01 C2 Audit Strategy, Audit Planning

These notes are incomplete without our videos. Study from these notes at your own risk.
We keep on updating our books, notes and videos. You should always
study from updated notes with our videos. Many concepts are there which are missing in these notes, some are obsolete. We have discussed everything in our
video classes. www.neerajaroraclasses.com Amendments and updates will taught in classes and videos. Extra notes and charts will also be given.

Chapter 2- Audit Strategy, Audit Planning &

Audit programme
SA 300 “Planning an Audit of Financial Statements”
Scope
This Standard on Auditing (SA) deals with the auditor’s responsibility to plan an audit of financial statements.
Objective
The objective of the auditor is to plan the audit so that it will be performed in an effective manner.
Involvement of Key Engagement Team Members

The engagement partner and other key members of the engagement team shall be involved in planning the audit,
including planning and participating in the discussion among engagement team members.
Audit Plan to Conduct an Effective Audit
Plans should be made to cover, among other things:

(a) acquiring knowledge of the client’s accounting systems, policies and internal control procedures;
(b) establishing the expected degree of reliance to be placed on internal control;
(c) determining and programming the nature, timing, and extent of the audit procedures to be performed; and
(d) coordinating the work to be performed.
Plans should be further developed and revised as necessary during the course of the audit.
Benefits of Planning in the Audit of Financial Statements

Planning an audit involves
● establishing the overall audit strategy for the engagement and
● developing an audit plan.
Adequate planning benefits the audit of financial statements in several ways, including the following:

To get the best out of these notes visit www.neerajaroraclasses.com Chapter 1 | 1
Join Us on YouTube www.youtube.com/neerjarora
Join Us on Telegram https://t.me/neerajaroraclasses
These notes are incomplete without our videos. Study from these notes at your own risk. We keep on updating our books, notes and videos. You should always

DEVELOPMENT OF AUDIT PLAN
Description of Audit Plan
As per SA 300 “Planning an Audit of Financial Statement” the audit plan shall be include a description of:
❖ The nature, timing and extent of planned risk assessment procedures, as determined under SA 315.
❖ The nature , timing and extent of planned further audit procedures at the assertion level, as determined under
SA 330.
❖ Other planned audit procedures that are required to be carried out so that the engagement complies with SAs.
● Planning of the auditor’s risk assessment procedures occurs early in the audit process.
● However, planning the nature, timing and extent of specific further audit procedures depends on the outcome of
those risk assessment procedures.
Knowledge of the Client’s Business

It is one of the important principles in developing an overall audit plan. In fact without adequate knowledge of client’s
business, a proper audit is not possible.


As per SA-315, “Identifying and Assessing the Risk of Material Misstatement through Understanding the Entity and Its
Environment”, the auditor shall obtain an understanding of the following:
1. Relevant industry, regulatory and other external factors including applicable financial reporting framework.
2. The nature of the entity, including:
a. Its operations;
b. Its ownership and governance structures;
c. The types of investments that the entity is making and plan to make: &
d. The way that the entity is structured and how it is financed.
3. The entity’s selection and application of accounting policies, including the reasons for changes thereto.
4. The entity’s objectives and strategies, and those related Business risks that may result in risks of material
Misstatement.
5. The measurement and review of the entity’s financial performance.
Changes to planning decisions During the Audit

● The auditor shall update and change the overall audit strategy and the audit plan as necessary during the course
of the audit.
○ As a result of unexpected events,
○ changes in conditions, or
○ the audit evidence obtained from the results of audit procedures,
● the auditor may need to modify the audit plan & planned nature, timing and extent of further audit procedures,
based on the revised consideration of assessed risks.
● This may be the case when information comes to the auditor’s attention that differs significantly from the
information available when the auditor planned the audit procedures.
● For example, audit evidence obtained through the performance of substantive procedures may contradict the
audit evidence obtained through tests of controls.
Planning is not a discrete phase of an audit, but rather a continual and

iterative process
Planning is not a discrete phase of an audit, but rather a continual and iterative process that often begins shortly after
(or in connection with) the completion of the previous audit and continues until the completion of the current audit
engagement.
The auditor shall establish an overall audit strategy that sets the scope, timing and direction of the audit, and that
guides the development of the audit plan.
The nature and extent of planning activities will vary according to the size and complexity of the entity, the key
engagement team members’ previous experience with the entity, and changes in circumstances that occur during the
audit engagement.
Planning includes the need to consider matters such as


● The analytical procedures to be applied as risk assessment procedures.
● Obtaining a general understanding of the legal and regulatory framework applicable to the entity and how the
entity is complying with that framework.
● The determination of materiality.
● The involvement of experts.
● The performance of other risk assessment procedures.
Direction, Supervision and Review

The auditor shall
● plan the nature, timing and extent of
● direction and supervision of engagement team members and
● the review of their work.
The nature, timing and extent of the direction and supervision of engagement team members and review of their work
vary depending on many factors, including:
● The size and complexity of the entity.
● The area of the audit.
● The assessed risks of material misstatement
● The capabilities and competence of the individual team members performing the audit work.
DOCUMENTATION OF AUDIT PLAN

The auditor shall document:
a. the overall audit strategy;
b. the audit plan; and
c. any significant changes made during the audit engagement to the overall audit strategy or the audit plan, and
the reasons for such changes.
The documentation of the overall audit strategy is a record of the key decisions considered necessary to properly plan
the audit and to communicate significant matters to the engagement team.


Audit Strategy
Audit strategy is concerned with
➔ designing optimised audit approaches
➔ that seek to achieve the necessary audit assurance
➔ at the lowest cost
➔ within the constraints of the information available.
Relationship between the overall audit strategy and the audit plan
● Change in audit strategy will lead to change in audit plan and vice versa
● Audit plan in prepared after audit strategy and is more detailed. Audit strategy gives less detail but it forms the
basis of the planning
● The auditor shall establish an overall audit strategy that sets the scope, timing and direction of the audit, and
that guides the development of the audit plan
● Detailed audit plan would include the nature, timing and extent of the audit procedures so as to obtain sufficient
appropriate audit evidence.


01 C2 Audit Strategy, Audit Planning

Enviado por

Dados do documento

Direitos autorais

Formatos disponíveis

Compartilhar este documento

Compartilhar ou incorporar documento

Opções de compartilhamento

Você considera este documento útil?

Este conteúdo é inapropriado?

Direitos autorais:

Formatos disponíveis

01 C2 Audit Strategy, Audit Planning

Enviado por

Direitos autorais:

Formatos disponíveis

These notes are incomplete without our videos. Study from these notes at your own risk.

Chapter 2- Audit Strategy, Audit Planning &

Involvement of Key Engagement Team Members

Audit Plan to Conduct an Effective Audit

Plans should be made to cover, among other things:

Benefits of Planning in the Audit of Financial Statements

DEVELOPMENT OF AUDIT PLAN

Description of Audit Plan

Knowledge of the Client’s Business

Changes to planning decisions During the Audit

Planning is not a discrete phase of an audit, but rather a continual and

Planning includes the need to consider matters such as

Direction, Supervision and Review

DOCUMENTATION OF AUDIT PLAN

Você também pode gostar