isa 300: pLANING AN AUDIT OF FINANCIAL STATEMENTS

OVERVIEW


ISA 300 deals with the planning of an audit and this standard guides the auditor that how to undertake the planning activities prior to start an audit.


Key Takeaway Points

=> ISA 300 deals with the planning of the audit activities and it set the guidelines that how to carry out the effective planning for the timely completion of an audit.

=> In planning of the audit the auditor shall carry out some preliminary engagement activities that include, determination materiality and performing some initial analytical procedures as risk assessment procedures.

=> In the planning of audit each and every audit team member shall be involved in the audit planning. The audit partner shall guide every team member that how to carry out audit procedures for specific account heads in the financial statements.

=> The auditor shall develop overall audit strategy and audit planning as such are interconnected to each other’s. The audit planning is developed just once the audit strategy is developed.


WHY AUDIT PLANNING IS IMPORTANT?


Audit planning brings numbers of benefits in the timely completion of an audit and it helps to set the direction of auditor in particular audit so saves time and cost. The benefits of the audit planning summarizes as:


=>It helps to identify risky and important areas

=>It helps to carry out the audit job in an organized manner

=>It helps in the better supervision and direction of the audit team

=>It helps to solve the problems on timely basis.


The planning activities may vary from client to client. Generally, the audit planning activities depends upon:


=>Size and complexity of an entity

=>The professional experience of the audit team members

=>Any unusual circumstances that occurred during the course of an audit


THINGS TO PLAN DURING THE AUDIT


The auditor shall plan the following things prior to start an audit:


=>Obtaining the general understanding of the entity and its environment

=>Determination of the materiality

=>The performance of the analytical procedure before carrying out the risk assessment procedures

=>Considering the need to involve other experts if necessary during the audit


The auditor shall not design the audit planning in such a way that it looks impracticable to implement. However, it should be designed by keeping in view the current situation of the client and its environment. The auditor shall also discuss the audit planning with the management of the entity too and let them the opportunity to support the auditor in the effective implementation of the audit planning.


All of the audit team members shall be involved in the planning of audit including junior members of the team.


PLANNING OF THE PRELIMINARY ENGAGEMENT ACTIVITIES


At the beginning of every audit the auditor shall conduct preliminary audit engagement activities that include:


=>Deciding on the current status of the audit and to decide whether to continue the audit of entity

=>Compliance with the ethical requirements as per the ethical requirements

=>To establish an understanding of the terms of the audit engagement


In the initial audit engagement the auditor shall communicate with the predecessor auditor to obtain information that if there is any reason that the audit should not be accepted.


AUDIT STRATEGY


The auditor shall develop audit strategy that sets the scope, timing and direction of the audit and such audit strategy determines:


=>The resources need to conduct and complete audit field work

=>How the resources are directed and supervised during the audit


AUDIT PLANNING


=>The audit planning always comes once the audit strategy is being developed and it covers all the points that is developed in the audit strategy.

=>The audit planning and audit strategy shall not be rigid and fixed but flexible and auditor shall change it or modify it as per the required circumstances during the audit.


DOCUMENTATION


The auditor shall document each and every part of the audit planning and audit strategy and such documentation shall made part of the audit working papers.