ICPAK AUDIT MANUAL 6. PLANNING (INCORPORATING ISA 300) 6.1. Planning 6.1.1. Why Plan? ISA 300 requires the auditor to plan the audit so that the engagement is performed in an effective manner. Planning also helps the firm perform the engagement efficiently. Planning involves establishing and documenting the overall audit strategy for the engagement and developing and documenting an audit plan, in order to reduce audit risk to an acceptably low level. Effective audit planning ensures: > That appropriate attention is devoted to key audit areas and significant risks. > That potential problems are identified and resolved on a timely basis. > That the engagement is properly organised and managed in order to be performed in an effective and efficient manner. > Proper assignment of work to the engagement team and also makes the engagement team aware of their responsibilities. > Proper direction and supervision of the engagement team and review of their work, and assists, where applicable, in the coordination of work done by the auditors of components and experts. Planning is not a discrete phase of an audit, but a continual process that often begins shortly after the completion of the previous audit and continues until the completion of the current audit engagement. Planning should in any case start before the accounting year-end to take into account year end procedures which need to be carried out e.g. attendance at the annual inventory count or circularisation of receivables. The nature and extent of planning will vary according to the size and complexity of the entity, previous experience with the entity and changes in circumstances that occur during the engagement. 6.1.2. Planning Activities The table below summarises the key planning activities and gives reference to the section in the manual where these stages are covered in detail. Planning Activity Preliminary Engagement Activities Independence ISA ISA 220 and COE ISA 220 Client acceptance (initial engagement) and continuation Terms of audit engagement Planning - Overall Audit Strategy Materiality Assessing the reporting requirements ISA 210 ISA 320 ISA 250 and IAPS 1014 Communicating audit matters to those charged with ISA 260 6. Planning Version 1 - 9th October 2006 Audit Reference Manual Section 4.1 Section 5.1 and 5.3 Section 5.2 Section 11.3 and 11.4 Sections 9.2 and 10.2 Section 27.3 1 of 11
ICPAK AUDIT MANUAL Planning Activity governance Preliminary assessment of the accounting system and internal controls 402 ISA 315 and ISA Setting out responsibilities for the engagement team ISA 200 Section 2.5 Development of the audit strategy ISA 300 Opening balances and comparatives 710 Planning - Audit Plan Preliminary analytical review ISA 520 Section 14.3 Preliminary review of risk ISA 315 Considering the work of internal audit and other sources of reliance Setting materiality levels ISA 320 Response to assessed risk ISA 330 Consideration of fraud ISA 240 Compliance / Substantive testing ISA 315 Sampling ISA 530 Administration including audit timetable, audit requirements, time and staff budgets and allocation of work. ISA ISA 510 / ISA ISA 505, ISA 580, ISA 600,