Page 88 - DCOM204_AUDITING_THEORY

Auditing Theory

Notes audit strategy that will appropriately respond to assessed risks. The overall audit strategy
includes consideration of planned audit responses to specific risks through the development of
the audit plan. The overall audit strategy also helps the auditor determine the resources required
for the engagement, including engagement staffing. Therefore, at a minimum the following
matters should be included in the overall audit strategy:

1. Relevant characteristics of the audit engagement, such as the reporting framework used in
order to set the scope of the engagement;
2. Key dates for reporting and other communications;

3. Setting of materiality;
4. Preliminary risk assessment and whether internal controls are to be tested; and
5. Consideration of resources available and how they are to be used.

Self Assessment

Fill in the blanks:

4. ISA 210 describes the contents of an ................
5. The terms of the engagement include consideration of ......................
6. The purpose of the overall audit strategy is to develop an effective response to the....................

5.8 Select Staff for Engagement

Appropriate staff, knowledgeable about the client’s industry, must be assigned to the engagement.
In order that they may effectively carry out their work, the assigned engagement staff should
have the following capabilities and competencies:
1. An understanding of, and practical experience with, audit engagements of similar nature
and complexity through appropriate training and participation.

2. Appropriate technical knowledge, including knowledge of relevant information
technology.
3. Knowledge of relevant industry in which the client operates.

4. Ability to apply professional judgment.
5. An understanding of the firms quality control policies and procedures.
6. An understanding of professional standards and regulatory and legal requirements.
For existing clients there may also be a need for continuity from year to year. In addition, ISA
300 states that “the auditor should plan the nature, timing, and extent of direction and supervision of
engagement team members and review of their work.” In reviewing the work of engagement team
members, it should be ensured that:
1. the work has been performed in accordance with professional standards and regulatory
and legal requirements;

2. the work performed supports the conclusions reached;
3. the work performed is appropriately documented;
4. the evidence obtained is sufficient and appropriate to support the auditor’s report;

5. the objectives of the engagement have achieved;

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