The planning of an audit is a fundamental part of completing a successful assignment. The process can be broken down into the following stages;
The main focus of this stage is ensuring that there are no factors that prohibit the assignment from commencing. The following procedures are carried out as part of this stage;
This stage involves an assessment of the company’s situation from various sources with a view to determining the overall audit risk. This stage involves;
Following on from stage 2, should be a summary of the key audit risks and how these risks affect the planned approach of the audit. The overall risk (including fraud risk) should be assessed as low, medium or high.
For each individual financial statement level, a planned audit approach should be documented. All risk areas should have an appropriate plan to deal with that risk. The work program of the audit should be driven by this.
Another matter to be considered at this stage is the framework on which the financial statements will be prepared and if reduced disclosure options are available.
An appropriate staffing plan should be put in place for the assignment (with appropriate skillsets and experience assigned to the team). A timetable for completion of the job should be agreed with the client.
A team meeting sets out the planned audit approach, the key risk areas, how these risks will be addressed and clarifies each members role in the assignment.
Consider whether any useful recommendations can be made to the client regarding any issues identified.
The client should be notified of any changes in the nature/scope of the assignment. In addition to this, the information required by the audit team is communicated to and agreed with the client.
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