Establishing the overall audit strategy for the engagement and producing an audit plan are both part of the planning process for an audit. The type and scope of preparatory activities will vary depending on the entity's size and complexity, the past experience of key engagement team members with the entity, and changes in circumstances that occur throughout the audit engagement. Planning is not a distinct phase of an audit; rather, it is a continuous and iterative process that often begins soon after (or in conjunction with) the completion of the prior audit and continues until the current audit engagement is completed.
The
audit approach and plan
According
to ISA 300, audit planning activities should include:
§ establishing the overall audit strategy
for the engagement; and
§ developing an audit plan.
Audit
Strategy
The
audit strategy lays out in broad terms how the audit will be done, as well as
the audit's scope, timing, and direction. After that, the audit strategy
directs the creation of the audit plan, which includes the comprehensive
responses to the auditor's risk assessment.
Audit
Plan
The
audit plan is more specific than the overall audit strategy since it specifies
the nature, time, and scope of audit procedures that engagement team members
will undertake. Prior to the auditor's identification and assessment of the
risks of material misstatement, planning includes such matters as:
§ The analytical procedures to be used as
risk assessment procedures must be considered.
§ Getting a general grasp of the legal and
regulatory framework that applies to the entity, as well as how that framework
is being followed.
§ The process of determining materiality.
§ The participation of experts.
§ Performing of other risk assessment
techniques.
Benefits
of Audit Planning
The
audit of financial statements benefits from adequate planning in various ways,
including the following:
§ assisting the auditor in devoting
adequate attention to critical areas of the audit
§ assisting the auditor in identifying and
resolving potential issues in a timely manner.
§ assisting the auditor in appropriately organizing
and managing the audit engagement in order for it to be completed in a timely
and effective manner.
§ assisting in the selection of engagement
team members with the necessary talents and expertise to respond to predicted
risks, as well as the suitable assignment of tasks to them.
§ facilitating the direction, supervision,
and evaluation of engagement team members' work.
§ assisting, if appropriate, in the
coordination of work done by component auditors and experts.
Practice:
At the start of every
audit engagement, the auditor must include the following in the audit
documentation: (a) the overall audit strategy; (b) the audit plan; and (c)
any major changes to the overall audit strategy or the audit plan made during
the audit engagement, as well as the reasons for such changes.
Source:
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