SA 300: Planning an Audit#
Importance of Planning#
- Proper planning ensures effective audit execution
- Helps allocate appropriate resources
- Facilitates coordination with client
- Reduces audit risk
Steps in Audit Planning#
1. Preliminary Engagement Activities
- Client acceptance/continuation
- Evaluate ethical requirements
- Establish terms of engagement
2. Planning Activities
- Understand entity and environment
- Assess materiality
- Identify and assess risks
- Develop audit strategy
Audit Strategy#
- Nature, timing, and extent of procedures
- Reporting objectives
- Resource allocation
Materiality#
Performance Materiality
- Amount set at lower than materiality
- Used for planning substantive procedures
Calculation Methods
- Based on revenue, total assets, profit before tax
- Industry-specific benchmarks
Risk Assessment#
- Inherent risk: Susceptibility to material misstatement
- Control risk: Failure of internal controls
- Detection risk: Risk that auditor fails to detect misstatement
Documentation#
- Audit plan
- Materiality calculations
- Risk assessment conclusions
- Nature, timing, extent of procedures