DEPARTMENT OF THE AUDITOR-GENERAL OF PAKISTAN GUIDELINES FOR THE AUDIT OF DEFENCE SERVICES TO BE USED BY THE DIRECTORATE GENERAL AUDIT (DEFENCE SERVICES) 2 Table of Contents PREFACE ........................................................................................................................................................ 1 1. INTRODUCTION TO AUDIT GUIDELINES........................................................................................ 2 1.1 Purpose of the Guidelines........................................................................................................................2 1.2 Guiding Principles ....................................................................................................................................2 1.3 Auditors’ Responsibility ..........................................................................................................................2 1.4 Practical Tools ..........................................................................................................................................3 1.5 Continuous Improvement .......................................................................................................................3 1.6 Using the Standard Audit Working Papers ............................................................................................3 1.7 The Accountability Cycle .........................................................................................................................4 2. OVERVIEW OF THE DIRECTORATE GENERAL OF AUDIT DEFENCE SERVICES- (NORTH & SOUTH) .......................................................................................................... 6 2.1. Overview of the Office .............................................................................................................................6 2.2 Jurisdiction ...............................................................................................................................................7 2.3 Organogram of DG, Audit Defence Services ...........................................................................................8 3. SCOPE OF AUDIT .................................................................................................................................... 9 3.1 Types of Audits .........................................................................................................................................9 3.2 Definition of Government Audit ..............................................................................................................9 3.3 Certification Audit ....................................................................................................................................9 3.4 Compliance with Authority Audit ......................................................................................................... 10 3.5 Important Audit Components of Defence Audit .................................................................................. 11 4. PERMANENT FILE OF AUDITEE DEPARTMENTS ..................................................................... 13 4.1 Introduction ........................................................................................................................................... 13 4.2 The Audit Team’s Responsibility .......................................................................................................... 14 4.3 Documentation in Permanent File ........................................................................................................ 14 4.4 Update Control Sheet – PF ..................................................................................................................... 14 4.5 Status of Entity – Form PF-I. ................................................................................................................. 15 4.6 Background Information – Form PF-II. ................................................................................................ 15 4.7 List of Auditable Locations – Form PF-III. ............................................................................................ 15 4.8 List of Bank Accounts – Form PF-IV. .................................................................................................... 15 4.9 List of Authorized Signatories – Form PF-V. ........................................................................................ 15 4.10 External Factors – Form PF-VI. ........................................................................................................... 16 4.11 Accounting Records and Accounting System - Form PF-VII. ............................................................ 16 4.12 Key Contacts – Form PF-VIII. .............................................................................................................. 17 4.13 Significant Audit Areas – Form PF IX. ................................................................................................. 17 4.14 Significant Accounting Policies – Form PF-X. .................................................................................... 20 5. AUDIT PLANNING PHASE ................................................................................................................ 22 5.1 Introduction ........................................................................................................................................... 22 5.2 The Audit Team’s Responsibility in Planning Phase ........................................................................... 22 5.3 Documentation in Planning Phase ........................................................................................................ 23 5.4 Audit objectives and scope .................................................................................................................... 24 i 5.5 Points for attention at next audit (from last year) .............................................................................. 24 5.6 Entity communication letter ................................................................................................................. 24 5.7 Audit planning memorandum ............................................................................................................... 25 5.8 Memorandum on post-planning changes ............................................................................................. 25 5.9 Important dates ..................................................................................................................................... 25 5.10 Tour programme ................................................................................................................................. 25 5.11 Information requested from entity officials ...................................................................................... 25 5.12 Materiality assessment form............................................................................................................... 26 5.13 Expected aggregate error and planned precision form .................................................................... 26 5.14 Audit risk assessment form ................................................................................................................ 26 5.15 Inherent risk assessment form ........................................................................................................... 26 5.16 Internal control questionnaire - controls for overall environment ................................................. 26 5.17 Internal control questionnaire – general computer controls ........................................................... 27 5.18 Internal control questionnaire – application controls ...................................................................... 27 5.19 Control risk assessment forms ........................................................................................................... 27 5.20 Analytical procedures assurance form ............................................................................................... 28 5.21 Source of audit assurance form .......................................................................................................... 28 5.22 List of applicable laws and regulations .............................................................................................. 28 5.23 Sample selection checklist .................................................................................................................. 28 5.24 High value item selection form ........................................................................................................... 31 5.25 Key item selection form....................................................................................................................... 31 5.26 Sample sizing for tests of internal control ......................................................................................... 31 5.27 Sample sizing for substantive tests of details .................................................................................... 32 5.28 Checklist of accounting estimates to be reviewed ............................................................................ 32 5.29 Points for attention at next audit ........................................................................................................ 32 5.30 Audit planning checklist .....................................................................................................................