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Audit Planning

Audit planning is a vital phase in the audit process that involves developing a strategy to conduct effective audits by identifying risks and allocating resources. Key steps include understanding the entity, assessing risks, determining materiality, developing the audit strategy, and preparing the audit plan. It is a dynamic process that requires documentation and continuous updates throughout the audit.

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8 views3 pages

Audit Planning

Audit planning is a vital phase in the audit process that involves developing a strategy to conduct effective audits by identifying risks and allocating resources. Key steps include understanding the entity, assessing risks, determining materiality, developing the audit strategy, and preparing the audit plan. It is a dynamic process that requires documentation and continuous updates throughout the audit.

Uploaded by

vanessa claire abad
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Audit Planning: Overview and Key Steps

Audit planning is a crucial phase in the audit process where the auditor develops an overall
strategy and detailed approach to conduct an effective and efficient audit. Proper planning
ensures that significant risks are identified and addressed, and that audit resources are
appropriately allocated.

🔹 1. Objectives of Audit Planning


●​ Ensure the audit is performed in an effective and efficient manner.​

●​ Identify and assess risks of material misstatement.​

●​ Determine the nature, timing, and extent of audit procedures.​

●​ Assign appropriate team members based on competence and experience.​

●​ Coordinate audit activities (especially in group audits or with other auditors).​

🔹 2. Key Standards
●​ ISA 300: Planning an Audit of Financial Statements​

●​ AU-C 300 (US GAAS)​

●​ ISA 315: Identifying and Assessing the Risks of Material Misstatement​

🔹 3. Steps in Audit Planning


A. Understanding the Entity and Its Environment

●​ Industry, regulatory, and external factors​


●​ Nature of the entity (structure, operations, ownership)​

●​ Objectives and strategies​

●​ Internal control system​

●​ Financial performance and position​

B. Risk Assessment Procedures

●​ Perform preliminary analytical procedures​

●​ Inquire of management and others within the entity​

●​ Observe and inspect relevant processes​

●​ Identify risk of material misstatement (inherent + control risk)​

C. Materiality Determination

●​ Set overall materiality threshold for financial statements​

●​ Determine performance materiality (for individual account balances)​

●​ Consider clearly trivial amounts​

D. Develop the Audit Strategy

●​ High-level decisions about scope, timing, and direction of the audit​

●​ Plan use of internal audit, component auditors, or specialists​

●​ Determine audit team requirements​

E. Prepare the Audit Plan

●​ Details specific audit procedures for each area​

●​ Tests of controls and substantive procedures​


●​ Timing (interim vs year-end)​

●​ Nature and extent of documentation required​

F. Staffing and Supervision

●​ Assign team members based on skill level and audit complexity​

●​ Establish supervision and review protocols​

G. Consider Use of Experts or IT Auditors

●​ Evaluate need for actuarial, valuation, or legal experts​

●​ Plan for IT audit procedures if systems are complex​

🔹 4. Audit Documentation
Audit planning must be documented, including:

●​ The overall audit strategy and audit plan​

●​ Changes made to the plan (and reasons for those changes)​

●​ Risk assessments and planned responses​

●​ Significant discussions with management or those charged with governance​

🔹 5. Continuous and Dynamic Process


Audit planning is not a one-time activity. It should be updated and revised as the audit
progresses and new information arises.

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