VSN & Associates, Chartered Accountants, were appointed as statutory auditors of Ema Energy Limited for the financial year ended 31st March,…

The audit planning ideally commences at the conclusion of the previous year's audit, and along with the related programme, it should be reconsidered for modification as the audit progresses. Such consideration is based on the auditor's review of the internal control, his preliminary evaluation thereof, and the results of his compliance and substantive procedures. While developing an audit programme, the auditor may conclude that relying on certain internal controls is an effective and efficient way to conduct his audit. However, the auditor may decide not to rely on internal controls when there are other more efficient ways of obtaining sufficient appropriate audit evidence. The auditor should also consider the timing of the audit procedures, the coordination of any assistance expected from the client, the availability of assistants, and the involvement of other auditors or experts. Further, the auditor normally has flexibility in deciding when to perform audit procedures. However, in some cases, the auditor may have no discretion as to timing, for example, when observing the taking of inventories by client personnel or verifying the securities and cash balances at the year-end. For the purpose of programme construction, the following points should be kept in mind: (1) Stay within the scope and limitation of the assignment. (2) Prepare a written audit programme setting forth the procedures that are needed to implement the audit plan. (3) Determine the evidence reasonably available and identify the best evidence for deriving the necessary satisfaction. (4) Apply only those steps and procedures which are useful in accomplishing the verification purpose in the specific situation. (5) Include the audit objectives for each area and sufficient details which serve as a set of instructions for the assistants involved in audit and help in controlling the proper execution of the work. (6) Consider all possibilities of error. (7) Co-ordinate the procedures to be applied to related items. In the given case of Ema Energy Limited, the auditor is required to continuously review and modify the audit programme based on evaluation of internal controls, results of audit procedures and practical audit requirements. The auditor must properly plan timing of audit procedures such as inventory observation and verification of cash and securities balances, while ensuring that the audit programme contains clear procedures, audit objectives and coordination instructions so as to obtain sufficient appropriate audit evidence efficiently and effectively.