Presentation is loading. Please wait.

Presentation is loading. Please wait.

Preparation before the commencement of Audit

Published bySamantha Wood Modified over 5 years ago

Similar presentations

Presentation on theme: "Preparation before the commencement of Audit"— Presentation transcript:

1 Preparation before the commencement of Audit
Ascertain the scope of duties Procure engagement letter Knowledge about business Knowledge of the accounting system List of Principal officers Knowledge of the technical details Enquiry into special circumstances if any Instruction to the client

2 Audit Planning Developing time budgets Assigning audit staff personnel
Scheduling dates for interim and year end audit procedures

3 Audit Programme “An audit programme is an outline of all procedures to be followed in order to arrive at an opinion concerning client’s financial statements.” Stettler “An audit programme is a listing of evidence gathering procedures considered necessary to satisfy specific practical audit objectives. Jack c. Robertson

4 Advantage of Audit Programme
Clarity of duties Efficiency of the audit assistants increase It enables the auditor to keep in touch with the work done Fixing of the responsibility of audit assistants becomes easier The routine get systematic Continuity is not lost even if the person on duty is changed The chief auditor is saved from botheration of issuing instructions to the staff.

5 Disadvantage of Audit Programme
The task becomes mechanical The task may be finished hurriedly Not good for small organisation Lack of uniformity of audit programme It brings rigidity Inefficient audit assistants may shelter behind the programme.

6 Examples of Audit Programme
Audit programme for cash Account for numeric sequence of cash receipts and payments. Check posting of cash book. Check rough book and petty cash book Examine and review system for cash receivables Check the banking of cheques received. Check the vouchers for cash transactions Check bank reconciliation statements Check direct receipts into the bank and payments out of the bank account. Check posting into personal accounts Check arithmetic accuracy

7 Audit programme for purchases
Examine and review system for purchases Check authority and authorisation for ordering goods. Check invoices checked by invoice clerk and compare with order book and goods inward book. Check the approval of the goods by the department ordering it. Check the entries in stock register. In case of forward transactions check the provision for losses. Check the advice note of the concerned department for purchase return and compare with invoice. Check the consignment outwards journal for goods sent on consignment

8 Audit Programme for sales return
Review and check the system from the stage of customer’s order to the ultimate receipt of cash. Check number of entries in sales book Check the entries for sales tax Check a representative number of sales invoices with goods outward record. Check the goods sold but still in possession are not taken in stock Check the valuation of goods Check the goods sold on hire purchase Check the provision for bad and doubtful debts Check the system of accounting for goods sold on sale or return basis.

9 Audit programme for salary Expense of key officers
Check organisation chart and make a list of officers. Check salary authorisation from minutes of board of directors. Observe individuals and their office locations. Add up authorised salaries and compare it to the expense account balance Retrace the payroll journal entries to posting in the expense account Inquire about the existence of any stock options or bonus plans Scan stock issue records for issue of shares to officers Check bonus plan Check legal cut off for salaries.

10 Types of Audit Programme
Fixed Audit Programme Flexible Audit Programme Audit Programme for independent Audit Audit Programme for internal Audit

11 Audit Note Book Audit notebook is a diary or register maintained by audit staff to note errors, doubtful queries and difficulties.

12 Contents of Audit Note Book
A list of books of accounts maintained The name duties and responsibilities of principal officers The particulars of missing receipts and vouchers Mistakes and errors detected The points calling for clarifications and explanations The points deserving the attention of the auditor Various total and balances Extracts from the minutes and contracts The points to be part of the Auditor’s report Date of commencement and completion of Audit

13 Advantages of Audit note book
Helps in knowing the amount of work done Important matters relating to the audit work may be easily recalled Facilitates the preparation of audit report No difficulty in case assistant in-charge is changed It shows the extent of pains and interest taken by audit staff It ensures the audit programme has been sincerely followed. It is reliable evidence in the court of law

14 Audit working papers Permanent file Papers Audit Administrative Papers
Audit Evidence Papers

15 Permanent File Papers Copy of M.O.A , A.O.A and partnership deed
Copy of minutes of the meetings Short description of the type of business and place of business List of responsible officers Policy regarding valuation of inventories, charge of depreciation etc. Copies of continuing contracts History of company and its products Copies of balance sheet of earlier years

16 Current file Papers Appointment letter
Memoranda of meetings with the management Memoranda of meetings with audit committee Audit time budget Internal control questionnaire Management control questionnaire Internal control system with flow chart Audit programme

17 Audit working Papers It is the audit evidence working papers contain the record of the procedures followed, the test performed, the evidence obtained and the decisions made in the course of Audit.

18 Purpose of working Papers
Shows volume of work done by auditor and its staff Shows extent of adherence to accounting Principles and standards Useful evidence against the charge of negligence

19 Forms and contents of working papers
It should record the audit plan, the nature, timing and extent of audit procedures performed and conclusion drawn. It should be complete and detailed

20 Ownership of working papers
Soekockinsky Vs. Bright Grahm &Company (1938) Chantrey Martin & Co Vs. Martin (1953)

21 Procedure of Audit Use of special ticks Routine checking Test checking

Download ppt "Preparation before the commencement of Audit"

Similar presentations

Chapter 14 Audit of the Sales and Collection Cycle

Chapter 14 Audit of the Sales and Collection Cycle
Chapter 3 : Types of Audit

Chapter 3 : Types of Audit
BUSINESS DOCUMENTS. Stages of Financial Recording Calculate Net Profit and Capital Employed Prepare Final Accounts and Balance Sheet Balance ledger accounts.

BUSINESS DOCUMENTS. Stages of Financial Recording Calculate Net Profit and Capital Employed Prepare Final Accounts and Balance Sheet Balance ledger accounts.
CHAPTER 8 INTERNAL CONTROL AND CASH After studying this chapter, you should be able to: 1 Define internal control. 2 Identify the principles of internal.

CHAPTER 8 INTERNAL CONTROL AND CASH After studying this chapter, you should be able to: 1 Define internal control. 2 Identify the principles of internal.
 Transaction  It is a business event for example a sale of inventory “Hall 2009”

 Transaction  It is a business event for example a sale of inventory “Hall 2009”
ACCT 201 ACCT 201 ACCT 201 Reporting and Analyzing Cash and Internal Controls UAA – ACCT 201 Principles of Financial Accounting Dr. Fred Barbee Chapter.

ACCT 201 ACCT 201 ACCT 201 Reporting and Analyzing Cash and Internal Controls UAA – ACCT 201 Principles of Financial Accounting Dr. Fred Barbee Chapter.
ACCT 100 Chapter 7 Internal Control and Cash Internal Control and Managing Cash 2 Objectives of the Chapter 1. Introduce the internal control to safeguard.

ACCT 100 Chapter 7 Internal Control and Cash Internal Control and Managing Cash 2 Objectives of the Chapter 1. Introduce the internal control to safeguard.
Chapter 2 Reporting and Analyzing Cash and Internal Controls

Chapter 2 Reporting and Analyzing Cash and Internal Controls
Accounting for Cash and Internal Controls

Accounting for Cash and Internal Controls
Cash and Internal Control

Cash and Internal Control
Copyright © 2007 Prentice-Hall. All rights reserved 1 Internal Control & Cash Chapter 8.

Copyright © 2007 Prentice-Hall. All rights reserved 1 Internal Control & Cash Chapter 8.
Sales & Cash Receipts Transactions By David N. Ricchiute

Sales & Cash Receipts Transactions By David N. Ricchiute
© The McGraw-Hill Companies, Inc., 2005 McGraw-Hill/Irwin Chapter 6 Reporting and Analyzing Cash and Internal Controls 6-1.

© The McGraw-Hill Companies, Inc., 2005 McGraw-Hill/Irwin Chapter 6 Reporting and Analyzing Cash and Internal Controls 6-1.
AUDIT OF CO-OPERATIVE SOCIETIES 1SIMON RODRIGUES & ASSOCIATES.

AUDIT OF CO-OPERATIVE SOCIETIES 1SIMON RODRIGUES & ASSOCIATES.
INTERNAL CONTROLS. Session Objectives Understand why an organization should have internal controls Understand the key components of internal controls.

INTERNAL CONTROLS. Session Objectives Understand why an organization should have internal controls Understand the key components of internal controls.
Learning Objectives LO1 Outline six general audit techniques for gathering evidence. LO2 Identify the procedures and sources of information auditors can.

Learning Objectives LO1 Outline six general audit techniques for gathering evidence. LO2 Identify the procedures and sources of information auditors can.
C. P. Mansoor Ahmed M. Com PGDBA

C. P. Mansoor Ahmed M. Com PGDBA
Lecture 7 Audit Documentation

Lecture 7 Audit Documentation
Chapter 6 Cash and Internal Control. Cash  Cash:  Readily available to pay debts  Various forms of cash:  Coin and currency on hand  Cash on deposit.

Chapter 6 Cash and Internal Control. Cash  Cash:  Readily available to pay debts  Various forms of cash:  Coin and currency on hand  Cash on deposit.
Auditing Purchases, Trade Payables and Payroll

Auditing Purchases, Trade Payables and Payroll

Similar presentations

Ads by Google