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Unit 5: Audit Planning

any unanticipated changes as well as professional judgment of the engagement Notes
team in the components of the audit universe as discussed above. The work schedule
should also reflect the internal auditor’s assessment of risks associated with various
areas covered by the particular internal audit engagement and the priority attached
thereto.

The internal auditor should also prepare a formal internal audit programme listing the
procedures essential for meeting the objective of the internal audit plan. Though the form
and content of the audit programme and the extent of its details would vary with the
circumstances of each case, yet the internal audit programme should be so designed as to
achieve the objectives of the engagement and also provide assurance that the internal
audit is carried out in accordance with the Standards on Internal Audit.
Questions:

1. Analyze the case and find out different methods employed in planning internal
audit
2. What were the main areas identified for overall annual audit plan?

Source: bcasonline.org

5.16 Summary

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.

The overall “audit strategy” describes in general terms how the audit is to be carried out
and the “audit plan” details the specific procedures to be carried out to implement the
strategy and complete the audit.

It is also important for students to understand the precise meaning of the risk terms:
“audit risk” and “inherent risk” as both risks influence how the audit is carried out and the
costs involved.
ISA 210 describes the contents of an engagement letter. Although the standard does not
require use of an engagement letter, the guidance is provided in a manner that presumes
use of an engagement letter.
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.
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.
The auditor must have an understanding of the clients business sufficient to identify
whether an expert is needed e.g. where inventory is highly specialized and is material to
the financial statements independent valuation by an expert may be necessary.

Auditors need knowledge about operations to assess client business risk and inherent risk
in the financial statements.
ISA 520 Analytical Procedures states that analytical procedures include the consideration
of comparisons of the entity’s financial information.

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