The Case for the Structured Audit
Touche Ross & Co.
This paper provides: 1) a definition and illustration of a structured audit; 2) a comparison to other types of audit approaches; 3) some analysis of the audit environment including a segmentation of the different levels of audit activity; and 4) comparisons of the different types of audit approaches within the broad categories of audit activity.
What is a Structured Audit?
As this term is not common, it may be useful to see how it was derived. A dictionary definition of "structure" provides the following elements:
• A meaningful frame of reference
• An established relationship between components
• A set of rules or an agenda to be followed
• An arrangement in a definite pattern of organization.
Therefore, a structured audit would be one with a meaningful frame of reference, with different areas of the audit clearly related to one another, with a predetermined way of proceeding, and with a definite pattern of organization.
An Example of the Structured Approach
The Touche Ross Audit Process is an example of a structured audit approach in that it is based on a conceptual framework that is used to design a program for each specific audit engagement. Our process enables us to focus our audit effort—and get results—where audit risks and significance are greatest. It is based on two major assumptions, namely:
• No two audits are so similar that major differences will not have to be dealt with
• Risk assessment and a focus on the entity's transactions provide an organizational framework that can be applied across all audits.
The process is neither overly rigid nor lacking in direction and thrust—it provides a disciplined approach based on risk assessment to determine audit effort. Recognizing that no two companies are identical, the process focuses on the company's transactions, a focus that unifies the audit effort as it does the company's operations. It works this way: first, we understand the company's business because that understanding is vital to a focused audit. Second, we understand the company's operating transactions because these are the tangible evidence of business activity and the unifying ingredient in every