Chapter 2 - Audit Strategy, Planning and Programming

Audit Strategy Audit Planning Audit Programming

Meaning: Designing Audit Approaches to achieve necessary audit assurance  Developing an overall plan for the  Detailed plan of work

Meaning

Meaning
at the lowest cost. expected scope and conduct of the  comprises of techniques and
1. Obtaining knowledge of business: audit and procedures,
It provides a frame of reference within which the auditor exercises  Developing an audit programme
 may also contain objectives for
his professional judgement to assess risk, to plan audit, to evaluate showing NTE of Audit procedures
each audit step.
audit evidence and providing quality services.

a
 Acquiring knowledge of client  Nature of business.

Aspects to be covered
2. Performing Analytical Procedures at Initial Stages: To assess accounting system, policies and  Overall Plan

vi
Matters to be
the potential for material misstatement in the F.S. as a whole. internal control procedures.  System of internal control and

considered
3. Evaluating Inherent Risk:  Establishing the expected degree accounting procedures.

d
On the basis of prior audit experience, controls exercised by of reliance on internal control.  Size and structure of
management, significant changes since last assessment.

re
 Determining the NTE of audit organization.
Steps involved in Audit Strategy

Factors to be evaluated to assess inherent risk procedures.  Information regarding the

ha
At the level of F.S. At the level of A/c Balance  Coordinating the work to be organization.
 Integrity of Management.  Quality of Accounting System. performed.  Accounting policies followed.
 Management experience  Susceptibility to Misstatement

s
 To devote attention to important areas  Draw a broad outline
 Changes in management / Misappropriation of assets.  Identify & resolve potential

First Time Audit

 Filled up the details on a

Importance of

Development of Audit programme

as
 Pressures on Management  Complexity of transactions. problems. consideration of

planning
 Nature of entity business.  Degree of judgement involved.  Organized and managed audit. deficiencies in internal

w
 Factors affecting industry.  Unusual transactions  Selection of suitable ET. control.
4. Evaluating Internal Control System:  Coordination of work done  Determine the special
By documenting the extent of computerization, preparing/updating  Direction and supervision of procedures needs to be

m e
flowcharts to record the transactions. engagement team. applied.
5. Formulating Audit Strategy: Requires consideration of:
 Engagement objective
co rc 

Terms of engagement
Nature & timing of reports
Review earlier programme and
modified on account of:
o. ou
Factors to be
 Experience gained during the

Engagement
considered
 Legal or statutory requirements.

Subsequent
 Knowledge of clients business
 Accounting policies & changes therein. previous audit.
 Preliminary judgements as to materiality
 Important changes in internal
er res

 Effects of new accounting/auditing

 Identified inherent risks control system, accounting
pronouncements.
 Extent of compliance testing  Identification of significant audit areas. procedures etc.
 NTE of Substantive testing  Setting of materiality levels.  Evaluation of internal control
 Points relating to planning and controlling the audit.
eH y

 Degree of reliance on internal control. for current year.

1. Employment of Qualitative Resources. 1. Substantial increase in Volume of turnover.
rs ud

Relationship - Audit Strategy & Audit Planning

Circumstances
2. Significant changes in accounting procedures.
Benefits

2. Allocation of appropriate quantity of resources.

requiring
changes
 Inter-related to each other because change in one would 3. Observation w.r.t. ineffective internal control.
3. Determining the timing of deployment of resources. result change in other. 4. Substantial increase in book debts or
t

4. Better management of resources in terms of direction, supervision, timing  Audit strategy is prepared before the audit plan and provides inventory.
ss

of team meetings etc. the guidelines for developing the audit plan. 5. Suspicion as to misappropriation of assets.

Compiled by: Pankaj Garg Page 1

hi

https://www.coursehero.com/file/27267043/Chapter-2-Audit-Strategy-Planning-Programming-Filepdf/
Powered by TCPDF (www.tcpdf.org)