Audit Planning

Audit Planning

1. Planning

   • Developing a general strategy and detailed approach for the expected nature, timing, and extent of the audit.

2. Obtain Knowledge of the company.

   • In this section we will discuss:
     • Obtaining industry information
     • Obtaining general background of the client company
     • The investigation of the company's legal position
     • Industry knowledge: Many industries have unique accounting requirements that the auditor must understand to evaluate the client's financial statements.
       • Company Knowledge: Obtaining the required knowledge of the business is a continuous and cumulative process of gathering and assessing the information at all stages of the audit.
         • Source of information:
           • Management
             • Audit committee
               • Site visits
         • Investigate the company's legal position: Certain legal documents and records should be collected and examined early in the engagement.

3. Obtain and Understanding of accounting and internal control systeams

   • The auditor should obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach
     • The control environment
       • Include:
         • The functions of the board of directors and its committees
           • Management's philosophy and operating style.
             • The entity's organizational structure and methods of assigning authority and responsability.
               • Management's control system including the internal audit function, personnel policies and procedures and segregation of duties.
     • The control procedures
       • Include:
         • Reporting, reviewing and approving reconciliations.
           • Checking the arithmetical accuracy of the records.
             • Controlling applications and environment of computer information systems
   • Procedures to obtain an understanding of accounting and control system
     • The auditor understands and documents both the accounting system and the internal control system.
       • The size and complexity of the entity and its computer system
         • Materiality considerations
           • The type of internal controls involved.
             • The nature of the entity's documentation of specific internal controls
               • The auditors assessment of inherent risk

4. Preliminary analytical procedures

   • In the planning stages of an audit, analytical procedures typically involved the current period interim data