AUDIT PLANNING AND ANALYTICAL PROCEDURES

Group 2
SUMMARY of KEY POINTS

PSA 200(R&R) - OBJECTIVE AND GENERAL PRINCIPLES GOVERNING AN AUDIT OF FINANCIAL

STATEMENTS

 The auditor should plan and perform the audit with an attitude of professional skepticism
recognizing that circumstances may exist which cause the financial statements to be materially
misstated. (par. 15)

o Professional skepticism – an attitude that includes a questioning mind, being alert to

conditions which may indicate possible misstatement due to error or fraud, and a critical
assessment of audit evidence.

 Professional skepticism includes being alert to, for example:

(a) Audit evidence that contradicts other audit evidence obtained;

(b) Information that brings into question the reliability of documents and responses to inquiries
to be used as audit evidence;
(c) Conditions that may indicate possible fraud;
(d) Circumstances that suggest the need for audit procedures in addition to those required by
the PSAs (par. A18).

PSA 210(Red) - TERMS OF AUDIT ENGAGEMENT

 The auditor shall agree the terms of the audit engagement with management or those charged
with governance, as appropriate (par. 9).
 The agreed terms of the audit engagement shall be recorded in an audit engagement letter or
other suitable form of written agreement (par. 10).

PSA 220(Red) - QUALITY CONTROL FOR AN AUDIT OF FINANCIAL STATEMENTS

 The engagement partner shall be satisfied that the engagement team, and any auditor's experts
who are not part of the engagement team, collectively have the appropriate competence and
capabilities to:
(a) Perform the audit engagement in accordance with professional standards and
regulatory and legal requirements; and
(b) Enable an auditor's report that is appropriate in the circumstances to be issue (par.
14).
 PSA 230(Red)-AUDIT DOCUMENTATION

 The auditor shall prepare audit documentation that is sufficient to enable an experienced
auditor, having no previous connection with the audit, to understand:
(a) The nature, timing, and extent of the audit procedures performed to comply with the
PSAS and applicable legal and regulatory requirements;
(b) The results of the audit procedures performed, and the audit evidence obtained; and
(c) Significant matters arising during the audit, the conclusions reached thereon, and
significant professional judgments made in reaching those conclusions. (Par. 8).

PSA 240(Red) - THE AUDITOR'S RESPONSIBILITIES RELATING TO FRAUD IN AN AUDIT OF FINANCIAL

STATEMENTS

 An auditor conducting an audit in accordance with PSAS is responsible for obtaining reasonable
assurance that the financial statements taken as a whole are free from material misstatement,
whether caused by fraud or error.

PSA 250 - CONSIDERATION OF LAWS AND REGULATIONS IN AN AUDIT OF FINANCIAL STATEMENTS

 When planning and performing audit procedures and in evaluating and reporting the results
thereof, the auditor should recognize that noncompliance by the entity with laws and
regulations may materially affect the financial statements.

 In order to plan the audit, the auditor should obtain a general understanding of the legal and
regulatory framework applicable to the entity and the industry and how the entity is complying
with that framework.

PSA 300(Red) - PLANNING an AUDIT OF FINANCIAL STATEMENTS

 The auditor shall undertake the following activities prior to starting an initial audit:
(a) Performing procedures required by PSA 220 regarding the acceptance of the client
relationship and the specific audit engagement; and
(b) Communicating with the predecessor auditor, where there has been a change of
auditors, in compliance with relevant ethical requirements. (Par. 12).

 The auditor shall develop an audit plan that shall include a description of:
(a) The nature, timing and extent of planned risk assessment procedures;
(b) The nature, timing and extent of planned further audit procedures; and
(c) Other planned audit procedures that are required to be carried out so that the
engagement complies with PSAs. (par. 8).
PSA 315 UNDERSTANDING the ENTITY and its ENVIRONMENT and ASSESSING the RISKS of MATERIAL
MISSTATEMENT

 The auditor shall consider whether information obtained from the auditor's client acceptance or
continuance process is relevant to identifying risks of material misstatement (par. 7).

PSA 320(R&R) - MATERIALITY IN PLANNING AND PERFORMING AN AUDIT

 The auditor has the responsibility to apply the concept of materiality in planning and performing
an audit of financial statements (par.1)

 The concept of materiality is applied by the auditor both in planning and performing the audit,
and in evaluating the effect of identified misstatements on the audit and of uncorrected
misstatements, if any, on the financial statements and in forming the opinion in the auditor's
report. (par. 5)

PSA 402-AUDIT CONSIDERATIONS RELATING TO ENTITIES USING SERVICE ORGANIZATIONS

 The auditor should consider how a service organization affects the client's accounting and
internal control systems so as to plan the audit and develop an effective audit approach.

PSA 550 (R&R)-RELATED PARTIES

 The auditor should perform audit procedures designed to obtain sufficient appropriate audit
evidence regarding the identification and disclosure by management of related parties and the
effect of related party transactions that are material to the financial statements.

 The auditor shall identify and assess the risks of material misstatement associated with related
party relationships and transactions and determine whether any of those risks are significant
risks. In making this determination, the auditor shall treat identified significant related party
transactions outside the entity's normal course of business as giving rise to significant risks (par.
18).

PSA 570(Red)-GOING CONCERN

 When performing risk assessment procedures as required by PSA 315Red, the auditor shall
consider whether there are events or conditions that may cast significant doubt on the entity's
ability to continue as a going concern. In so doing, the auditor shall determine whether
 management has already performed a preliminary assessment of the entity's ability to continue
as a going concern (par. 10).

PSA 600 USING THE WORK OF ANOTHER AUDITOR

 When the principal auditor uses the work of another auditor, the principal auditor should
determine how the work of the other auditor would affect the audit.

 When planning to use the work of another auditor, the principal auditor should consider the
professional competence of the other auditor in the context of the specific assignment. (600)

PSA 610 (Red) - CONSIDERING THE WORK OF INTERNAL AUDITING

 In determining whether the work of the internal auditors is likely to be adequate for purposes of
the audit, the external auditor shall evaluate:
(a) The objectivity of the internal audit function;
(b) The technical competence of the internal auditors;
(c) Whether the work of the internal auditors is likely to be carried out with due
professional care; and
(d) Whether there is likely to be effective communication between the internal auditors
and the external auditor.

PSA 620(R&R) - USING THE WORK OF AN AUDITOR'S EXPERT

 An Auditor's expert - refers to an individual or organization possessing expertise in a field other

than accounting or auditing, whose work in that field is used by the auditor to assist the auditor
in obtaining sufficient appropriate audit evidence.

 When planning to use the work of an expert, the auditor should assess the expert's competence,
capabilities and objectivity for the auditor's purposes.