ISA 300 - Audit Planning Flashcards
ISA 300
Why plan ( Benefits of / the importance of / purpose of planning )
ATTENTION It helps the auditor to devote appropriate attention to important areas of the audit.
(Areas of high audit risk, areas of significant risk). This is to make sure audit risk is kept low
PROBLEMS It helps the auditor to identify & resolve potential problems on a timely basis.
This is to make sure deadlines are met.
MANAGE It helps the auditor to properly organize & manage the audit engagement.
This is to make sure the audit is performed in an effective and efficient manner.
TEAM It assists in the selection of engagement team members with appropriate levels of
capabilities & competence to respond to anticipated risks,
& the proper assignment of work to them.
SUPERVISION It facilitates the direction & supervision of engagement team members &
the review of their work.
EXPERT It assists, where applicable, in coordination of work done by experts.
ISA 300
OVERALL AUDIT STRATEGY (Strategy must be documented & approved by Engagement Partner)
Consider SCOPE of audit work
The financial reporting framework of the client & whether FS have been prepared based on it.
The number of branches the company has.
To decide which branches will be visited to TEST their accounting systems.
There is no need for all the branches to be visited in the same year. High risk branches must be visited annually. Lower risk branches can be visited at LEAST once every 3 years.
− The location of inventory counts & whether auditor will be attending all locations. External auditor will be present at all material locations.
External auditor can REQUEST internal auditors to be present at the remaining locations.
Thus, with the assistance of the internal auditors, the year- end inventory can be checked at more locations than if this work was carried out entirely by the external auditor
The effect of IT on the audit procedures (whether CAATs be appropriate, use of DATA ANALYTICS)
Whether HELP needed from Internal Auditors, Client or Expert (ISA 610 , ISA 620)
Whether any of client functions (relevant to audit) have been outsourced. (ISA 402)
To what extent audit evidence obtained in previous audits will be utilised (Results of tests of control on automated controls on previous audits) (ISA 330)
Consider TIMING of audit work (Including deadlines & the nature of communications required)
− The audit timetable for reporting and whether there will be an interim as well as final audit.
− The timings of the audit team meetings and review of work performed.
− Organisation of meetings with client’s management to discuss any Matters Arising (audit issues).
− Timing of inventory counts.
Consider DIRECTION of focus of the audit team’s efforts
− The determination of Overall materiality & Performance Materiality
− To note the CLASS OF SIGNIFICANT Transactions, Account balances Disclosures (ISA 315 Revised 2019)
− To note the FS items that are of SIGNIFICANT RISK. (ISA 315 Revised 2019)
− Significant business developments including changes in accounting systems
− To decide the AUDIT APPROACH & whether reliance will be placed on internal controls.
Consider AUDIT RESOURCES
− The selection of the audit team with experience of this type of industry.
− Assignment of audit work to the team members
ISA 300
AUDIT PLAN (Plan must be documented & approved by Engagement Partner)
Audit plans contain the Nature, Extent & Timing of audit procedures to be performed by audit staff.
STANDARD AUDIT PLANS
These contain standard audit procedures that cover AREAS COMMON to every audit engagement.
They are Pre-designed & Pre-approved … by the audit firm. Examples:
- Internal Control Questionnaire (ICQ)
- Internal Control Evaluation Questionnaire (ICEQ)
- Inventory count checklist
- Subsequent events checklist
- Going concern checklist
- Disclosure checklist
- Audit completion checklist
NON STANDARD AUDIT PLANS
These contain “Further Audit Procedures”.
Non-standard audit plans are updated annually.
Procedures are TAILOR – MADE
to fit client circumstances
in response to assessment of risk.
These audit procedures reduce detection risk to an acceptably low level.
ISA 300
Audit Planning Meeting (Audit Briefing Meetings) – MANDATORY (Required by ISA 300)
The audit planning meeting is ALWAYS held at the start of the audit.
A meeting is important as this is where key matters pertaining to the audit are discussed with members of the audit team BEFORE performing the planned audit procedures.
Key matters pertaining to the audit that may be discussed:
BACKGROUND − Background information about the client, its industry, including applicable laws & regulations
RISK − Areas of key audit risk, including any susceptibility to misstatement due to fraud and how fraud might occur (including areas of SIGNIFICANT RISK & FRAUD RISK INDICATORS)
− Business risks and how they impact on the financial statements
ETHICAL − Relevant ethical requirements for this audit
MATTERS including the importance of independence and objectivity
WORK − Materiality / performance materiality thresholds
− Audit strategy (i.e. the audit approach to be adopted) and how the audit plan addresses the risks identified
− Locations that will be visited
− Allocation of work to members of the audit team and how to raise issues arising
− The importance of professional skepticism
− Requirements for documenting audit work and who will review junior team members’ work
− Timetable for completion of audit work including deadline for signing the auditor’s report
