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Table of Contents

1. ORGANISATION AND PURPOSE OF THE MANUAL


1.1 Purpose of the Audit manual 1-1
1.2 Types of audits dealt with 1-1
1.3 Audit entities dealt with 1-2
1.4 Accounting Responsibility Structure of the Government of Pakistan 1-2
1.5 Stages of audit work dealt with 1-2
1.6 Organisation of the manual 1-3
1.7 Links to other guidance material 1-3
1.8 Standard audit working paper kit 1-3
1.9 Need for professional judgment 1-3
1.0 Updating the Audit Manual 1-4

2. ROLE OF THE AUDITOR GENERAL


2.1 Parliamentary Control and Public Accountability 2-1
2.2 Introduction to Auditing 2-1
2.3 Legislative Basis 2-1
2.4 Vision, Mission and Values 2-2

3. THE JOB OF THE AUDITOR


3.1 Expectations 3-1
3.2 Conditions of Employment 3-1
3.3 Code of Ethics 3-1
3.4 Protection of the Auditor 3-5

4. DAGP AUDIT STANDARDS


4.1 Basic Principles in Government Auditing 4-1
4.2 General Standards in Government Auditing 4-6
4.3 Standards with Ethical Significance 4-10
4.4 Field Standards in Government Auditing 4-15
4.5 Reporting Standards in Government Auditing 4-22

5. DAGP’S ANNUAL PLANNING PROCESS


5.1 DAGP Strategic Audit Objectives 5-1
5.2 DAGP Audit Scope 5-1
5.3 DAGP Strategic Audit Plans 5-2
5.4 The annual planning process 5-2
5.5 Integration of audit work 5-4
5.6 Approval process for the budget of centrally-led audits 5-5

6. THE AUDIT CYCLE


6.1 Introduction 6-1
6.2 General audit planning 6-4
6.3 Activity and Resource Planning 6-8
6.4 Roles and responsibilities 6-10

7. PLANNING THE AUDIT


7.1 Step1 – Establish audit objectives and scope 7-1
7.2 Step 2 –Understand the entity’s business 7-4
7.3 Step 3 – Assess materiality, planned precision, and audit risk 7-6
7.4 Step 4 – Understand the entity’s internal control structure 7-16

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7.5 Step 5 – Determine components 7-24
7.6 Step 6 – Determine financial audit and compliance with authority objectives, and
error/irregularity conditions 7-26
7.7 Step 7 - Assess inherent risk and control risk 7-30
7.8 Step 8 – Determine mix of tests of internal controls, analytical procedures and
substantive tests of details 7-36
7.9 Reliance on other auditors 7-43
7.10 Documenting strategic planning decisions 7-44
7.11 Application to Government-wide Audits 7-44

8. ACTIVITY AND RESOURCE PLANNING FOR INDIVIDUAL AUDITS


8.1 Formulate/update Audit Programmes 8-1
8.2 Updating staffing requirements and allocating resources 8-2
8.3 Updating budget requirements 8-4
8.4 Updating timing considerations 8-5
8.5 Updating information required from the entity 8-7
8.6 Re-assessing the general and detailed planning decisions for individual audit 8-7
8.7 Documenting the detailed planning decision 8-7
8.8 Updated planning file 8-8
8.8 Approval of the general and detailed planning decisions 8-9

9. CONDUCTING THE AUDIT


9.1 Introduction 9-1
9.2 Compliance Testing 9-1
9.3 Substantive Testing 9-2
9.4 Evidence 9-6
9.5 Matters to deal with during fieldwork 9-11
9.6 Cause and Effect Analysis 9-14
9.7 Developing Conclusions and Recommendations 9-15
9.8 Keeping entity official informed 9-19
9.9 Documenting the work performed 9-19
9.10 Custody and maintenance of working paper files 9-20
9.11 Quality assurance during field work 9-20

10. EVALUATING AUDIT RESULTS


10.1 Evaluating Financial Audit Results 10-1
10.2 Known errors, most likely errors, further possible errors and maximum possible
errors 10-1
10.3 Determining the cause of errors, violations and deviations 10-4
10.4 Concluding on the on the results of each test 10-5
10.5 Concluding on the results of each component 10-7
10.6 Concluding on the financial statements as a whole 10-10
10.7 Dealing with unacceptable results 10-13
10.8 Dealing with acceptable results 10-16
10.9 Documenting the evaluation process 10-17
10.10 Evaluating Regularity Audit Results 10-18
10.11 Quality assurance during the evaluation phase 10-19

11. THE REPORTING PROCESS


11.1 Introduction 11-1
11.2 Focus on the Reporting Process 11-2
11.3 Clearing Observations, Conclusions and Recommendations 11-2

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11.4 Obtaining Management Responses 11-3
11.5 Management representation letter 11-4
11.6 Audit completion checklist 11-6
11.7 Producing the Audit Report 11-7
11.8 Review of reports by others 11-7

12. THE AUDIT REPORT


12.1 Introduction 12-1
12.2 The Certification Report and Types of Opinion 12-2
12.3 Audit reports other than opinions on financial statements 12-7
12.4 Reporting style and format 12-8
12.5 Compliance and Performance Reports 12-11

13. DOCUMENTATION AND WORKING PAPERS


13.1 The Need for Documentation and Working Paper Files 13-1
13.2 The Purpose of Working Paper Files 13-1
13.3 The Quality of Working Paper Files 13-2
13.4 Custody and Maintenance of the Working Paper Files 13-4

14. AUDIT FOLLOW UP


14.1 Introduction 14-1
14.2 Timing of the follow up 14-2
14.3 Determining the desired level of assurance 14-3
14.4 Performing the follow up 14-4
14.5 Reporting the results of the follow up 14-6
14.6 Performing additional follow ups 14-6

15. QUALITY ASSURANCE


15.1 Introduction 15-1
15.2 General quality assurance techniques described in this manual 15-1
15.3 Quality assurance during the planning phases for individual audits 15-2
15.4 Quality assurance during the fieldwork phase for individual audits 15-3
15.5 Quality assurance during the evaluation phase 15-3
15.6 Quality assurance during the reporting phase 15-3
15.7 Quality assurance during the follow up phase 15-4
15.8 Other quality assurance procedures 15-4

List of Appendices
Appendix A: Glossary of Terms A-1
Appendix B: Statistical and Non-Statistical Sampling and the Use of CAATs B-1
Appendix C: Computer Assisted Auditing Techniques (CAATs) C-1
Appendix D: Assurance and Materiality D-1
Appendix E: Analytical Methods E-1
Appendix F: Interviewing F-1

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