Lecture Notes

Today's Topic: Audit Strategy and Audit Planning

Review of Previous Lecture

• Planning Process
  • Preliminary Engagement Activity
    • Acceptance and Continuity
    • Ethical Requirements (Independence)
    • Terms of Engagement
  • Planning Activities
    • Audit Strategy
    • Audit Planning

Audit Strategy

• Four Main Points of Strategy:
  1. Resources
  2. Reporting Objectives
  3. Preliminary Engagement Activities
  4. Nature, Timing, and Extent of Resources

Development of Audit Plan

• It is necessary to develop the audit plan based on the audit strategy.
• Objective of the Audit Plan:
  • Achieve Audit Objectives
  • Effective Use of Auditors' Resources

Understanding the Client's Business

• Understanding the client's business is important in the development of the audit plan.
• Auditing without proper knowledge is not possible.

Contents of Audit Plan

• Things Included in the Audit Plan:
  • Nature, Timing, and Extent of RAP (Risk Assessment Procedures)
  • Nature, Timing, and Extent of FAP (Further Audit Procedures)
  • Other Planning Procedures

Audit Program

• Audit Program:
  • It is a detailed plan that includes the details of the audit procedures to be performed.
  • It provides information on what type of verification procedures will be applied to financial statements and accounts.

Advantages of Audit Program

1. Total Perspective: Comprehensive view of the audit work.
2. Clear Instructions: Provide clear instructions for the task.
3. Selection of Assistants: Selection based on the assistant's capability.
4. Accountability: Responsibility for the work accepted by the assistant.
5. Monitoring Work Progress: Helps in knowing the status of work progress.

Disadvantages of Audit Program

1. Mechanical Work: The work becomes too mechanical.
2. Inadequate Flexibility: It is difficult to make changes in the program.
3. Inefficient Assistants: Some assistants exploit assistance benefits.
4. Hard and Fast Program: Suppresses the initiative of skilled assistants.

Conclusion

• In the next class, we will discuss the construction and development of the audit program.
• Risk assessment in the next lecture.

Note: These notes are prepared based on class discussions.