ICAI Notes: Audit Strategy, Audit Planning and Audit Programme | Auditing and Ethics for CA Intermediate PDF Download

 Page 1


 
 
a
    
 
CHAPTER 
2 
 
 
LEARNING OUTCOMES 
 
 AUDIT STRATEGY, 
AUDIT PLANNING 
AND AUDIT 
PROGRAMME 
 
 
 
After studying this chapter, you would be able to - 
? Understand the Audit Planning and its benefits. 
? Learn about Planning Process and its Elements. 
? Learn about establishing overall strategy and developing 
audit plan in detail. 
? Learn about audit programme. 
? Gain the knowledge of control of quality of audit work w.r.t 
delegation and supervision of audit work. 
? Practicality of above concepts by studying through examples 
and case studies. 
© The Institute of Chartered Accountants of India
Page 2


 
 
a
    
 
CHAPTER 
2 
 
 
LEARNING OUTCOMES 
 
 AUDIT STRATEGY, 
AUDIT PLANNING 
AND AUDIT 
PROGRAMME 
 
 
 
After studying this chapter, you would be able to - 
? Understand the Audit Planning and its benefits. 
? Learn about Planning Process and its Elements. 
? Learn about establishing overall strategy and developing 
audit plan in detail. 
? Learn about audit programme. 
? Gain the knowledge of control of quality of audit work w.r.t 
delegation and supervision of audit work. 
? Practicality of above concepts by studying through examples 
and case studies. 
© The Institute of Chartered Accountants of India
a
 
 
AUDITING AND ETHICS  
 
2.2 
 
 
 
 
 
 
Planning an audit involves:
Establishing the overall audit strategy 
Developing an audit plan
The auditor should plan his work to enable him to 
conduct an effective audit in an efficient and timely 
manner.
Plans should be based on knowledge of 
the client's business.
Plans should be further developed and 
revised as necessary during the course of 
the audit.
CHAPTER OVERVIEW 
© The Institute of Chartered Accountants of India
Page 3


 
 
a
    
 
CHAPTER 
2 
 
 
LEARNING OUTCOMES 
 
 AUDIT STRATEGY, 
AUDIT PLANNING 
AND AUDIT 
PROGRAMME 
 
 
 
After studying this chapter, you would be able to - 
? Understand the Audit Planning and its benefits. 
? Learn about Planning Process and its Elements. 
? Learn about establishing overall strategy and developing 
audit plan in detail. 
? Learn about audit programme. 
? Gain the knowledge of control of quality of audit work w.r.t 
delegation and supervision of audit work. 
? Practicality of above concepts by studying through examples 
and case studies. 
© The Institute of Chartered Accountants of India
a
 
 
AUDITING AND ETHICS  
 
2.2 
 
 
 
 
 
 
Planning an audit involves:
Establishing the overall audit strategy 
Developing an audit plan
The auditor should plan his work to enable him to 
conduct an effective audit in an efficient and timely 
manner.
Plans should be based on knowledge of 
the client's business.
Plans should be further developed and 
revised as necessary during the course of 
the audit.
CHAPTER OVERVIEW 
© The Institute of Chartered Accountants of India
 
 
 
 
AUDIT STRATEGY, AUDIT PLANNING AND AUDIT 
PROGRAMME 
 
 2.3 
By now, Sameer had grasped basic nature of auditing. It was crystal clear to him 
that objective of an audit of financial statements is to express an opinion on the 
same. He could easily visualize that a complex process like audit needs to be 
performed methodically. “Carrying out an audit ought to be a logical and 
systematic process leading from one step to another. Performing a complex 
process effectively, would certainly, be involving planning. Planning helps one to 
achieve desired objectives. Audits should be no different” - He was talking to 
himself. 
Besides, he was pretty sure that there must be timelines in which audits were to 
be completed for different entities. He remembered his father had held few shares 
of some blue-chip companies. He was able to recall that notices of annual general 
meetings of these companies used to be delivered at their ancestral home in 
Rajkot and those also related to consideration and adoption of audited accounts. 
Linking that, he had reasonably concluded that audits were required to be 
performed in a timely manner. The whole audit process, therefore, must be 
properly planned to ensure its effectiveness. 
He was curious to learn about how planning for an audit is undertaken. What are 
the basic elements of planning? What are likely matters to be included therein? 
He was aware about CA students undergoing articled training. Most of the 
students must be going for audit work of different entities as part of their practical 
training.  A thought came to his mind- “How do students who have freshly joined 
their articles carry out audit work?  There must be some mechanism, some sort of 
detailed set of instructions for carrying out audit. What is it known as?” His 
inquisitive mind was constantly engaged in such kind of questions.   
He was also anxious to know what would happen to audit plan if some new 
information comes to light of auditor during course of audit which was hitherto 
unknown to him at time of planning? Is audit plan flexible? Can it be changed as 
audit progresses? Another question raging in his mind was whether all such 
information was necessary to be put in writing by the auditor. 
  
© The Institute of Chartered Accountants of India
Page 4


 
 
a
    
 
CHAPTER 
2 
 
 
LEARNING OUTCOMES 
 
 AUDIT STRATEGY, 
AUDIT PLANNING 
AND AUDIT 
PROGRAMME 
 
 
 
After studying this chapter, you would be able to - 
? Understand the Audit Planning and its benefits. 
? Learn about Planning Process and its Elements. 
? Learn about establishing overall strategy and developing 
audit plan in detail. 
? Learn about audit programme. 
? Gain the knowledge of control of quality of audit work w.r.t 
delegation and supervision of audit work. 
? Practicality of above concepts by studying through examples 
and case studies. 
© The Institute of Chartered Accountants of India
a
 
 
AUDITING AND ETHICS  
 
2.2 
 
 
 
 
 
 
Planning an audit involves:
Establishing the overall audit strategy 
Developing an audit plan
The auditor should plan his work to enable him to 
conduct an effective audit in an efficient and timely 
manner.
Plans should be based on knowledge of 
the client's business.
Plans should be further developed and 
revised as necessary during the course of 
the audit.
CHAPTER OVERVIEW 
© The Institute of Chartered Accountants of India
 
 
 
 
AUDIT STRATEGY, AUDIT PLANNING AND AUDIT 
PROGRAMME 
 
 2.3 
By now, Sameer had grasped basic nature of auditing. It was crystal clear to him 
that objective of an audit of financial statements is to express an opinion on the 
same. He could easily visualize that a complex process like audit needs to be 
performed methodically. “Carrying out an audit ought to be a logical and 
systematic process leading from one step to another. Performing a complex 
process effectively, would certainly, be involving planning. Planning helps one to 
achieve desired objectives. Audits should be no different” - He was talking to 
himself. 
Besides, he was pretty sure that there must be timelines in which audits were to 
be completed for different entities. He remembered his father had held few shares 
of some blue-chip companies. He was able to recall that notices of annual general 
meetings of these companies used to be delivered at their ancestral home in 
Rajkot and those also related to consideration and adoption of audited accounts. 
Linking that, he had reasonably concluded that audits were required to be 
performed in a timely manner. The whole audit process, therefore, must be 
properly planned to ensure its effectiveness. 
He was curious to learn about how planning for an audit is undertaken. What are 
the basic elements of planning? What are likely matters to be included therein? 
He was aware about CA students undergoing articled training. Most of the 
students must be going for audit work of different entities as part of their practical 
training.  A thought came to his mind- “How do students who have freshly joined 
their articles carry out audit work?  There must be some mechanism, some sort of 
detailed set of instructions for carrying out audit. What is it known as?” His 
inquisitive mind was constantly engaged in such kind of questions.   
He was also anxious to know what would happen to audit plan if some new 
information comes to light of auditor during course of audit which was hitherto 
unknown to him at time of planning? Is audit plan flexible? Can it be changed as 
audit progresses? Another question raging in his mind was whether all such 
information was necessary to be put in writing by the auditor. 
  
© The Institute of Chartered Accountants of India
a
 
 
AUDITING AND ETHICS  
 
2.4 
1. AUDITOR’S RESPONSIBILITY TO PLAN AN  
AUDIT OF FINANCIAL STATEMENTS 
SA 300- Planning an audit of financial statements deals with the auditor’s 
responsibility to plan an audit of financial statements. It states that objective of the 
auditor is to plan the audit so that it will be performed in an effective manner. 
1.1 Why Planning an audit is necessary? - Its Benefits 
Planning an audit is necessary to carry out it effectively in a timely manner. Besides 
ensuring compliance with professional standards, it helps in performing audit 
engagement effectively.   
Adequate planning benefits the audit of financial statements in several ways, 
including the following: - 
1. Helping the auditor to devote appropriate attention to important areas of the 
audit.      
2. Helping the auditor identify and resolve potential problems on a timely basis. 
3. Helping the auditor properly organize and manage the audit engagement so 
that it is performed in an effective and efficient manner.  
4. Assisting in the selection of engagement team members with appropriate 
levels of capabilities and competence to respond to anticipated risks, and the 
proper assignment of work to them.  
5. Facilitating the direction and supervision of engagement team members and 
the review of their work.  
6. Assisting, where applicable, in coordination of work done by others such as 
experts  
Therefore, planning an audit ensures that audit risk is reduced to an acceptable low 
level. When audit work is adequately and properly planned, it reduces the risk of 
inappropriate opinion by the auditor.   
© The Institute of Chartered Accountants of India
Page 5


 
 
a
    
 
CHAPTER 
2 
 
 
LEARNING OUTCOMES 
 
 AUDIT STRATEGY, 
AUDIT PLANNING 
AND AUDIT 
PROGRAMME 
 
 
 
After studying this chapter, you would be able to - 
? Understand the Audit Planning and its benefits. 
? Learn about Planning Process and its Elements. 
? Learn about establishing overall strategy and developing 
audit plan in detail. 
? Learn about audit programme. 
? Gain the knowledge of control of quality of audit work w.r.t 
delegation and supervision of audit work. 
? Practicality of above concepts by studying through examples 
and case studies. 
© The Institute of Chartered Accountants of India
a
 
 
AUDITING AND ETHICS  
 
2.2 
 
 
 
 
 
 
Planning an audit involves:
Establishing the overall audit strategy 
Developing an audit plan
The auditor should plan his work to enable him to 
conduct an effective audit in an efficient and timely 
manner.
Plans should be based on knowledge of 
the client's business.
Plans should be further developed and 
revised as necessary during the course of 
the audit.
CHAPTER OVERVIEW 
© The Institute of Chartered Accountants of India
 
 
 
 
AUDIT STRATEGY, AUDIT PLANNING AND AUDIT 
PROGRAMME 
 
 2.3 
By now, Sameer had grasped basic nature of auditing. It was crystal clear to him 
that objective of an audit of financial statements is to express an opinion on the 
same. He could easily visualize that a complex process like audit needs to be 
performed methodically. “Carrying out an audit ought to be a logical and 
systematic process leading from one step to another. Performing a complex 
process effectively, would certainly, be involving planning. Planning helps one to 
achieve desired objectives. Audits should be no different” - He was talking to 
himself. 
Besides, he was pretty sure that there must be timelines in which audits were to 
be completed for different entities. He remembered his father had held few shares 
of some blue-chip companies. He was able to recall that notices of annual general 
meetings of these companies used to be delivered at their ancestral home in 
Rajkot and those also related to consideration and adoption of audited accounts. 
Linking that, he had reasonably concluded that audits were required to be 
performed in a timely manner. The whole audit process, therefore, must be 
properly planned to ensure its effectiveness. 
He was curious to learn about how planning for an audit is undertaken. What are 
the basic elements of planning? What are likely matters to be included therein? 
He was aware about CA students undergoing articled training. Most of the 
students must be going for audit work of different entities as part of their practical 
training.  A thought came to his mind- “How do students who have freshly joined 
their articles carry out audit work?  There must be some mechanism, some sort of 
detailed set of instructions for carrying out audit. What is it known as?” His 
inquisitive mind was constantly engaged in such kind of questions.   
He was also anxious to know what would happen to audit plan if some new 
information comes to light of auditor during course of audit which was hitherto 
unknown to him at time of planning? Is audit plan flexible? Can it be changed as 
audit progresses? Another question raging in his mind was whether all such 
information was necessary to be put in writing by the auditor. 
  
© The Institute of Chartered Accountants of India
a
 
 
AUDITING AND ETHICS  
 
2.4 
1. AUDITOR’S RESPONSIBILITY TO PLAN AN  
AUDIT OF FINANCIAL STATEMENTS 
SA 300- Planning an audit of financial statements deals with the auditor’s 
responsibility to plan an audit of financial statements. It states that objective of the 
auditor is to plan the audit so that it will be performed in an effective manner. 
1.1 Why Planning an audit is necessary? - Its Benefits 
Planning an audit is necessary to carry out it effectively in a timely manner. Besides 
ensuring compliance with professional standards, it helps in performing audit 
engagement effectively.   
Adequate planning benefits the audit of financial statements in several ways, 
including the following: - 
1. Helping the auditor to devote appropriate attention to important areas of the 
audit.      
2. Helping the auditor identify and resolve potential problems on a timely basis. 
3. Helping the auditor properly organize and manage the audit engagement so 
that it is performed in an effective and efficient manner.  
4. Assisting in the selection of engagement team members with appropriate 
levels of capabilities and competence to respond to anticipated risks, and the 
proper assignment of work to them.  
5. Facilitating the direction and supervision of engagement team members and 
the review of their work.  
6. Assisting, where applicable, in coordination of work done by others such as 
experts  
Therefore, planning an audit ensures that audit risk is reduced to an acceptable low 
level. When audit work is adequately and properly planned, it reduces the risk of 
inappropriate opinion by the auditor.   
© The Institute of Chartered Accountants of India
 
 
 
 
AUDIT STRATEGY, AUDIT PLANNING AND AUDIT 
PROGRAMME 
 
 2.5 
 
1.2 Nature of Audit Planning- A Continuous and iterative 
process 
Planning is not a discrete phase of an audit, but rather a continual and iterative 
process that often begins shortly after (or in connection with) the completion of 
the previous audit and continues until the completion of the current audit 
engagement. Planning, however, includes consideration of the timing of certain 
activities and audit procedures that need to be completed prior to the performance 
of further audit procedures. For example, planning includes the need to consider, 
prior to the auditor’s identi?cation and assessment of the risks of material 
misstatement, such matters as: - 
1. The analytical procedures to be applied as risk assessment procedures. 
2. Obtaining a general understanding of the legal and regulatory framework 
applicable to the entity and how the entity is complying with that framework. 
3. The determination of materiality. 
4. The involvement of experts. 
5. The performance of other risk assessment procedures. 
 
Benefits of Benefits of 
Planning
Appropriate attention Appropriate attention 
to important areas
Identify and Identify and 
Resolve Potential Resolve Potential Resolve Potential 
Problems
Efficient and Efficient and 
Effective Audit
Selection of Selection of 
Team Team Team 
Members
Direction  and Direction  and 
Supervision of Team Supervision of Team Supervision of Team 
& Review of work
Coordination with Coordination with 
other Auditors and other Auditors and other Auditors and 
Experts
© The Institute of Chartered Accountants of India