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    Audit Planning

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    mohammad faraz ali
    Audit planning involves considering various factors such as the nature, size and complexity of the client's business, their industry, methods of processing transactions, and prior experience with the client. The auditor obtains knowledge about the client's business and develops an overall audit strategy that identifies significant audit areas and materiality levels. Key steps in planning include documenting the overall audit plan, preparing a time budget and audit timetable, and developing an audit program to provide directions for staff and ensure uniformity and supervision of the audit work.

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    Audit Planning

    Uploaded by

    mohammad faraz ali
    40 views4 pages
    Audit planning involves considering various factors such as the nature, size and complexity of the client's business, their industry, methods of processing transactions, and prior experience with the client. The auditor obtains knowledge about the client's business and develops an overall audit strategy that identifies significant audit areas and materiality levels. Key steps in planning include documenting the overall audit plan, preparing a time budget and audit timetable, and developing an audit program to provide directions for staff and ensure uniformity and supervision of the audit work.

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    4. Audit Planning

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    Audit planning involves considering various factors such as the nature, size and complexity of the client's business, their industry, methods of processing transactions, and prior experience with the client. The auditor obtains knowledge about the client's business and develops an overall audit strategy that identifies significant audit areas and materiality levels. Key steps in planning include documenting the overall audit plan, preparing a time budget and audit timetable, and developing an audit program to provide directions for staff and ensure uniformity and supervision of the audit work.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    40 views4 pages

    Audit Planning

    Uploaded by

    mohammad faraz ali
    Audit planning involves considering various factors such as the nature, size and complexity of the client's business, their industry, methods of processing transactions, and prior experience with the client. The auditor obtains knowledge about the client's business and develops an overall audit strategy that identifies significant audit areas and materiality levels. Key steps in planning include documenting the overall audit plan, preparing a time budget and audit timetable, and developing an audit program to provide directions for staff and ensure uniformity and supervision of the audit work.

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    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.

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