Audit Planning: Meaning and Objectives
Chapter Seventeen
Syllabus topic 1, "Audit Planning – Meaning, Objectives, Factors to be considered, Sources of obtaining information, Discussion with Client, Overall Audit Approach"
Pages 46 to 47 of 98
In one line
Audit planning is developing an overall strategy for the expected conduct and scope of the audit, before the detailed work begins.
The meaning
Planning is deciding, before the work starts, what work will be done, by whom, when, and how much of it. It produces two documents:
| Document | What it holds |
|---|---|
| The overall audit plan | The strategy: scope, timing, direction, materiality, risk, resources |
| The audit programme | The detailed list of procedures, chapter 1060 |
Planning is continuous, not a single act at the beginning. The plan is developed before the work, and revised whenever the work reveals something the plan did not anticipate: a control that does not operate, a balance far larger than expected, a suspicion of fraud.
The five objectives
| Objective | What it prevents | |
|---|---|---|
| 1 | Appropriate attention is devoted to important areas | Effort spent evenly over areas of unequal risk |
| 2 | Potential problems are identified and resolved promptly | A problem found in the last week, with no time to deal with it |
| 3 | The work is completed expeditiously | Missing the date on which the accounts must be laid |
| 4 | Work is properly assigned to assistants | A junior sent to audit the most judgmental area |
| 5 | Coordination of the work of other auditors and experts | A branch auditor's report arriving after the main report is signed |
Objective one is the most important and is the reason risk assessment comes first. An audit that spends the same effort on petty cash as on revenue has planned nothing.
Why planning is required, not merely useful
| It is a principle of audit | Documented and planned work is one of the nine principles |
| It affects the report's timing | Section 137 requires the statements to be filed within thirty days of the annual general meeting, and section 136 requires them to reach the members twenty-one days before it, so the audit has a fixed deadline |
| It affects the cost | An unplanned audit costs more and is worth less |
| It is evidence | The plan in the working papers shows that the audit was carried out with due care |
The last row matters if the auditor's work is ever questioned. A documented plan is the first thing produced, and its absence is itself a finding.
What a plan contains
| Head | What is settled |
|---|---|
| Knowledge of the business | The industry, the entity, its ownership and management |
| Understanding the accounting system | How transactions become entries |
| Risk and materiality | The assessed risk, the materiality threshold, the areas needing special attention |
| Nature, timing and extent of procedures | What will be done, when, and how much |
| Coordination and direction | Staff, timetable, other auditors, experts, internal audit, the client's own staff |
| Other matters | Going concern, related parties, statutory requirements, the terms of the engagement |
The rest of this chapter
Module one is free. The rest of this chapter comes with the B.Com. (Accountancy) Semester 3 notes.
You are reading a chapter from a later module. Everything in module one of every subject stays free, and so does the syllabus.
Notes: ₹499 Already bought it? Sign in
Free either way: the syllabus, and module one of every subject.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.