Audit Planning

- Introduction
- Aims of planning
- Audit team and using the work of others

PRESENTATION BY TSHEPO MOEJANE JR

Learning Objectives
• Audit Strategy
• Audit Plan
• Audit programs
• Audit teams
• Dealing with client staff
Responding to Assessed Risk
Audit Planning is basically about the response of the auditor form it’s
risk assessment process.
The response will be documented in the audit strategy which will also
consider the key findings of the risk assessment process and important
areas to focus on in the audit engagement process.
The audit strategy will also include factors such as using the work of
others and audit staffing.
Audit Strategy
Audit Strategy >>> Audit Plan >>> Audit staff
ISA 300.4- The auditor should plan it’s engagement so that it’s
performed in an efficient manner.

Audit strategy- sets the scope, timing and direction of an audit, and
guides the development of more detailed audit plan.
This is a key planning document, it is generic in terms of audit planning
references.
The audit planning includes some general areas of audit planning such as;
- The timetable for reporting, key dates and statutory obligation.
- Reporting framework and scope of the audit
- Audit team members and skills required
- Consideration of experts
- Arrangement for directing, supervising and reviewing the work of audit
team members

Audit plan- is a more detailed audit strategy which includes the nature,
timing and extend of audit procedures to be performed by engagement
team members so as to obtain sufficient and appropriate audit evidence in
order to reduce audit risk to an acceptably low level.
Reasons for planning an audit
• Appropriate attention is devoted to important areas of the audit
• Allocation of audit staff (task allocation)
• Potential problems are identified and attended to on a timely basis.
• An efficient and effective audit engagement.
Approach to planning an audit
Updating knowledge of the client and assessing risk

Ensuring ethical requirements are met, including independence

Establishing the overall strategy in terms of scope, timing and direction

Preparing a detailed audit approach

Making administrative decisions

Audit strategy
The development of the audit strategy includes;
i) Identify characteristics of the
engagement which defines the scope
ii) Ascertaining the reporting objectives
of the engagement to plan the timing
of the audit and the nature of the
communication required
iii) Considering the important factors
that will determine the focus of the
engagement team's efforts
- Financial reporting framework
- Industry specific reporting requirements
- Deadlines for the interim audit
- Key dates for communication with
management and those charged with
governance
- Materiality levels
- High risk areas
- Results of previous audits
Continuation…
iv) Considering the results of preliminary
engagement activities and, where
applicable, whether knowledge
gained on other engagements
performed by the engagement partner
for the entity is relevant
v) Ascertaining the nature, timing and
extent of resources necessary to
perform the engagement
- Ensuring the auditor is maintaining i=necessary
independence and is fit and proper to conduct an audit
- Management integrity issues that may affect the
auditor’s willingness to continue in conduct of the
audit.
- Resources required
- When the resources will be deployed
- How the resources will be used
- Clash of the client’s reporting time table to that of the
auditor.
Audit Plan
• A description of the nature, timing and extent of planned risk assessment
procedures sufficient to assess the risks of material misstatement.
• A description of the nature, timing and extent of planned further audit procedures
at the assertion level for each material class of transactions, account balance and
disclosure. This will include tests of controls and substantive procedures.

Examples of items included in the audit plan could be;

- Time table of the planned audit work
- Allocation of work to audit team members
- Audit procedures for each major account area
- Materiality for the financial statements as a whole.
Molantoa Rites Co sells baked goods in 10 shops across the country.
50% of the company’s revenue comes from 2 of these shops.
The audit strategy will set out the location of the shops and their relative
contribution to Molantoa Rites Co’s revenue, highlighting the fact that
the majority of the revenue is linked to two of these shops.
The audit strategy will then identify what this would mean for the
conduct of the audit, for example:
 The focus of audit procedures will be on the two major shops and
appropriate audit resources will be allocated to this purpose.
 Internal controls will be tested at the two shops, followed by
substantive procedures
 The level of audit testing at the other locations will be representative of the
level of activity at each shop. Audit team members will visit shops which have
not been visited over the past three years and carry out limited audit
procedures, to ensure that each location has been appropriately tested on a
rotational basis over a period of three years.
The audit plan will expand on the approach set out in the audit strategy and
identify:
 The audit team members who will carry out the audit procedures at each of
the shops
 The dates at which each of the shops within this year’s scope will be visited
 The specific tests of controls and substantive procedures to be carried out at
each of the shops
 If sampling techniques are to be used, how samples are to be selected for
each audit procedure
Changes to the audit strategy and plan & audit program

If there is any reason for a change in the strategy, which will also affect
the plan, or the plan distinctively, that should be documented.

Audit programs may be designed with reference to specific audit

objectives; this ensures that audit work is focused and that sufficient
appropriate audit evidence is gathered and documented.
Audit team and using the work of others
An audit should be engaged by staff experienced and with appropriate
skills.

The reporting partner should take responsibility of the audit engagement

and is responsible for assigning staff with necessary competencies to the
audit team.

The engagement partner is also the one who signs the audit report.
 Reporting
partner

Audit manager

Audit seniors (Supervisors)

Audit assistanats
When planning the audit, the reporting partner or manager;

• How many staff are needed for the engagement

• How experienced(grade)
• Any special skill or experience
• Will review the level of staffing the previous year and consider
whether that level of staffing was acceptable, he/she will also consider
the results of the risk assessment in the current year
The engagement team should include staff with the appropriate
capabilities and competence to respond to anticipated risks and work
should be assigned to them in accordance with their skills.
Continuation…
• An appropriate level of professional scepticism is applied by audit staff in
the conduct of the audit
• There is proper communication both within the audit team and with the
audited entity
• Keep regular contact with both audit and client staff during the audit to
assess the level of communication between them
• Attend the site during the audit to facilitate better communication if he feels
that it is necessary
• Foster lines of communication between client staff and audit staff during the
period between audits, to ensure a good working relationship is built up
between them
Sharpo hee, enjoy the following
presentations!