ISA 300 - Planning an Audit of Financial Statements

Question 1

ISA 300: Planning an Audit of Financial Statements:

Answer 1

This Standard talks about:
> Responsibility of Auditor to Plan, and Complete the Audit in effective and efficient manner.
> All the Key Engagement Team Members should be included in Planning the Audit, by the Auditor.

Question 2

ISA 300: Audit Planning: Preliminary Engagement Activities (3):

Answer 2

1) Procedure followed to decide Capability to continue Client relationship as per ISA 220.
2) Compliance with Ethical Requirements as specified in ISA220.
3) Proper understanding of Engagement Letter as per ISA 210.

Question 3

ISA 300: Audit Planning: Audit Strategy and Audit Plan

Answer 3

Audit Strategy:
> It is the Scope of the Audit.
> Outline of the Audit to be conducted.
> Entire Audit that we are going to do.
> Understand the overall business of the client:
- Nature of business,
- No. of branches,
Financial Reporting Framework applicable or in use.
- Presence of Internal Auditor,
- Risk areas, basically everything, resources needed, time required, etc

Audit Strategy (5 Characteristics):
1) Understanding the characteristics of the Engagement.
2) Reporting Objectives.
3) Identifying the significant factors and direct the Engagement team to focus on it.
4) Result of Preliminary Engagement Activities.
5) Nature, Time and extent of Resources required.

Audit Plan:
>Detailed plan of Nature, Time, and extent of Risk Assessment Procedure planned as per ISA 315.
> Respond to Risk as per ISA 330.
> Perform other Audit Procedures and supervise and review them.

> NB: Audit Strategy and Audit Plan are not interchangeable!
Instead, they are inter linked, ie first do the Audit Strategy, and then you do the Audit Plan based on the Strategy.

> Audit Plan to be open for modification as and when required.
If the Strategy changes, the Plan also changes.

Question 4

ISA 300: Documentation required (3):

Answer 4

1) Detailed Document of the Audit Strategy.
2) Audit Plan - Nature, Time, and Extent of Risk Assessment Procedure and further Audit Procedure.
3) Any significant changes done in Audit Strategy or Audit Plan along with the reason behind it.

Question 5

ISA 300: Additional consideration in case of initial Audits.

Answer 5

> Check the capability of accepting client as required by ISA 220.
Communicating with predecessor or out going Auditor - Code of Ethics.
Understanding the client work by enquiring and accessing documents of outgoing Auditor.
Discuss with TCWG/ Management about major issues and its implication.
Comply with the Procedure of ISA 510 - Initial Audit Engagement Opening Balances.
Quality Control confirmation by the Senior Authority of Audit Firm.

> Without Planning an Audit, you are destined to fail!