This blog is written by Mr. Ahmed Yar Khan, Manager Audit and Assurance Services. Please read this technically explained Blog and provide us your comments.
AUDIT PLANNING (ISA – 300)
It is a vital area of the audit primarily conducted at the beginning of audit process to ensure that appropriate attention is devoted to important areas, potential problems are promptly identified, work is completed expeditiously and work is properly coordinated. “Audit planning” means developing a general strategy and a detailed approach for the expected nature, timing and extent of the audit. The auditor plans to perform the audit in an efficient and timely manner.
Benjamin Franklin famously said: “By failing to prepare, you are preparing to fail.” Indeed, one of the most common causes of unsuccessful audits is inadequate planning. Too often, audit staff commitments to current engagements become an obstacle to planning the next engagement.
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:
- Helping the auditor to devote appropriate attention to important areas of the audit.
- Helping the auditor identify and resolve potential problems on a timely basis.
- Helping the auditor properly organize and manage the audit engagement so that it is performed in an effective and efficient manner.
- Assisting in the selection of engagement team members with appropriate levels of capabilities and competence to respond to anticipated risks, and the proper assignment of work to them.
- Facilitating the direction and supervision of engagement team members and the review of their work.
- Assisting, where applicable, in coordination of work done by auditors of components and experts.
ISA 300 requires engagement partner and other key members of the engagement team to get involved in planning and discussion.
ISA 300 Require to establish overall audit strategy;
- Identify the characteristics of the engagement that define its scope;
- Ascertain the reporting objectives of the engagement to plan the timing of the audit and the nature of the communications required;
- Consider the factors that, in the auditor’s professional judgment, are significant in directing the engagement team’s efforts;
- Consider the results of preliminary engagement activities and, where applicable, whether knowledge gained on other engagements performed by the engagement partner for the entity is relevant; and
- Ascertain the nature, timing and extent of resources necessary to perform the engagement.
ISA 300 requires to develop audit plan that involve;
- The nature, timing and extent of planned risk assessment procedures;
- The nature, timing and extent of planned further audit procedures at the assertion level, and
- Other planned audit procedures that are required to be carried out so that the engagement complies with ISAs.
ISA 300 requires to plan the nature, timing and extent of direction and supervision. The strategy, plan and any significant changes shall also be documented.
- ISA 300 require that in respect of Initial Audit Engagement;
- Performing procedures required by ISA 220 regarding the acceptance of the client relationship and the specific audit engagement; and
- Communicating with the predecessor auditor, where there has been a change of auditors, in compliance with relevant ethical requirements.
Ahmed Yar Khan