Audit Task Planning: Preparing the work program and selecting samples
Audit Engagement Planning: Preparing the Work Program and Audit Sampling
Internal Audit Planning: A professional guide on how to prepare the annual audit plan, define the scope, draft a detailed Audit Work Program, and select samples (Sampling) based on risk—Digital Salla.
- Transitioning from the Annual Plan to a specific Engagement Plan.
- Defining Engagement Scope and Objectives (Why are we auditing this?).
- How to draft an Audit Work Program: Steps and procedures.
- The logic of Audit Sampling: Statistical vs. Judgmental.
- Selecting the right sample size based on the Confidence Level.
- Documenting the plan via the Engagement Memo.
1) The Engagement Planning Cycle
Once a department (e.g., Procurement) is selected for audit in the annual plan, the auditor must perform “Pre-planning” which includes:
- Gathering Background: Policies, previous audit reports, and organization charts.
- Initial Meeting: Discussing the timeline with the department head.
- Walkthrough: Observing the process from start to finish to identify control points.
2) Defining Scope and Objectives
An audit without a scope is a “Never-ending story.” You must define:
- Objective: e.g., “To ensure all payments were made to approved vendors.”
- Scope: e.g., “Transactions from January 1st to June 30th, exceeding $5,000.”
3) The Audit Program Path (Visual Logic)
How we translate “Risk” into “Test Procedures”?
Audit-Ready Guide - Word/PDF File
4) Drafting the Audit Work Program
A professional Work Program acts as a guide for the junior auditor. It must include:
- Procedure Number: (e.g., Test 1.1).
- Detailed Procedure: “Select a sample of 25 invoices and verify the 3-way match.”
- Working Paper Ref: Link to the evidence gathered.
- Result: (Pass/Fail).
5) Audit Sampling: Methodology & Selection
Since we cannot check every single document, we use Sampling to reach a conclusion about the entire Population.
- Sampling Risk: The danger that the sample we chose is not representative (e.g., we pick 10 good invoices and miss the 1 fraud invoice).
- Tolerable Error: How much error management is willing to accept (e.g., 2% error rate).
6) Types of Sampling (How to choose?)
| Sampling Type | Method | When to use? |
|---|---|---|
| Judgmental | Auditor’s experience (Picking “Suspicious” items). | Small populations or highly focused fraud reviews. |
| Random | Using a random number generator. | When every item has an equal risk. |
| Stratified | Dividing data into groups (e.g., By Amount). | Ensuring 100% of high-value items are checked. |
7) Operational Controls & Readiness Checklist
To ensure your Audit Planning is robust:
Engagement Planning Quality Gate
- Was a Risk-Control Matrix (RCM) built specifically for this engagement?
- Is the sample size mathematically justified based on the population size?
- Does the Work Program include “IT General Controls” (System access)?
- Was the Engagement Memo (Planning document) approved by the CAE?
- Did we use Internal Questionnaires to gather data before the fieldwork started?
8) Common Errors and How to Prevent Them
- Scope Creep: Auditing things outside the original plan, causing delays. Solution: Use formal “Change Control” for the scope.
- Over-sampling: Checking 1,000 documents when 60 would have provided enough assurance (Wasting resources).
- Poor Documentation: Finding a mistake but forgetting to record which sample item it was. Solution: Link every finding to a Working Paper.
- Lack of Independence: Letting management decide which samples the auditor should look at.
9) Frequently Asked Questions
What is an Engagement Work Program?
It is the step-by-step roadmap that the auditor follows to test controls and gather evidence during a specific audit project.
Why use stratified sampling?
To ensure that the most important or high-risk items (like large payments) are always tested, while still checking a representative sample of smaller items.
How do I determine the sample size?
Sample size depends on the Confidence Level (how sure you want to be) and the Expected Error Rate. Professional standards usually provide lookup tables for this.
10) Conclusion
Audit Engagement Planning is the foundation of institutional trust. By building a systematic Work Program and utilizing disciplined Sampling techniques, you move from “Random Inspection” to “Scientific Assurance.” This methodology ensures that audit resources are focused where they provide the most value—protecting the company from material risks, identifying operational waste, and providing the Board with facts rather than opinions.
Action Step Now (30 minutes)
- Pick one recurring task in your department (e.g., Monthly Expense Approval).
- Define the #1 risk for that task (e.g., Approval by wrong person).
- Draft a 3-step Audit Procedure to test if that control worked in the last 3 months. You have just started a mini audit plan.