audit strategy planning programming
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8/18/2019 Audit Strategy Planning Programming
1/1
Compiled by: Pankaj Garg (CA, CS, CMA(I) – All India Topper, Gold Medalist) Page 1
Audit Strategy, Planning and Programming Audit Strategy Audit Planning Audit Programming
Meaning: Designing Audit Approaches to achieve necessary audit assurance
at the lowest cost.
M e a n i n g
Developing an overall plan for the
expected scope and conduct of the
audit and
Developing an audit programme
showing NTE of Audit procedures M e a n i n g
Detailed plan of work
comprises of techniques and
procedures,
may also contain objectives for
each audit step.
S t e p s i n v o l v e d i n A
u d i t S t r a t e g y
1. Obtaining knowledge of business:
It provides a frame of reference within which the auditor exercises
his professional judgement to assess risk, to plan audit, to evaluate
audit evidence and providing quality services.
A s p e c t s t o b e c o v e r e d
Acquiring knowledge of clientaccounting system, policies and
internal control procedures.
Establishing the expected degree
of reliance on internal control.
Determining the NTE of audit
procedures.
Coordinating the work to be
performed.
M a t t e r s t o b e
c o n s i d e r e d
Nature of business. Overall Plan
System of internal control and
accounting procedures.
Size and structure of
organization.
Information regarding the
organization.
Accounting policies followed.
2. Performing Analytical Procedures at Initial Stages:
To assess the potential for material misstatement in the financial
statements as a whole.
3. Evaluating Inherent Risk :
On the basis of prior audit experience, controls exercised by
management, significant changes since last assessment.
Factors to be evaluated to assess inherent risk
At the level of F.S. At the level of A/c Balance
Management experience
Changes in management
Unusual pressures onManagement
Nature of entity business.
Factors affecting industry.
Quality of Accounting System.
Susceptibility to Misstatement
/ Misappropriation of assets. Complexity of transactions.
Degree of judgement involved.
Unusual transactions
I m p o r t a n c e o f p l a n
n i n g
To devote attention to important areas
Identify & resolve potential
problems. Organized and managed audit.
Selection of suitable engagement
team.
Coordination of work done
Direction and supervision of
engagement team.
D e v e l o p m e n t o f A u d i t p r o g r a m m e
F i r s t T i m e A u d i
t
Draw a broad outline
Filled up the details on a
consideration of
deficiencies in internal
control.
Determine the special
procedures needs to be
applied.
4. Evaluating Internal Control System:
By documenting the extent of computerization, preparing/updating
flowcharts to record the transactions.
5. Formulating Audit Strategy:
Requires consideration of:
Engagement objective
Knowledge of clients business
Preliminary judgements as to materiality
Identified inherent risks
Extent of compliance testing
NTE of Substantive testing
Points relating to planning and controlling the audit.
F a c t o r s t
o b e
c o n s i d e
r e d
Terms of engagement
Nature & timing of reports /
Communications
Legal or statutory requirements.
Accounting policies & changes therein. Effects of new accounting/auditing
pronouncements.
Identification of significant audit areas.
Setting of materiality levels.
Degree of reliance on internal control. S
u b s e q u e n t E n g a g e m e n t
Review earlier programme
and modified on account of:
Experience gained during
the previous audit.
Important changes in
internal control system,
accounting procedures etc.
Evaluation of internal
control for current year.
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