Chapter 5

AUDIT PLANNING

Audit planning involves developing a general audit strategy and a

detailed approach for the expected conduct of the audit. The
auditor's main objective in planning the audit is to determine the
s cope of the audit procedures to be performed.

The auditor should plan the audit work to that audit will be
performed in an effective and efficient manner. The extent of
planning will vary according to the size of the entity, the complexity
of the audit and the auditor's experience with the entity, and
knowledge of the business.

Adequate planning of the audit work is important because:

 Planning helps ensure that
appropriate attention is devoted to important
areas of the audit.

It helps identify potential problems.

 It allows the work to be
completed expeditiously.
 It assists in the proper
assignment and coordination of work.
 It helps ensure that the audit
is conducted effectively and efficiently.

PSA 315 requires the auditor to obtain sufficient understanding of

the entity and its environment including its internal control. Such
understanding involves obtaining knowledge about the entity's:
a. Industry, regulatory, and
other external factors, including financial
reporting framework;
b. Nature of the entity,
including entity's selection and application of
accounting policies;
c. Objectives and strategies
and the related business risks that may result in a
material misstatement of the financial statements;
d. Measurement and review
of the entity's performance; and
e. Internal Control