List three disadvantages of using standardized audit programmes and how these disadvantages can be avoided

Audit programs may either be standardized or tailored to clients‘ requirements.
It used to be common for audit firms to preprint standardized audit programmes, usually one set for larger entities and another set for smaller entities.

The advantages were: –

(i) A consistent approach to all audits
(ii) Reduced risk of procedures being omitted
(iii) Reviewers could quickly check the progress of the audit being familiar with the contents of the programme.
(i) They stifle initiative in that audit staff consider procedures laid out in audit program as the maximum they need to do

(ii) Different clients may require different procedures to be carried out yet with a standardized program, the procedures are the same.
(iii) A lot of flexibility is required in the design of audit procedures so as to ensure all unique features of a client are addressed. This is not possible with a standardised audit program.
These disadvantages can be overcome by the use of tailored audit programmes. Although most firms continue to provide model audit programmes, these can be tailored to the specific circumstances of each engagement. The benefits of this approach are: –
(i) The design of procedures and the names of the documents and records detailed in the programme match the actual accounting system and the entity.
(ii) The balance between tests of control and substantive procedures can be varied to match the preliminary assessment of inherent and control risk separately for each major financial statement assertion.
(iii) It provides engagement staff with greater control over the audit based on their knowledge of the entity and the specific audit risks. This, in turn, results in a better understanding of the purpose of each procedure since the staff member performing the procedure will have been involved in designing the programmes being followed.

Share through

Leave a Reply

Your email address will not be published. Required fields are marked *