Types of audit programme: Standard and tailored

Types of audit programme: Standard and tailored

Basis	Standard audit programme	Tailored audit programme
Meaning	A prepared set of procedures commonly used for the same audit area across different clients.	A programme designed or adapted for a particular client’s operations, systems and risks.
When useful	As a starting point for routine areas with similar transactions and controls.	When the client has unusual transactions, significant changes or risks requiring specific attention.
Main advantage	Saves preparation time, promotes consistency and reminds staff to cover common audit objectives.	Directs staff towards the particular ways the client’s financial statements could be misstated.
Main limitation	Staff may follow it mechanically and overlook a risk specific to the client.	Requires more planning time and judgement. A programme developed from scratch may overlook routine work.
Example	An inventory programme instructs staff to select items from the year-end inventory listing and locate them in the warehouse to test existence.	After learning of a warehouse flood, the auditor adds procedures to identify damaged stock and assess whether its carrying amount should be reduced.

A firm can start with a standard programme and tailor it. The decision depends on what could go wrong at the particular client and whether the planned procedures would detect it.

Worked example | Jengka Furniture Sdn. Bhd.

During a warehouse tour, the auditor finds 40 water-damaged tables included in year-end inventory. Each table is recorded at RM500.

Programme step	Audit procedure	Assertion
Standard procedure	Select tables from the year-end inventory listing and physically locate them in the warehouse. Record the quantities found and any signs of damage.	Existence
Tailored procedure	Identify the 40 damaged tables on the inventory listing. Examine subsequent selling prices and estimated repair and selling costs to determine their net realisable value.	Valuation

Suppose the evidence supports a net realisable value of RM350 per damaged table. The required write-down is 40 × (RM500 − RM350) = RM6,000. The auditor then checks whether management recorded the adjustment.

The count answers “Are the tables there?” The additional procedure answers “Is RM500 per table still recoverable?” That second question explains why the programme needed tailoring.