Audit Planing and Documentation

The importance of audit planning
Meaning of planning
Nothing but a layout or a proper planning done by the auditor, that, how he will execute his
work.
Why audit is planed
 Help the auditor devote appropriate attention to important areas of the audit
• Help the auditor identify and resolve potential problems on a timely basis
• Help the auditor properly organise and manage the audit so it is performed in an effective
manner
• Assist in the selection of appropriate team members and assignment of work to them
• Facilitate the direction, supervision, and review of work
• Assist in co-ordination of work done by auditors of components and experts
Basis of planning
It is based on the knowledge that an auditor have about his clints business
Objectives or coverage
He wants to cover the entire internal controls system.
Accounting policies and principles that has been carried out
He wants to coordinate the work that has been performed by the accountants, internal
auditors, and he himself that he has performed .
Structured approach to planning
Step 1
Ensuring that ethical requirements are meet including independence.
Step 2
Ensuring the terms of the engagement are understood
Step3
Establishing the overall audit strategy that sets the scope, timing and direction of the audit
and guides the development of the audit plan
• Identify the characteristics of the engagement that define its scope.
• Ascertain the reporting objectives to plan the timing of the audit and nature of
communications required.
• Consider significant factors in directing the team's efforts.
• Consider results of preliminary engagement activities.
• Ascertain nature, timing, and extent of resources necessary to perform the engagement.
Step 4
Developing an audit plan that includes the nature, timing and extent of planned risk
assessment procedures and further audit procedures.
The audit strategy
The overall audit strategy sets the scope, timing, and direction of the audit, and guides the
development of the more detailed audit plan.
Characteristics of engagement
 Financial reporting framework

 Industry specific reporting requirements
 Expected audit coverage
 Nature of business segments
 Availability of internal audit work
 Use of service organizations
 Effect of information technology and audit procedure
 Availability of clients personal and data.
Reporting objectives, timing of the audit and nature of the communication
 Entity’s timetable of reporting

 Organization meeting with management and those charged with governance
 Discussion with management and those charged with governance
 Expected communication with third party
Significant factors , preliminary engagement activities and knowledge gained in other

activities
 Determination of materiality
 Areas identified with high level of risk of material misstatement
 Results of previous audit
 Need to maintain professional skepticism
 Volume of transitions
 Significant business developments
 Significant industry development
 Significant changes in financial reporting framework
 Other significant recent developments
Nature, timing, and extent of resources
 Selection of management team

 Assessment of work to team members
 Engagement budgeting
The audit plan
The audit plan converts the audit strategy into a more detailed plan and includes the nature,
timing, and extent of audit prgocedures to be performed by engagement team members in
order to obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low
level.
The audit plan must include the following
a description of the nature, timing and the extend of planed risk assessment procedure.
A description of the nature, timing, and extent of planned further audit procedures at the
assertion level
Other planned audit procedures
Interim and final audit

Interim audit visit is carried out during the period of review
Final audit visit will take place after the year end.
Interim audit procedures may include:
• Inherent risk assessment and gaining an understanding of the entity
• Recording the entity's system of internal control
• Evaluating the design of internal controls
• Carrying out tests of control on the company's internal controls to ensure they are operating
as expected
• Performing substantive testing of transactions/balances to gain evidence that the books and
records are a reliable basis for the preparation of financial statements
• Identification of issues that may have an impact on work to take place at the final audit
Final audit procedure may include
Substantive procedures involving verification of statement of financial position balances and

amounts in the statement of profit or loss
• Obtaining third-party confirmations
• Analytical procedures relating to figures in the financial statements
• Subsequent events review
• Agreeing the financial statements to the accounting records
• Examining adjustments made during the process of preparing the financial statements
• Consideration of the going concern status of the entity
• Performing tests to ensure that the conclusions formed at the interim audit are still valid
• Obtaining written representations
Impact of interim audit work on final audit
Performance materiality

Audit Planing and Documentation

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The importance of audit planning

Why audit is planed

• Facilitate the direction, supervision, and review of work

• Assist in co-ordination of work done by auditors of components and experts

He wants to cover the entire internal controls system.

Accounting policies and principles that has been carried out

Structured approach to planning

Ensuring that ethical requirements are meet including independence.

Ensuring the terms of the engagement are understood

• Identify the characteristics of the engagement that define its scope.

• Consider significant factors in directing the team's efforts.

• Consider results of preliminary engagement activities.

The audit strategy

 Financial reporting framework

Reporting objectives, timing of the audit and nature of the communication

 Entity’s timetable of reporting

Significant factors , preliminary engagement activities and knowledge gained in other

Nature, timing, and extent of resources

 Selection of management team

The audit plan

The audit plan must include the following

Other planned audit procedures

Interim and final audit

Interim audit procedures may include:

• Inherent risk assessment and gaining an understanding of the entity

• Recording the entity's system of internal control

• Evaluating the design of internal controls

Final audit procedure may include

Substantive procedures involving verification of statement of financial position balances and

• Obtaining third-party confirmations

• Analytical procedures relating to figures in the financial statements

• Subsequent events review

• Agreeing the financial statements to the accounting records

• Consideration of the going concern status of the entity

• Obtaining written representations

Impact of interim audit work on final audit

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