Title: The Importance of Audit Planning (Part 2)
(Relevant to ACCA F8, P7 and CAT T8)
Contents of the Audit Plan
The audit plan is more detailed than the overall audit strategy and ISA 300 defines the contents which the detailed audit plan should take.
The audit plan should document the nature, timing and extent of the audit procedures to be adopted which should be sufficient and effective enough to be able to assess the risks of material misstatement within the financial statements.
The detailed audit plan should also contain a description of the nature, timing and extent of planned further audit procedures at the assertion level for each material class of transactions, account balances and disclosures. This section of the audit plan interlinks with the provisions of ISA 330 ‘The Auditor’s Procedures in Response to Assessed Risks’.
Finally, the audit plan should also contain details of other audit procedures to be adopted so that the audit can be carried out in accordance with the ISA’s (for example, ISA 620 (revised and redrafted) ‘Using the Work of an Auditor’s Expert’).
It is important to understand that planning for the audit procedures takes place over the course of the audit engagement. Risk assessment procedures are carried out early on in the audit, whereas the nature, timing and extent of audit procedures will be carried out in response to the risk assessment.
Typical contents of the detailed audit plan are:
• Nature of the business and what it does
• Risk and problematic areas (both business risk and financial statement risk)
• Details of any complexities associated with the audit assignment
• Specific accounting and auditing standards relevant to the assignment
• Planned audit procedures
• Details of sampling techniques
• Key personnel employed at the clients
• Points brought forward from previous audits
Planning During the Audit
It is important to understand that once the planning of the audit is completed, it is not simply forgotten about. There could be occasions when the audit plan might need to be changed, for example due to unforeseen circumstances and in these respects the auditor will need to change the overall audit plan.
During the planning stage the auditor plans the nature, timing and extent of the audit procedures to be carried out. This is not the only issue which the auditor needs to address during the course of the planning. The auditor should also ensure that they plan the nature, timing and extent of the review of the work of the engagement team members.
The review of the engagement team members work will vary depending on various factors such as the complexity of the audit engagement, the risk of material misstatement and the competencies involved. These factors are not exhaustive and specific factors attached to the audit engagement should be considered when planning the nature, timing and extent of the engagement team members work review.
The provisions of ISA 300 state that the auditor must document the overall audit strategy and the audit plan. In addition, any significant changes to the overall audit strategy and audit plan must also be documented. Standard audit programmes can be used to deal with this issue, however it is important that the auditor tailors the audit programme appropriately so it is specific to the engagement. Remember, the audit is not simply a ‘tick box’ exercise. ISA 230 (revised) ‘Audit Documentation’ governs the documentation required during the course of an audit.
The planning stage of the audit is an extremely vital area. Going in to an audit ‘blind’ is reckless and does not conform to ISA 300 Audit Planning.
Latest update: 17/02/2011