AUDIT PLANNING

FACTORS OF AUDIT PLANNING

It depends upon number of external and internal factors.

1. Nature, complexity and size of enterprise.

2. Environment in which an enterprise operates.
3. Methods of processing transitions.
4. Reporting requirements
5. Previous experience with the client
6. Knowledge of clients business.
7. Industry in which the enterprise is involved.

PLANNING PROCEDURE

Planning is a continuous process and must be followed throughout the engagement. It can be classified
under the following stages.

1. Obtaining knowledge about clients business both existing and new in case of existing client the
information would relate to changes since the last audit in respect of operations, administrative
setup, accounting system etc.
2. Developing an overall audit plan paying specific emphasis on such activities like audit strategy,
timing, staffing and liaison with the client and clients executives’.
3. Implementing the audit plan thorough the process of audit programmes.
4. Updating the audit plan in the light of current circumstances incorporating significant changes and
also updating the planning memorandum in respect of regular visit clients.
Moderation

KNOWLEDGE ABOUT CLIENTS BUSINESS

The auditor should obtain knowledge about.

1. Annual accounts to share holders.

2. Minutes of shareholders, directors and committees.
3. Internal financial reports.
4. Previous years working papers.
5. Discussions with clients management and staff.
6. Clients policy, accounting and management manual.
7. Government policies and their impact on clients business.
8. Visits to clients premises and plant facilities.

OVERALL AUDIT STRATEGY

1. Terms of engagement and statutory responsibilities.
2. Nature and timing of reports required to be submitted under engagement.
3. Accounting policies adopted and changes therein.
4. Effect of new accounting and auditing standards.
5. Identification of significant audit areas.
6. Setting of materiality levels.
7. Circumstances requiring special attention.
8. Degree of reliance to be placed on accounting system and internal control.
9. Possible repeat action.
10. Nature and extent of evidence obtained.
11. Work of internal auditor and utilization and reliance thereon
12. Work of other auditors involved in branch audit subsidiaries audit.
13. Involvement of experts

DOCUMENTATION OF OVERALL PLAN

The auditor in the end of the first stage of planning should document his plan. The auditor should follow
time budget technique showing allocated hours for each audit procedures. The time budget would be
and effective tool for audit planning.

MINOR AUDIT OBJECTIVES

It is not advisable to consider minor audit objectives or test at this stage. Such objectives may be
considered while writing the audit programmes.

AUDIT TIMETABLE

For an efficient control of an audit is essential that.

1. The client should be persuaded to plan his work and
2. The auditor too should pay sufficient attention to the preparation of its own plan.

The auditor should document an overall audit timetable setting out the dates agreed with the client for
the commencement and the completion of audit. The spreading of the audit work over the year has the
advantage of having time pressure and an improvement over the audit progress. Such phasing may be
planned as.

1. Interim audit during the year at specified intervals.

2. Advance year end verification of certain debtors creditors balances, stock verification.
3. First audit.

ADJUSTMENT OF PLANNING
The auditor while considering the scope of adjustments to be made in the audit strategy should keep in
view the following points.

1. How far the high risk areas have been given consideration.
2. Low risk areas have not been given attention more than it was needed.
3. Whether insignificant areas were left out.
4. To what extent the possibilities of existence of errors and omission have been safeguarded by audit
planning.

SPECIFIC PLANNING AREAS

1. Time budgeting
2. Staff planning.
3. Clients work support
4. Extent of reliance over internal control.
5. Meeting with tax and finance department.
6. Joint auditor sectional audit.
7. Work performs by auditors distant offices.

DIRECTION AND SUPERVISION

The auditor has prepared the audit strategy for the completion of an audit he should spell out the
directions for his audit staff of various level of knowledge, ability and experiences and also provide for
supervision. This aspect of audit strategy is incorporated in a document which is commonly termed as
audit programme.

AUDIT PROGRAMME

Audit programme is the auditor plan of action indicating the work to be accomplished, the audit tests
and procedures to be followed, the persons responsible for the accomplishment of the work and the
time within which the work is to be accomplished. Thus an audit programme is written scheme designed
by the auditors.

PREPARATION OF THE AUDIT PROGRAMME

In order to draw up a well designed and satisfactory audit programme the auditor should include the
following in the audit program.

1. Name of the client.

2. Audit commencement date.
3. Duration of audit.
4. Accounting system of the client.
5. System of internal contro.
6. Previous auditors reports.
7. Examination of
 a. Cash book.
b. Sales and sales returns books.
c. Purchase and purchase returns books
d. Bills receivable and bills payables books.
e. Ledger accounts and other books.
f. Statutory books and registers being maintained by the company.

ADVANTAGES OF AUDIT PROGRAMME

1. It facilitates to monitor the progress of the assistants.

2. Uniformity in the audit work is maintained throughout as the same audit programme is to be
followed at subsequent audit.
3. Division of work amongst the juniors can be made easily.
4. Final review of work already done can easily be made before signing the audit report.
5. Planning fr future audit can be made easily.
6. It serves as a material evidenced in the court of law.

DIS-ADVANTAGES OF AUDIT PROGRAMME

1. Audit staff may lose their initiative and interest due to the repetitive nature of work which they
carry out as given in the audit programme.
2. It may result in rigidity of the audit work unless the programme is frequently reviewed and
modified.

PLANNING MEMORANDUM

A planning memorandum is generally prepared for each assignment. It contains all useful information of
the clients business. The aims of preparing such memorandum are to record all planning process of
audit and to keep all audit staff informed about the planning decisions.