auditing helps to research

1. Audit Planning & Procedures
Prof. Sneha Birje
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C H A P T E R 4

2. Audit Planning
Prof. Sneha Birje
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 Audit planning refers to developing an overall plan
for:
a. Determining scope & conduct of audit
b. Developing audit programme showing the nature,
timing and extent of audit procedures.
 This is done to optimize efficiency and effectiveness
when conducting an audit. Efficiency refers to the
amount of time spent gathering audit evidence.
 Effectiveness refers to the minimization of audit risk.

3. Audit Planning
Prof. Sneha Birje
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Audit Planning SA300 1) Understanding client
2) Reliance on internal
control system
3) Coordinating the work to
be performed.

4. Objectives of audit planning
Prof. Sneha Birje
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 Attention to important areas of audit
 Identify potential problems
 Utilization of assistants
 Complete work asper standards
 Coordination of work

5. FACTORS TO BE CONSIDERED
Prof. Sneha Birje
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1. Complexity of the Audit
2. Environment in which the entity operates
3. Previous experience with the client
4. Knowledge of the client’s business
5. Discussion with Client

6. Sources of Obtaining Information
Prof. Sneha Birje
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The Auditor should obtain a level of knowledge of the client's
business that will enable him to identify the events, transactions and '
practices that, in his judgment, may have significant effect on the
financiai information. The Auditor can gain knowledge of client's '
business from:
1. The client's Annual Reports to Shareholders.
2. Minutes of Meetings of Shareholders, Board of Directors and
important Committees.
3. Internal Financial Management Reports for current and
previous periods, including Budgets, if any.
4. Previous year's Audit Working Papers, and other relevant files.
5. Firm's personnel responsible for non-audit services to the client
who may be able to provide on information matters that may
affect the audit.

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6. Discussions with Client
7. Client's Policy and Procedures Manual.
8. Relevant publications of the ICAI and other professional
bodies,
Industry Publications, Trade Journals, Magazines,
Newspapers
or Textbooks.
9. Consideration of the state of the economy and its effect
on the
client's, business.
10. Visits to the client's premises and plant facilities.

8. Overall Audit Plan
Prof. Sneha Birje
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The auditor should consider the following matters in developing his overall
plan for the expected scope and conduct of the audit
1. The terms of his engagement and any statutory responsibilities.
2. The nature and timing of reports or other communication.
3.The applicable legal or statutory requirements
4. The accounting policies adopted by the client and changes in those policies.
5. The effect of new accounting or auditing pronouncements on the audit.
6. The identification of significant audit areas.
7. The setting of materiality levels for audit purposes.
8. The possibility of material error or fraud or numerous related party
transaction.
9. The degree of reliance he expects to be able to place on
accounting system and internal control.
10. The nature and extent of audit evidence to be obtained; etc.
11. The auditor should document his overall plan including a time budget.

9. AUDIT PROGRAMME
Prof. Sneha Birje
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Meaning
 An audit programme is a detailed plan of application of the
audit procedures and techniques in the given circumstances
with necessary instructions and accordingly to conduct audit
for fulfillment of audit objectives.
Factors
While construction an audit programme, the Auditor should
keep the following points in his mind
1. The extent of reliance on internal control.
2. The timing of the procedures
3. The coordination of any assistance expected from the client.
4. The availability of assistants and
5. The involvement of other auditors or experts.

10. Advantages
Prof. Sneha Birje
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 It provides the assistant carrying out the audit with total
and clear set of instructions of the work generally to be
done
 It is essential, particularly for major audit to provide a
total perspective of the work to be performed.
 Selection of assistants for the jobs on the basis of
compatibility becomes easier when the work is rationally
planned, defined and segregated
 In case of any mistake or negligence on part of an audit
assistant, responsibility is fixed on concerned assistant
because the work allotted to him is already noted and he
has sign against his name in the programme.

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 A properly drawn up audit programme serves as evidence in
the event of any charge of negligence being brought against
the auditor.
 It serves as a guide for audit s to be carried out in the
succeeding year.
 An Audit Programme insures that no important area of audit
is left out. It also avoids the same job being done twice.
 It is very useful for an auditor in taking a final taking final
review before preparing and signing his audit work.
 A Flexible Audit Programme is preferable to a Fixed one. A
Flexible Programme is based on the current conditions suchs
as current laws, current accounting or auditing standards laid
down by ICAI etc.

12. Disadvantages
Prof. Sneha Birje
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1.Since and Audit Programme contains detailed
instructions, the audit work becomes mechanical and
routine.
2. An effficient assistant may lose his initiative as he has to
follow a pre-determined procedure and work within the
time limit given.
3. Some efficient assistants may get shelter under audit
programme. They may defend themselves on the ground
that the audit programme did not contain proper
instruction for the matter in which they have committed a
mistake.
4. As there is a deadine, work may be done hurriedly and
completed within the required time schedule.

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5. A Fixed Programme ignores the current conditions
such as current laws, current accounting or auditing
standards laid down by ICAl etc. hence become
outdated and irrelevant.!
6. A common programme can not be drawn for a group
of clients because each client's business may have
different problems and procedures.

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