As per NSA-300 on Audit Planning, the auditor should plan the audit work so that the audit will be performed in an effective manner. The “Audit Planning” means developing a general strategy and a detailed approach for the expected nature, timing and extent of the audit. The auditor plans to perform the audit in an efficient and timely manner. Audit planning is one of the basic principles of auditing. Plan should be based on knowledge of the client‟s business. Audit planning is a continuous process throughout the audit engagement and covers developing an overall plan for the expected scope and conduct of the audit and developing an audit program showing the nature, timing and extent of audit procedures. Adequate planning of the audit work helps to ensure that appropriate attention is devoted to important areas of the audit, those potential problems are identified and that the work is completed expeditiously. Planning also assists in proper assignment of work to assistants and in coordination of work done by other auditors and experts. The extent of planning will vary according to the size of the entity, the complexity of the audit and the auditor’s experience with the entity and knowledge of the business. Matters to be considered by the auditor in developing the overall audit plan include knowledge of business, understanding the accounting and internal control systems, risk and materiality, nature, timing and extent of procedures, coordination, direction supervision and review process etc.
The same NSA-300 mentions that the auditor should develop and document an audit program setting out the nature, timing and extent of planned audit procedures required to implement the overall audit plan. Hence, audit program is nothing but a list of examination and verification steps to be applied set out in such a way that the inter-relationship of one step to another in clearly shown and designed, keeping in view the assertions discernible in the statements of account produced for audit or on the basis of an appraisal of the accounting records of the client. In other words, an audit program is a detail plan of applying the audit procedures in the given circumstances with instructions for the appropriate techniques to be adopted for accomplishing the audit objectives.
The difference between audit plan and audit program is that audit program is a part of audit plan. While audit plans involve each step of audit from engagement to issuance of final report audit program deals with only nature, timing and extent of audit procedures.
In summarized form,
The Distinction between Audit Plan and Audit Program are outlined as follows:
Audit plan is the developing a general strategy and a detailed approach for the expected nature, timing and extent of the audit. The auditor plans to perform the audit in efficient and timely manner whereas audit program is the step and guidance and works as a tool for performing/implementing audit at the execution level. The distinctions of those two are:
Audit plan is prepared before preparing audit program.
Audit plan is border scope than audit program.
Audit plan assists acquiring knowledge of client‟s business and concentrating on risk areas which will help for preparing effective audit program.
Audit plan generally prepares by senior auditors and program may be prepared by juniors based on plan and duly approved by seniors.