Planning an audit

The objective of an auditor is to plan the audit so that it would be done in an effective manner. Why the need of planning?? To devote more time in important and risky areas To identify and resolve potential problem in a timely basis Properly organize and manage the audit so that it is performed in an effective and efficient manner. Facilitate the direction and the supervision of the audit member and the review of their work Planning Procedures Review previous work years working paper If a new customer, review previous report of previous audit working paper Review work of the internal audit Set materiality level Prepare time budget Allocate and brief audit staff

What is planning?? Planning an audit involves in establishing the overall audit strategy for the engagement and developing an audit plan. The auditor shall establish an overall audit strategy that sets the scope, timing, direction of the audit and that guides the development of the audit plan.

Determine the characteristics of the audit client.

Establish deadline for completion of the work Establishing key dates for communication

Consider primarily materiality Consider initial identification of high risk areas within FS

Main Sections of an audit Strategy 1. Understand the entity environment Provide details of the industry area and specify any activities and strategies by the individual client 2. Understand the accounting and internal control system Details on the client accounting polices Assessment of the internal control system 3. Risk Assessment of risk of the client and risk of fraud and error 4. Materiality The materiality level of the audit planning purpose

Overall Audit Strategy

Knowledge of the entity what the industry is involved, specified and activity and strategies of the individual client Materiality The materiality of the audit planning process Risk Assessment the risk of the client, risk of fraud, risk of error Planned and audit approach set the direction, consider primarily materiality consider the high risk areas within the FS Key dates meeting the deadlines for completion of the work-Establish the key dates for expected communication Audit Budget