of all ledger poing. Some of the salient feabres of the system of Routine Checking are as follows:
lhis involvcs chccking of each and e v e y transaction of the business Thls is a methud af extensive checking
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This prtxeb of checking takes more time and consumds higher cost
In case the test check approach fails to detect some errors or frauds, the auditor is held responsible for negligence in the performance of his duties; this implies his failure to exercise reasonable care and skill in audit. Test checking cannot be used as a defence against negligence of duties, because the statutes expect the auditor to express an opinion on the true and fair vio, of the state of affairs of the business; how this opinion is formed is the responsibility of the auditor himself.
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Test checking is not a legally acceptable basis of checking and it does not guarantee any specified degree of reliability on the entire set of transactions; it is only a broad indicator of results obtained through the process of selective verification While the technique of test checking is commonly use4 by the auditors, they remain conscious of the risks and limitations too; they apply their care and skill on an extended level as soon as they discover that the results demonstrated 6y test checking raise an alarm for further investigation. .
Audit Planning
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KEY WORDS
i~erc tliili ii detirilcd examination of transactions is possible Whcre i\i\ appraisal of the system of internal control by the , ( I I , ! ~ ! + I : I!,rv. , +,i(l'rt,~~tc~ty rcwlts, t~e niay lclay on Test Checking rather than on Routine
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Financial statements: Trding.and ~rofit,and Loss Account, Balance Sheet, Statement of Sources and Uses of Funds plus any other relevant statement forming part of the rinal operations results of the business.
Flow chart : A diagrammatic sequence of aperations showing the process of a work from its coinmenccment to the conclusion.
Internal Audit : Audit within the organisation by its own staff. Internal Control : The system of checks devised and operatcd by the cornpal~ywithin the organisation to minimise the possibilities of errors and frauds.
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rhi>y H ot'tz~~ ;:I sul~plc~r~critary. In fact, audit niakes a combined used of the two '1'~:;tc:hccking is sclectctl ilcrns, therefore, is joi~iedby detailed Routine t'llrh:.6rtrjr; I I ~ I ! . : x : ~ I ~ ~ ~nI ~lcl~tti, I I i I:I~I~I particularly in arcas which demand greater attentian.
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[r i!. 1 1 1 : ~wirlcly ~ugycs~t'rl Tcsts Checking should be used on the basis of statistical thnt ~ ~ . . ; . I I I I I ~ ~ U Ct ~~ t :,;~~npliug.liis is with n view to achieve a suitable balance between the ' 'T' t i ~ l l i i w ~ ~ t : : v c:xtrcrnc!i while mcilsuring the precision and reliability of accounting ~~ ~ t
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Joint Audit : Whcre more than one auditor are appointed to conduct the audit of a company.
Random Check : When each and e v e ~ y item of a population has an equal chance of being included in the sanlple selected for verification. Test : The process of verifications of an entry, an asset, a statement or a document. True and Fair : The correct financial position which is without any manipulation or window dressing.
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It i'i trirrk1i:r !illi;!;cal~tL tllat tllc st:ltistical sarnpling techniques should also make use of .,tr;rf~li~:atlorra~rditchecks, which is a still n~orc in sophisticated and dependable system. 'it~.,lrrt'i::atitrit tiivirlcs t l ~ dI'icld urlder review into different layers according to the size of thr: Itt:rlP!i. It the11 ~CCOIIICS possible to verify a large part of the total value by examining ,\ !;rr~:tll a~arrl~tr itt:rlrs. 'l'l~ir; helps thc auditor in reducing the possibilities of risk ol' r.'tlilki~:r[tii'~ll ~il;rl(.~rillg verification of a number of items which have not been ~ f t ~ ~ the i ~r~\:lc~rleil fllc s;u~lplc irl size.
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FreeJHonest, (vi) Careful B 5 (i) False, (ii) True, (iii) False, (iv) False, (v) True, (vi) True, (vii) False, viii) True, ix) False, x) True
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Audit It'lant~ing is 1111 essential process of systcrnatic verification and organised uxi~~nin.rtita~. cxuct n:~turcof audit planning, however, should be guided by the 1'11i: ctrnJiriitan irl~ti~ining tla company. Thus :I careft11planning of audit operations in in ~ I ~ ~ VCIISII~L:S I O O :ru(lit. Adequnte preparations must be made before , I ~ I C ';ICS I ~ ~I
INAL QUESTIONS
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What dacumcnts are required from the coinpmy to be produced befok the auditor at the time of the commencement of audit?
~.~rlIrklrlr!ncelncrllt~ iil~dit. i f This will: (a) allow the auditor to design an appropriate 1)rc$rLrnlslr t l l ;adit. Ib) dcv~.lop suioble procedures of vefification, (c) apply proper tt:cfairluer 01 ulwckir~g. cosurc li~ilelycompletion of work, and (e) give full (d) ~~l~l)~lrtlllitl tIlL Illc l'inoncial statements shows a true and frjr view of the 10 . . stiltc t)f ilffi1irs.
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Audit I'mgrrrnmc helps plmlninp. supervision and convol of audit performance. I t : (a! 4 h c s file works hi. done, (h) the proculures to be adopted, (c) the duties m be [~~l.firnn~d illldit staff, the time scllcdule 10 be followed for audit, and (e) the hy the rxtt'flt Of rfleckirlg to he ~(Kduct~d verification. An audit programme, themfore, is a for "l~'i111\ 1 "l\LW t~Llil1ilyOf audit performance and is an evidence of the record of work " tlone hy the iu~tl~tta.
An Audit Note Rook is a record of solne in~portnnt information gathered or experienced I n ajur\r of vclificati0~ iCCounts. It includes significant matters observed during the of i111ditwllicll may he (if considerable use at the time of finalisation of reports as well as ifuring succcssivc aulits.
Audit Working I'fipcn keep a file of such useful infomation which relate to,the C(mlpdny, its ;KCflllntS, ~ c c O ~done, decisions taken and the basis of C ~ decisions in rtbSPCCtOf [llc rtp(U'ting respoi~sibilities the auditor. All such papers of classified llndct lw m;lln citfcgOric~: Information directly related to the set (a) accounts under adit <luring the year, prvrcrved in I Currelit File, and (b) Information of a relatively mt)rc illntinuol~~ usefulness to the audit of the company in successive years maintained in a Permanent I4lc.
. Note : These questions will help you to undershnd the unit better. Try to write
answers for them: But do not submit your answers to the University. These are for your practice only.
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Routine C h ~ c k i n ~il detriletl ~ n d is ertcnsivc method of checking adopted for the FllrplJX of vt!riflc:l[i(m Of ~ a d and evcry item of a bookl where as ~~~t checking is l hus.J selective cxmination of tmnractions 80 avoid verification of items wjliL'kl nO[ hc of illly tllilt~rhl inlponancc so far ast, the purposes of ~(bneerncd. difkr~l)t 'rk culnponcnts of audit planning, therefore, play a crucial role in are 1 c n l l i f l ~ Run iilandntion 10 ;In elfectivc, economical and efficient audit oer~omance. 11
s t ~ t t i ~ i3~1a. , T.R. Auditing. Snhitya Bhawan; Agra. (Chapteys,Jh 2 61 3) ' Kamal Gupta and Ashok Arora. Fu,tdamentals of Auditing: Tpta !r McGraw-Hill Publishi~gCo. Ltd, New Dell~i(Chapters 1 to 5).