AUDIT PLANNING

Ø  AUDIT PLANNING
AUDITING

AUDITING

Ø  MEANING OF AUDIT PLANNING

1. AUDIT PLANNING IS A VITAL AREA OF THE AUDIT PRIMARILY CONDUCTED AT THE BEGINNING OF THE AUDIT PROCESS TO ENSURE THAT APPROPRIATE ATTENTION IS DEVOTED TO IMPORTANT AREA,POTENTIAL PROBLEMS AND COORDINATION OF AUDIT WORK.
2. AN AUDIT PLAN IS THE SPECIFIC GUIDELINES TO BE FOLLOWED WHEN CONDUCTING AN AUDIT.IT HELPS THE AUDITOR TO OBTAIN SUFFICIENT APPROPRIATE EVIDENCE FOR THE CIRCUMSTANCES,HELPS KEEP AUDIT COSTS AT REASONABLE LEVEL AND HELPS AVOID MISUNDERSTANDING WITH THE CLIENT.
3. AUDIT PLANNING REFERS TO PLANNING BY THE AUDITOR TO ENABLE HIM TO CONDUCT AN EFFECTIVE AUDIT IN AN EFFICIENT AND TIMELY MANNER.IT IS ONE OF THE BASIC PRINCIPLES GOVERNING AN AUDIT. IT SHOULD BE BASED ON THE KNOWLEDGE OF THE CLIENT’S BUSINESS

Ø  AUDIT PLANNING

• DEALS WITH:-

1. WHAT ARE THE OBJECTIVE OF AUDIT?
2. WHERE WILL THE AUDIT BE DONE(SCOPE)
3. WHEN WILL THE AUDIT OCCUR? HOW LONG
4. WHO ARE THE AUDITORS?
5. HOW WILL THE AUDIT BE DONE?

Ø  FACTORS

1. IN PLANNING THE AUDIT THE FOLLOWING FACTORS WILL BE TAKEN INTO ACCOUNT:-
2. COMPLEXITY OF THE AUDIT
3. ENVIRONMENT IN WHICH THE INDUSTRY OPERATES
4. PREVIOUS EXPERIENCE WITH THE CLIENT IF ANY

Ø  NEED

1. APPROPRIATE ATTENTION TO IMPORTANT AREA OF AUDIT
2. PROMPT IDENTIFICATION OF POTENTIAL PROBLEMS
3. TIMELY COMPETITION OF WORK
4. COORDINATION OF WORK

• SCOPE

1. PLANNING SHOULD BE CONTINUOUS THROUGHOUT THE ORGANIZATION:-
2. OBTAINING THE KNOWLEDGE OF THE CLIENT ACCOUNTING SYSTEM,POLICIES,PROCEDURES AND INTERNAL CONTROLS
3. DEVELOPING THE OVERALL PLAN
4. DEVELOPING THE AUDIT PROGRAMME

5. KNOWLEDGE OF THE CLIENT BUSINESS

• SOURCES:-

1. ANNUAL REPORTS TO SHAREHOLDERS
2. VISIT TO THE CLIENT’S PREMISES
3. DISCUSSION WITH THE CLIENT
4. ACCOUNTING ANNUAL AND PROCEDURE MANUAL
5. PREVIOUS YEAR’S AUDIT WORKING PAPERS AND FILES
6. RELEVANT PUBLICATION OF ICAI

Ø  DEVELOPMENT OF OVER ALL PLAN

• DOCUMENT HIS OVERALL PLAN
• FOLLOWING FACTORS:-

1. THE TERMS OF THE ENGAGEMENT
2. STATUTORY LIABILITIES AND RESPONSIBILITY AS REGARD AUDIT
3. NATURE AND TIMING OF REPORT
4. ACCOUNTING POLICIES ADOPTED BY THE CLIENT AND APPLICABILITY OF THE LEGAL RULES
5. THE SIGNIFICANCE AUDIT AREA
6. DEGREE OF RELIANCE TO BE PLACED ON ACCOUNTING SYSTEM AND INTERNAL CONTROL
7. INVOLVEMENT OF OTHER AUDITORS,EXPERTS
8. SCOPE AND WORK OF INTERNAL AUDITORS
9. ALLOCATION OF WORK BETWEEN JOINT AUDITORS
10. ESTABLISHING AND COORDINATING STAFF REQUIREMENTS

Ø  MERITS OF AUDIT PLAN

1. HELPS IN DEVOTING TO IMPORTANT AREA OF AUDIT
2. IDENTIFICATION OF POTENTIAL PROBLEMS
3. QUICK COMPLETITION
4. UTILIZATION OF THE WORK OF ASSISTANTS
5. CORDINATE THE WORK DONE BY OTHER AUDITORS AND EXPERT

Ø  SA 300 PLANNING AN AUDIT OF FINANCIAL STATEMENTS

• SCOPE:-DEALS WITH AUDITOR’S RESPONSIBILITY TO PLAN AUDIT OF FINANCIAL STATEMENTS.ALL THE MEMBERS OF THE TEAM SHALL BE INVOLVED IN THE PLANNING OF AUDIT.

1. PRELIMINARY OF ENGAGEMENT OF ACTIVITIES:-
2. AT THE BEGINNING OF THE CURRENT AUDIT,THE AUDITOR UNDERTAKE PERFORMING PROCEDURE AS PER SA 220
3. EVALUATING COMPLIANCE OF ETHICAL REQUIREMENTS SA 220
4. ESTABLISHING TERMS OF ENGAGEMENT AS PER SA 210
5. PLANNING ACTIVITIES
6. IDENTIFY THE CHARACTERISTICS OF ENGAGEMENT THAT DEFINES ITS SCOPE
7. OBJECTIVE OF ENGAGEMENT AND TIMING OF AUDIT
8. CONSIDERATION OF THE FACTORS THAT ARE SIGNIFICANT IN DIRECTING THE ENGAGEMENT TEAM’S EFFORTS
9. CONSIDERATION OF THE RESULT OF PRELIMINARY ENGAGEMENT
10. ASCERTAIN THE NATURE,TIMING AND EXTENT OF RESOURCES NECESSARY TO PERFORM ENGAGEMENT

11. DEVELOPMENT OF THE AUDIT PLAN
1. THE NATURE,TIMING AND EXTENT OF PLANNED RISK ASSESSMENT PROCEDURE AND FURTHER AUDIT PROCEDURE AT ASSERTION LEVEL
2. OTHER PLANNED AUDIT PROCEDURE THAT ARE REQUIRED TO BE CARRIED OUT
12. THE AUDITOR SHALL DOCUMENT :-
1. OVER ALL AUDIT STRATEGY
2. THE AUDIT PLAN
3. ANY SIGNIFICANT CHANGES MADE  IN AUDIT PLANNING AND REASONS FOR THE CHANGE