Audit Program Formats and Their Preparation
An audit program is a procedure describing the steps and tests to be performed by an internal auditor when actually doing fieldwork. The program should be finalized after the completion of the preliminary and field surveys and before starting the actual audit. It should be constructed with several criteria in mind, the most important of which is that the program should identify the aspects of the area to be further examined and the sensitive areas that require audit emphasis.
A second important purpose of an audit program is that it is a tool to guide both less and more experienced internal auditors. For example, management may request that internal audit observe the taking of an annual physical inventory. This type of review consists of fairly standard procedures to assure, among other matters, that goods shipping and receiving cutoff procedures are proper. A less experienced internal auditor may not be aware of these procedure steps, and even experienced internal auditors may forget one or another. An audit program outlines the required audit steps. An established internal audit department probably will have built a library of audit programs, established over time, for tasks such as a physical inventory observation or a review of fixed assets. When planning a review where such established programs exist, audit management needs only to use these programs with consideration given to any changed conditions that have been discovered through the preliminary or field surveys. The audit program then is revised as necessary, with the changes approved by audit management prior to the start of the review.
For many internal audit departments, appropriate established audit programs may not be available for some areas. This is because internal auditors typically face a wide and diverse set of areas for review, but they will not have the time or resources to review every area frequently. Established programs prepared for prior audits often become out of date due to new systems or changed processes.
The internal auditor responsible for the field survey or another member of audit management should update any existing audit program or prepare a revised set of audit program steps for the planned review. Depending on the type of planned audit, programs usually follow one of three general formats:
(1) a set of general audit procedures,
(2) audit procedures with detailed instructions for the auditor, or
(3) a checklist for compliance reviews.