AUDIT PROCESS : PLANNING,

EXECUTION, REPORTING

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 Audit
 Definition
 Types of audit
 Compliance audit
 Financial Attest Audit
 Performance Audit
Apart from these, specialized audits like
information technology and environment
audits are also conducted.
 Roles of Auditor and Audited entity
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 Audit Process
The Audit Process
normally consists Planning
of four stages:
1.Planning
2.Fieldwork, Fieldwork

3.Audit Report,
and Audit Report
4.Follow-up.
Audit Follow Up

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 Planning

Mission, Strategic
plans, goals and •Categorization •Audit Scope
objectives, Annual •Risk Assessment and Approach
Audit Plan, •Materiality
Detailed plan •Methodologies
for Individual Audit

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 Audit Planning
•Developing a general strategy and a
detailed approach for the expected
nature, timing and extent of the Audit.
•An Audit task Plan is the specific
guideline to be followed when conducting
an audit.
•Audit Planning is a vital area of the
audit primarily conducted at the
beginning of audit process.
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 Contd…
• In each Audit , the first step should be
the development of a fully documented
audit task plan.
• There is an Audit Planning Group (APG),
headed by the DG/PD/PAG (Audit)/ AG
(Audit), responsible for preparation of
the Audit Plan for the office.

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 Strategic Plan
• Key focus areas for audit over the next
three to five years
• A list of prioritised topics for
performance audits and theme-based
audits, based on risk assessment
• Associated changes, if any, required in
audit methodologies and procedures

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 Annual Audit Plan
• Topics for theme based and compliance
audits – with detailed scope/ objectives
and timeframes
• Revise/ reprioritise, if required, topics
for performance audits
• Thrust areas for audit of accounts
• Timelines for submission, processing
and finalisation/ reporting

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Audit Task Plan addresses the
specifics of what, where, who,
when and how:
•What are the audit objectives?
•Where will the audit be done? (scope)
•When will the audit (s) occur? (how long)
•Who are the auditors?
•How will the audit be done? (Methodology)

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 Contents of an Audit Task
Plan
1. Legal Framework for the audit;
2. Description of the activity, programme or
body to be audited.
3. Reasons for the audit;
4.Factors affecting the audit, including those
determining the materiality of matters to
be considered;
5. Risk Assessment;
6. Audit Objectives;
7. Audit Scope and Approach

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 Contd…
8. Resources required, and when:
• Audit staff (in detail), responsibilities;
• Specialist staff (who and when);
• External experts;
• Travel requirements;
• Time and cost budgets.
9. Timetable for the audit,
10. Management arrangements for the audit; and
11. Form, content and users of the final output.

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Audit Scope
Determining the Audit Scope
Detailed Plans for Individual Audits
• Detailed audit guidelines and checklists for
audit of different functional areas
• Audit Plans for individual audits, indicating
– scope of audit
– sample size
– timeframe and resources

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Process of Planning

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 Auditing Principles

Ethics and Professional judgment, Quality control

Independence due care and skepticism

Audit Team Audit Risk Materiality

management and skills

Documentation Communication
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 The Audit Process

Annual Audit Quarterly Audit

Field Audit
Programme Programme

CAG’s
Inspection Report Draft Paragraphs
Audit Reports

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Field work

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 Field Audit – Audit Execution
• Conducting the fieldwork is the main activity under
the executing stage and it concentrates on
transaction testing and informal communications.
• Auditor implements the audit plan and performs
audit procedures (Test of Controls, Analytical
procedures and Substantive tests etc.)
• Auditor gathers sufficient appropriate audit
evidence in execution phase to support his
opinion.

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 Field-work
The evidence gathering phase of the project, involves a variety of
methods, including:
•file/document reviews
•surveys
•data analysis
•interviews of key staff and stakeholders
•physical observation

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Audit Process

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Audit evidence

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 Audit Evidence
 Information collected and used to support audit
findings;
 Gives auditors a rational basis for forming opinion and
judgments;
 Supports the contents of an audit report including all
observations and conclusions leading to
recommendations;
 Foundation of good audit is effective evidence gathering
and data collection;
 Competent, relevant and reasonable evidence should
be obtained to support the auditors’ judgements and
conclusions.
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 Analyzing Evidence
 Analysis done to understand or explain what has been
observed,
 A wide range of models or methods of analysis can be
used,
 Can be done in the form of:
 more detailed statistical analysis,
 discussions on the findings within the audit team,
 studies of documentation and working papers,
 comparisons of findings

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 Competence, relevance and
sufficiency of evidence
 Sufficiency is a measure of quantity while
appropriateness is a measure of quality of audit
evidence.
 The requirement of appropriateness is fulfilled by
the criteria of competence and relevance.
 An evidence is competent when it is valid and
reliable and actually represents what it purports to
represent.
 An evidence is relevant if it bears a clear and a
logical relationship to audit objectives and to the
criteria.

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Unconventional Methods of Collection of
Evidence
Evidence collection through multiple sources to make the
comment more persuasive.
Some of the sources are
Working papers
Photographs
Surveys
Interviews
Use of third party Data

….and problems with these

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 While Analysing…

Valid &
Reliable

Relevant Evidence Persuasive

Sufficient

Professional judgement

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 Evidence Analysis process

Lowest audit
question Consequence
Collect

Criteria Evidence
Rule or good practice Analyse

Collect X
Evidence Gap
Analyse Finding
Collect

Condition Evidence
Analyse
What is

Cause Recommendation
 Audit Findings

• Audit findings are the specific pieces of evidence gathered and

analyzed by the auditor to satisfy the audit objective(s), in
order to answer the audit questions and verify the stated
hypotheses ( ISSAI 3200 ED para 109)

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 A sound observation entails…
Be Certain that-
If the effect occurred in the past, the situation
has not already been remedied to prevent it
from recurring.
If the effects are not readily identified, the
performance auditor may need to assert
potential effects of the finding.
 Framing an Audit Finding

• Audit finding generally contains:

1. Criteria
2. Condition
3. Gap between 1 & 2
4. Cause
5. Effect
Estimate likely impacts of the recommendations wherever possible
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 Reporting Process

• Working Papers
• Exit Conference
• Proposed/draft Report
• Final Report
 Reporting process (cont.)
Input
Draft report
Audit plan
Audit memos and its responses
Working papers

Process Output
Exit meeting Audit report
Seek response of audited entity to draft Press brief
report Summaries
Writing draft report after incorporating
Leaflets, brochure,
response of audited entity
presentations
Perform QA reviews
Finalize audit report
Disseminate audit report
 Characteristics of a Good Report

• Completeness
• Accuracy
• Objectivity
• Convincing
• Clarity
 Cont..

• Concise
• Balanced
• Consistent
• Constructive
• Timely
 Audit Report Format
• Executive summary
• Introduction- Background information
• Audit Objectives, Scope, Methodology
• Audit Findings
– Criteria
– Condition
– Cause and Effect
• Audit Conclusion
• Audit Recommendations
• Appendices (if any)
Thanks

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