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Microlesson · 5-min read

One Audit Programme is Not Applicable to All Businesses — Need for Periodic Review

## One Audit Programme ≠ Universal Programme

### Why a Single Programme Cannot Fit All Clients

Businesses differ across multiple dimensions:

  • Nature of business (manufacturing vs service vs trading)
  • Size and volume of transactions
  • Composition of assets, liabilities, and operations
  • Internal control efficiency and design
  • Exact nature of service the auditor is engaged to provide

Because of these variations, evolving one audit programme applicable to all businesses under all circumstances is not practicable.

> Exam phrase to memorise: "Evolving one audit programme applicable to all business under all circumstances is not practicable."

### Why Periodic Review of the Existing Programme is Mandatory

Even for a continuing client (same entity, next year), the audit programme must be reviewed periodically because:

1. The client's business policy may change — new products, new markets, diversification.

2. Internal controls may have been strengthened or weakened.

3. Without review, the auditor works on an obsolete programme — this constitutes negligence.

4. Legal consequence: the entire audit may be held as negligently conducted.

### Rigidity vs. Flexibility

A common misconception is that enforcing programme adherence creates rigidity. This is not true because:

  • Assistants follow the programme as written (no ad-hoc deviation)
  • The principal reviews and updates the programme periodically
  • Assistants are encouraged to observe salient features of accounting functions and flag anomalies

Result: Discipline in execution + Flexibility through periodic official review.

Worked example

### Example 1

PYP May 2024 (4M) — CA R vs CA P: Bakes Ltd. and Time Ltd. differ entirely in volume and nature. CA P is correct that the same programme cannot be used — this is a direct application of the 'not practicable' principle.

### Example 2

PYP Sep 2024 (4M) — KALI Ltd.: M/s PP & Co. have audited KALI Ltd. for 3 years. The company has now made major changes in business policy. The audit manager instructs the team to follow the old programme unfailingly. This is incorrect — the changed business policy demands a fresh review of the audit programme. Using the old programme without review constitutes negligence and exposes the firm to legal consequences.

⚠️ Common exam mistakes

  • Saying 'rigidity is a problem' without explaining that periodic review resolves it — examiners expect the nuanced answer.
  • Failing to state the legal consequence of using an obsolete programme (audit held as negligently conducted).
  • Not linking 'periodic review' to both internal control changes AND business policy changes — both are triggers.
  • Confusing 'assistants must follow the programme' (discipline) with 'programme must never change' (not true).
Reference:
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