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An Audit Procedure outlines the specific steps and methods auditors use to examine financial records, internal controls, and business operations. In Pakistan, these procedures follow the International Standards on Auditing (ISA) and guidelines set by the Institute of Chartered Accountants of Pakistan (ICAP).

These procedures help auditors gather reliable evidence, detect irregularities, and ensure compliance with local tax laws and the Companies Act 2017. Common procedures include reviewing bank statements, confirming account balances, checking inventory records, and interviewing key personnel. Auditors adjust these steps based on the company's size, industry risks, and specific regulatory requirements.

Companies need Audit Procedures when preparing for annual statutory audits required by Pakistan's Companies Act 2017, especially before filing financial statements with SECP. They're essential during major business changes like mergers, acquisitions, or when seeking investment, as these situations demand clear financial verification.

Organizations also implement audit procedures when expanding operations, launching new product lines, or facing regulatory scrutiny. For listed companies, these procedures become particularly important during quarterly reviews and when complying with PSX listing requirements. Small businesses benefit from audit procedures when applying for bank loans or bringing in new shareholders.

• Substantive Audit Procedures: Verify specific account balances and transactions through direct testing, sampling, and documentation review
• Control Testing Procedures: Evaluate internal control systems, including IT controls and financial reporting processes
• Analytical Procedures: Compare financial ratios, trends, and industry benchmarks to identify unusual patterns
• Compliance Audit Procedures: Focus on adherence to SECP regulations, tax laws, and Companies Act requirements
• Industry-Specific Procedures: Tailored approaches for sectors like banking (SBP guidelines), manufacturing, or real estate

• External Auditors: Independent chartered accountants who design and execute audit procedures according to ISA standards and ICAP guidelines
• Internal Audit Teams: Company employees who implement ongoing audit procedures and monitor internal controls
• Management: Responsible for providing necessary documentation and ensuring staff cooperation during audits
• Board of Directors: Oversee audit committee activities and approve major audit procedure changes
• Regulatory Bodies: SECP and SBP officials who review audit procedures during compliance checks

• Risk Assessment: Review company's operational areas, financial systems, and industry-specific risks
• Documentation Review: Gather past audit reports, internal control manuals, and relevant financial statements
• Regulatory Framework: Check current SECP guidelines, ISA standards, and industry-specific requirements
• Resource Planning: Identify team members, timeline, and required tools for each audit task
• Stakeholder Input: Consult department heads about existing processes and control weaknesses
• Technology Assessment: Evaluate available audit software and data analysis tools

• Scope Definition: Clear statement of audit objectives, timeframe, and departments covered
• Methodology Section: Detailed sampling methods, testing procedures, and evidence collection approaches
• Risk Assessment Framework: Identification and evaluation criteria for business and control risks
• Compliance Requirements: References to relevant SECP regulations, Companies Act sections, and ISA standards
• Documentation Guidelines: Specific formats for working papers, evidence collection, and report preparation
• Quality Control Measures: Review processes and quality assurance steps aligned with ICAP standards

Audit Procedures are often confused with Compliance Procedure, but they serve distinct purposes in Pakistani organizations. While both relate to organizational oversight, their scope and application differ significantly.

• Purpose and Scope: Audit Procedures focus on examining financial records and operational processes to verify accuracy and effectiveness, while Compliance Procedures outline steps to meet regulatory requirements and internal policies
• Timing and Frequency: Audit Procedures are typically executed during scheduled audits or specific investigations, whereas Compliance Procedures run continuously as part of daily operations
• Implementation Authority: Audit Procedures are primarily executed by internal or external auditors, while Compliance Procedures are implemented by department heads and compliance officers
• Outcome Focus: Audit Procedures aim to provide assurance and identify discrepancies, while Compliance Procedures focus on preventing violations and maintaining regulatory adherence