Adequate planning benefits the audit of financial statements in several ways, including
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The audit plan determines the audit’s scope, how the auditor checks the client’s accounting system and internal control system, determines the program or type of audit, and sets the audit procedures to carry out the entire audit. What is Audit Planning?An audit plan is a detailed strategy that sets the nature, timing, scope, and boundaries for the auditor to carry out the entire audit procedure. An audit plan contains the nature, timing, and extent of audit procedures (including risk assessment procedures) to be performed by engagement team members to obtain sufficient appropriate audit evidence. Meaning of Audit PlanningPlanning the audit includes establishing the overall audit strategy for the engagement and developing an audit plan, which includes, in particular, planned risk assessment procedures and responses to material misstatement risks. Planning is not a discrete phase of an audit but a continual and iterative process that might begin shortly after (or in connection with) the completion of the previous audit. It continues until the completion of the current audit. A good plan and actual control of the work as per the plan will prove to be valuable evidence that the audit has been carried out according to generally accepted auditing practices if the plan and controls exercised are adequately documented. Audit control seeks to ensure that the work is carried out as intended. The auditor exercises control over the quality of the audit by effectively supervising the work of his assistants, coordinating work performed by others, and adequately documenting the audit matters. The auditor should develop and document an audit plan that includes a description of:
Role and Timing of PlanningAdequate planning benefits the audit of financial statements in several ways, including the following:
Audit procedures should be discussed with the client’s management, staff, and audit committee to coordinate audit work, including internal audits. However, all audit procedures remain the responsibility of the external auditors. Planning the AuditAudit planning involves the development of an overall strategy or game plan for the expected conduct and scope of the audit—matters such as the integrity of management, errors and irregularities, and illegal acts. The auditor should plan the audit with professional skepticism about such. The amount of planning required in engagement will vary with the size and complexity of the client and the auditor’s knowledge of and experience with the client. As expected, considerably more effort is needed to adequately plan an initial audit than a recurring audit. Preliminary Engagement ActivitiesThe auditor should perform the following activities at the beginning of the audit:
Planning ActivitiesThe nature and extent of planning activities depend on the company’s size and complexity, the auditor’s previous experience with the company, and changes in circumstances that occur during the audit. When developing the audit strategy and audit plan, the auditor should evaluate whether the following matters are important to the company’s financial statements and internal control over financial reporting and, if so, how they will affect the auditor’s procedures:
What are the benefits of adequate planning of the audit of financial statements?Adequate planning helps to ensure that appropriate attention is devoted to important areas of the audit, that potential problems are identified and resolved on a timely basis and that the audit engagement is properly organized and managed in order to be performed in an effective and efficient manner.
What are the benefits of planning an audit?Benefits of audit plan
It helps the auditor obtain sufficient appropriate evidence for the circumstances. It helps to keep audit costs at a reasonable level. It helps to avoid misunderstandings with the client. It helps to ensure that potential problems are promptly identified.
What benefits does the auditor derive from planning audits?There are three main benefits from planning audits: it helps the auditor obtain sufficient appropriate evidence for the circumstances, helps keep audit costs at a reasonable level, and helps avoid misunderstandings with the client.
What are the factors to be considered by the auditor in planning their audit?Factors Affecting Audit Planning
Size of the company and nature of its operations. Accounting system, internal control and adherence to standard. Environment in which the company operates. Knowledge of client's business.
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