An audit strategy sets the scope, timing, and direction of an audit.

The strategy is then used as a

guideline when developing an audit plan. By developing an audit strategy, it is easier to create a
more targeted audit plan, thereby wasting less time in total during the planning phase of an audit.
The following are the main section of an Audit strategy together with their purpose;

Scope of an audit Engagement, means the size of area to be covered in audit assignment. The
following are the purpose of scope of an audit engagement;

To identify which financial reporting framework adopted by client. An auditor should consider
financial reporting framework used by the client in preparation and presentation of the financial
statement in order to identify any material misstatement for compliance. For example, to identify
which financial reporting framework adopted by B-star in treatment of different transactions
such as cash sales and credit card sales. The treatment of cash sales is different from that of
credit card sales. B-star own a themed park which comprises with many non-current assets, one
of them is PPE (Property, Plant and Equipment), an auditor should identify which financial
standards used to treat PPE whether is IAS (International Accounting Standards) 16 or other
financial standards.

Clear knowledge of the size of client business, the scope of audit engagement discloses the size
of the client business include things like number of branches or components and location of
components. For example, B-star is a centralized theme park based which is located in a country
side which has very little rainfall. Definitely, B-star is located in one place but the business has
increasing number of customers at approximately 15% each year. B-star business is a growing
business. The size of the business shows the expected audit coverage.

Clear knowledge of the nature of internal control systems. The scope of audit engagement
discloses the nature of internal control systems that is adequacy of internal control system. Intern
a control refers to the processes designed and affected by the management and those charged
with governance to provide reasonable assurance about achievement of the entity’s objectives.
For example, an auditor should have clear knowledge of B-star processes include procedures,
policies, practices regulation which are issued and used by management. B-star internal control
helps an auditor should have a clear knowledge of the means of payment that is how cash sales is
done and how credit card sales is done in the company.
The need for the involvement of experts in issue or areas beyond auditor capacity. The scope of
audit engagement discloses the type of the business which allow an audit to identify the need to
use the work of experts on area that are beyond auditor knowledge. For example, B-star is a
theme park based on popular series of children’s books, an auditor may require a service of
experts on those machines in order to conduct valuation.

Timing of the audit assignment, this is the second sections of audit strategy document which
show the time to which certain activity is done. The purpose of timing of the audit assignment is
to disclose the entity’s timetable for reporting, such as at interim and final stages. For example,
the timing of the audit assignment for B-star commencing date is 3 rd June 2013 and B-star’s year
end is 30th June 2013.

The purpose of the timing of the audit assignment is to disclose the organization of meetings
with management and those charged with governance of B-star to discuss the nature, timing and
extent of the audit work and also disclose the time for the discussion with management and those
charged with governance of B-star regarding the expected type and timing of reports to be issued
and other communications, both written and oral, including the auditor’s report, management
letters and communications to those charged with governance.

The purpose of the timing of the audit assignment is disclose expected communications with
third parties, including any statutory or contractual reporting responsibilities arising from the
audit. For example, an auditor needs to schedule the time to make external confirmation of B-star
such as credit card companies about the total amount received in case of credit card sales and
also the commission payable to credit card companies.

Direction of the Audit, the purpose of this section is to disclose the amount of resources to
deploy for specific audit areas, such as the use of appropriately experienced team members for
high risk areas or the involvement of experts on complex matters. For example, the risk area of
the B-star is the machine used for playing on slides which require the work of expert on that field
in order to revaluate the value of that machine.

Direction of the audit disclose the volume of transaction to be undertaken in B-star in order to
determine reliability of internal control. For example, B-star have two major transaction that is
cash sales or credit card sales, to check the efficient of internal control in case of maintaining the
transactions and its records.
REFERENCES

International Standard On Auditing(ISA) 300, Planning An Audit Of Financial Statements

https://www.ifac.org/system/files/downloads/a016-2010-iaasb-handbook-isa-300.pdf