An auditor is a person who is responsible for examining and verifying financial documents for correctness. This is done to assure that businesses are following tax rules. They protect the companies from fraud practices, bring out consistency in accounting and try to improve the operational efficiency.
An auditor's primary responsibility is to determine whether financial statements are compliant with widely accepted accounting rules (GAAP). All public firms are required by the Securities and Exchange Commission (SEC) to perform regular external audits following established auditing standards. Auditors come in a variety of shapes and sizes, including those who work for organizations in-house and those who work for an outside audit firm. An audit report's final judgment can be qualified or unqualified.
Regardless of whether an auditor is an internal or external auditor, both require the same information. When conducting an audit, the auditor must have evidence to back up his or her conclusions. Obtaining a small amount of evidence is the first step toward a successful audit. The Auditor normally creates a working sketch that includes the techniques to be employed.
They should analyze documents for support and be prepared for all types of fraud risks. They also have the right to obtain and verify information from records, practices, and documents to establish an overall audit plan and program.
The term "audit plan" refers to a scheme devised by an auditor that includes a strategy or technique for conducting an audit. On the other hand, an audit program entails a set of verification methods that are applied to the final accounts to obtain audit evidence, assisting the auditor in forming an educated conclusion.
Audit Plan vs. Audit Program
The major difference between an Audit Plan and an Audit Program is that an auditor follows rules called an audit plan while performing an audit, whereas an audit program indicates that the audit staff follows the processes outlined in the audit program to collect audit evidence.
The audit plan is the first and most fundamental step of the audit, while the audit program is the second and most important step for evidence examination.
Although the definitions and duties of an audit plan and program differ, both are necessary for a successful audit. An audit is a thorough, methodical, and objective assessment of a process to verify compliance.
It specifies the audit tactics to be used when performing an audit, such as identifying areas where specific audit considerations and abilities may be required, obtaining company knowledge, and so on. The audit program lays out how the audit will be carried out, who will undertake what work, and when it will be completed.
Audit planning is a recurring procedure that begins shortly after the last audit is completed and continues until the current engagement is completed. The audit plan should be adaptable enough to adjust or amend depending on the situation.
The audit program specifies what evidence or facts should be acquired and assessed, as well as how much of it should be obtained. It also lays out the audit staff's responsibilities for conducting the audit. The audit program should be adaptable enough to change in response to changing circumstances.
Difference Between Audit Plan and Audit Program in Tabular Form
|Specifications||Audit Plan||Audit Program|
|Meaning||The focus of audit planning is on a structural plan that lays out all of the tools, tactics, and procedures required for a specific audit.||All of the work began with the audit program. It will demonstrate in a step-by-step way what methods, procedures, and evidence are required to collect accurate information.|
|Range||Only one auditor||Auditor(s) or another accounting expert/entity (one or more)|
What is an Audit Plan?
This standard specifies the standards for audit planning. The auditor's goal is to plan the audit so that it may be carried out efficiently.
The engagement and its performance are the responsibility of the engagement partner. As a result, the engagement partner is in charge of planning the audit, and he or she may enlist the help of other members of the engagement team to do so. Members of the engagement team who assist the engagement partner with audit planning should also follow the requirements in this standard.
The audit should be well-planned by the auditor. The auditor's obligations for properly planning the audit are outlined in this standard. Establishing the overall audit strategy for the engagement and preparing an audit plan, which includes, in particular, planned risk assessment techniques and planned responses to substantial misstatement risks, are all part of the audit planning process.
Planning is not a distinct step of an audit; rather, it is a continuous and iterative process that can begin soon after (or in conjunction with) the conclusion of the prior audit and last until the current audit is completed.
At the start of the audit, the auditor should perform the following tasks:
- Follow processes for maintaining the client connection and the audit engagement in question.
- Determine whether or not the requirements for independence3A and ethics are being met, and
- Following AS 1301, Communications with Audit Committees, establish an understanding of the terms of the audit engagement with the audit committee.
Note: that compliance with independence and ethics criteria should not be restricted to preliminary engagement efforts and should be evaluated as circumstances change.
The nature and scope of the planning activities required are determined by the company's size and complexity, the auditor's prior experience with the organization, and changes in circumstances that occur throughout the audit. The auditor should examine whether the following items are essential to the company's financial statements and internal control over financial reporting when designing the audit strategy and audit plan and, if so, how they will affect the auditor's procedures:
- During the auditor's other engagements, he gained knowledge of the company's internal control over financial reporting.
- Financial reporting standards, economic situations, rules and regulations, and technology advancements all have an impact on the industry in which the company works.
- Aspects of the company's operations, such as its structure, operating characteristics, and capital structure;
- The extent to which the corporation, its operations, or its internal control over financial reporting have changed recently, if at all;
- The auditor's preliminary judgments on materiality, risk, and other factors relevant to the assessment of material
- Problems; in integrated audits, other factors relating to the determination of material weaknesses;
- Control flaws that have been previously reported to the audit committee or management; Legal or regulatory issues that the organization is aware of;
- The type and extent of evidence available about the effectiveness of the company's internal financial reporting controls;
- Initial assessments on the effectiveness of internal financial reporting controls;
- Information about the firm that is publicly available and is significant to determining the possibility of material financial statement misstatements and the effectiveness of the organization's internal control over financial reporting;
An audit plan should be developed and documented by the auditor, and it should include a description of:
- The planned type, timing, and scope of risk assessment procedures;
- The planned nature, timing, and scope of testing of controls and substantive procedures; and other planned audit procedures required to comply with PCAOB criteria.
What is an Audit Program?
An audit program, also known as an audit plan, is a document that outlines the methods that an auditor will use to verify that a company is following compliance rules. An audit program's purpose is to build a structure that is precise enough for any outside auditor to comprehend what official exams have been conducted, what conclusions have been made, and why each result was reached. The audit's objectives, scope, and timing should all be explained in the framework. Working papers — the audit's documented evidence — should be gathered, examined, and reported on, according to the audit program.
Objective of an Audit Program
The internal auditor and the audit team should begin by describing the audit's objectives, goals, and obligations while developing an audit program.
The audit program objectives govern the design of the audit report and are based on the company's rules, processes, and recommendations. These goals may relate to how the auditors will maintain efficiency, professionalism, and a specific code of behavior during the auditing process.
Aside from relevant regulatory compliance mandates, audit program objectives should take into account management priorities, business intentions, system requirements, business structure, legal and contractual mandates, customer and other interested parties' expectations, potential risk management vulnerabilities, and any corrective action is taken based on previous audits.
Individual businesses' audit programs are tailored to their specific needs, but audit plan preparation will take into account the audit's relevant statutory deadlines, staffing requirements, reporting structure, and overall aims. These objectives will take into account how the organization will maintain regulatory compliance through risk assessment and management techniques.
A timeline specifying when particular components of the audit program should take place and how they should be prioritized should also be included in the audit program.
Planning an audit program is frequently a continuous and iterative process. Companies can build on lessons learned from prior audits by incorporating newly discovered best practices that reduce risk and preserve compliance during audit preparation and development. The criteria and best practices for audit development differ by industry, but local and regional auditing certificates, as well as internationally recognized audit certifications, are available. Certified Internal Auditor and Certified Information Systems Auditor, as well as membership in the International Register of Certificated Auditors, are among these credentials.
Standardized audit programs, customized audit programs, and compliance audit programs are all examples of audit programs. Standardized audit programs, which are available for a variety of industries, can be utilized to assist a firm in developing its internal compliance framework and internal audit program ahead of time. The International Federation of Accountants, for example, provides a set of financial auditing standards known as the International Standards on Auditing. A standardized audit program differs from a fixed audit program, which is described as an audit plan that cannot be amended during the audit.
A flexible audit program is one in which the auditors are not required to follow a certain audit technique when conducting an audit. It simply outlines the scope, type, and restrictions of the audit that will be performed. Furthermore, it does not specify the type of work that each member of the audit team will conduct. The auditors make the majority of decisions as the job progresses and the auditor gains knowledge of the procedures and internal control system's reliability.
As a result, the auditor can design, adapt, and alter the program as needed. In addition, if the circumstance calls for it, the audit staff can take action. It is likely, however, that some critical audit processes will not be followed.
Main Differences Between Audit Plan and Audit Program In Points
- An Audit plan is a detailed blueprint that an auditor creates when conducting an audit. The Audit Program is the project's execution, which contains a detailed protocol for how it should be completed
- The Audit Plan is always prioritized over the Audit Program.
- Both may be written by the same Auditor; however, depending on the nature of the audit, another accounting organization or expert may be necessary to carry out the audit.
We all know that the fundamental goal of an audit is to determine a company's or entity's financial situation. To avoid any influences from a relationship within the client's circle, an auditor or accounting company must act independently. In a fraud prevention effort, both the Audit Plan and the Audit Program have responsibilities to play.
It enhances an organization's processes and ensures that its protocols are followed. It also prevents the appearance of fraud and other accounting problems. It emphasizes the significance of removing any doubts or suspicions from any documents, records, and other materials or proof. And should only record information that is true and correct.