Conducting an audit is a highly tedious job. It comprises of several steps among which preparing an audit plan constitutes the first step. In simple words, it is defined as a scheme comprising of approaches and strategies adopted by an auditor while administering an audit.
To conduct an audit, the auditor must have the relevant pieces of evidence to complement his opinion. Collecting those pieces of evidence sets the stage for the administration of an audit. For that, the auditor needs to prepare a proper outline of his course of action. An audit plan serves as one of the tools to draft this working sketch.
How is an Audit Plan prepared?
An audit plan is not merely a compilation of strategies. It is much more than that. Besides, the guidelines and strategies, the audit plan comprises the nature, scope, date and time of an audit to be administered by the engagement team members to obtain relevant evidence. Furthermore, it includes an assessment of the risks involved in the audit.
To prepare a proper audit plan, the following five components must be taken into consideration:
1. Do a Thorough Research on the Audit Area.
To begin with the audit, the auditor must first know and understand the area; he is going to audit. That is to say; he has to get familiar with the processes and functions of the enterprise he intends to audit. Accordingly, he needs to do thorough research by scrolling the internet for information, reviewing internal procedures and consulting the field experts.
2. Keeping the Communication Channels open throughout the Planning Process.
Any audit is considered a daunting process by the auditees. Therefore, the auditors must keep their communication channels open to mitigate any apprehensions concerning an audit. Getting familiar with the auditee before starting an audit is always preferable. It helps in getting the cooperation of the personnel of the organisation that is being audited. Consequently, evidence collection becomes a more straightforward task.
3. Conducting an in-person interview and inspection with the auditee for evidence collection.
When it comes to evidence collection, an in-person inspection is always desirable. Exploring the concerned organisation personally helps the auditor gather information related to the organisation’s objectives, rules, regulations, size, nature, complexity, etc.
4. Assessing the risks in the structures, processes or functions of an organisation.
Identification and assessment of risks is a critical component of an auditing process. For that, the auditor needs to discuss with the auditee, the risks often encountered by the organisation to meet its objectives and the mechanisms employed to mitigate them. Following this, the auditor can rate the perils as per their impact and frequency and evaluate the control systems based on their risk mitigation potentials.
5. Acquiring all the relevant data before venturing for fieldwork.
Data analysis is the primary focus of any audit in contemporary times. The reason is that an early assessment of collected data gives a prior knowledge of the organisation’s potential weaknesses and risks before the beginning of the fieldwork.
Advantages of Audit Plan
The following are some of the significant advantages of an Audit Plan:
- It enables the auditor to get a rough idea of the risk areas that need to be specifically focused upon.
- The auditor can anticipate the possible problems he may face during the auditing process through an audit plan.
- It helps the auditor to chalk out his course of action for the aiding process. Consequently, a hassle-free and successful audit is conducted.
- It provides an opportunity to the auditees to get all their apprehensions regarding the audit mitigated.
Disadvantages of Audit Plan
Despite its various advantages, preparing an Audit Plan is not without its share of limitations. Some of the significant demerits of an audit plan include:
- It follows specific guidelines and patterns. Consequently, the creativity of the auditors is choked, and the entire process becomes too mechanistic.
- Preparation of an audit plan automates the entire auditing process, leaving little scope for the auditors to use their own creativity and innovation. As a result, the auditors encounter a slackening of their sense of responsibility and duty.
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