Part-08AUDIT EXECUTION PHASE

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Muhammad ZafarACMAM.Phil FinanceMA English , M.ComMA Political Science

6.1 IntroductionThis chapter provides guidance for the auditors‟ work atthe execution stage. This stage includes compliancetesting (test of controls), substantive testing, collectingand reviewing evidence and maintaining working papersfiles. It needs to be noted that the audit programmesgiven at the end of this chapter provide guidance to thefield auditors for Certification Audit and Compliance withAuthority Audit. However, there are very few auditprogrammes as „compilation of accounts‟ which relatespecifically to certification audit.

Overall audit execution guidance is available in Chapter 9 of the FAMThe Audit Working Papers Kit provides:

Evidence that the auditor has complied with the DAGP auditing standards;

A basis to determine that the work delegated has been performed properly;

A source of information for preparing reports and answering enquiries; and,

Assistance in planning and executing future audits.

6.2 The Audit Team’s Responsibility in ExecutionPhaseThe audit team has a major responsibility fordocumenting audit evidence in the workingpapers including work performed and findings (theDAGP‟s Auditing Standards, Para 3.5.5).

As noted in FAM, the content and arrangement ofthe working papers is a reflection of an auditor‟sproficiency, experience and knowledge.Sections 9.9 to 9.11 of FAM provide details of theauditors‟ responsibility for documenting the workperformed and standards for maintaining andkeeping custody of the Working Papers file. Eachauditor should be familiar with theseresponsibilities.

The Audit Working Papers file should contain various financial documents provided by the auditee management, including:a. Financial Statementsb. Trial balancec. Civil Account

d. Appropriation Accounte. Any inter-governmental accounts for elimination.f. Supporting documents (important agreements,bills, vouchers other documents that are importantfor the audit record)g. In addition, the audit team should maintaindetailed minutes of all the meetings with theauditee representatives, which should be placed inthe Audit Working Papers file.

It needs to be highlighted that the audit strategy andmethodology recommended under FAM provide forcontinued quality assurance through all the phasesof audit. While reviewing the execution phase, thefunctionaries entrusted with the quality assurance ofaudit should ensure that the various stepsrecommended in these Guidelines and respectiveforms have been completely followed in all respects.

6.3 Forms and Schedules for Audit Execution PhaseTitles of various forms specified in the Audit WorkingPapers Kit are listed below:

Summary of Analytical Review ProceduresPerformed *

Details of Analytical Review Procedures Performed*

Completed Internal Control Questionnaires*Internal Control Deviations Form *Internal Control Deviations Summary *

Compliance SummarySubstantive Tests of Accounting EstimatesErrors in Accounting EstimatesSubstantive Test Sample Summary for each Audit

ProgrammeSubstantive Test of High Value/Key Items –

SummaryDetails of Errors in Samples, High Value Items and

Key ItemsExit Interviews

Note: These forms recommended under FAM andAudit Working Papers Kit essentially meet therequirements of Certification Audit. However, someof these forms, marked with asterisks (*), can also beused for Compliance with Authority Audit.

The following paragraphs provide general guidancefor using the above mentioned forms. Instructionsfor filling in these forms are contained in the AuditWorking Papers Kit which the auditors are requiredto follow.

6.4 Summary of Analytical Review ProceduresPerformedThis form is used to summarize the analyticalprocedures that were performed. The auditor shouldnote the procedures that were performed and cross-refer each procedure to the working paper thatprovides the details of the test (i.e. Details of AnalyticalReview Procedures Performed form)

6.5 Details of Analytical Review ProceduresPerformedDetails of each analytical review procedureconducted by the audit team, including type of test,data used, calculations performed, results andauditor‟s conclusion, are documented on this form.

6.6 Completed Internal Control QuestionnairesThe auditor must test the control environment todetermine whether the system of internal controls onwhich the audit team intends to rely is actually workingeffectively. This is done by following the detailed guidanceprovided in the Internal Control Questionnaires fordifferent aspects of the audit. The auditor will select theICQs that are to be used in this audit and tick them off onthe checklist provided. The auditor does not have to applyall the possible ICQs in every audit.

The key ICQs to be considered for Federal audit are asfollows:

Employee related expenditureGoods and ServicesReceiptsInvestmentsCashMajor AssetsStores and InventoryBudgeting and Expenditure ControlsGrant in Aid

6.7 Internal Control Deviations FormWhile working through the ICQs, the auditor shouldidentify deviations from the prescribed internalcontrols in the operations of the audited entity. Theauditor will document each individual deviation andits potential impact on the entity‟s FinancialStatements on this form. There should be one formfor each deviation encountered.

Where the operations of the auditee organisationare decentralized, it is important to assess whichweaknesses are due to scattered nature ofdepartment/policy weaknesses and which are dueto the inadequate application of these internalcontrol systems and policies within the decentralizedsites being audited.

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