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.