Preparation by the Auditor: Audit Planning

Audit Planning is the process by which the auditor develops an overall strategy and a detailed approach for the expected conduct and scope of the audit, based on the understanding gathered during the preparatory steps (Section a).

Audit planning typically involves:

• Understanding the entity and its environment — the nature of the business, its industry, its accounting policies, and its internal control system.
• Assessing materiality and risk — deciding which areas of the accounts are significant enough, or risky enough, to deserve closer attention.
• Developing an overall audit strategy — the broad approach (e.g. how much reliance to place on internal controls versus substantive testing of transactions).
• Preparing a detailed audit plan — translating that strategy into the specific nature, timing, and extent of the audit procedures to be carried out, which then feeds directly into the Audit Programme (Section c).
• Allocating and coordinating the work among the audit team members, deciding who checks what and by when.

Why planning matters:

1. It helps the auditor devote appropriate attention to important areas of the audit.
2. It helps identify and resolve potential problems on a timely basis.
3. It helps organise and manage the audit engagement so it is performed in an efficient and timely manner.
4. It assists in the proper assignment of work to assistants and in coordinating work done by other auditors or experts, where involved.