AUDITINGPLANNING AN | Course Paper

AUDITING

PLANNING AN AUDIT OF FINANCIAL STATEMENTS (BSA-300)

Lecture # 8

Planning an audit involves establishing the overall audit strategy for the engagement and

developing an audit plan, in order to reduce audit risk to an acceptably low level. Planning involves

the engagement partner and other key members of the engagement team and to enhance the

effectiveness & efficiency of the planning process.

Preliminary Engagement Activities

The auditor should perform the following activities at the beginning of the current audit

engagement:

• Perform procedures regarding the continuance of the client relationship and the specific

audit engagement.

• Evaluate compliance with ethical requirements, including independence.

• Establish an understanding of the terms of the engagement.

Planning Activities

The Overall Audit Strategy

The auditor should establish the overall audit strategy for the audit. The overall audit strategy sets

the scope, timing and direction of the audit, and guides the development of the more detailed audit

plan. The establishment of the overall audit strategy involves:

• Determining the characteristics of the engagement that define its scope, such as the financial

reporting framework used, industry-specific reporting requirements and the locations of the

components of the entity;