Audit Planning
Audit planning is the process of developing an overall strategy and detailed approach for the expected nature, timing, and extent of an audit engagement.
Explanation
Effective audit planning involves understanding the entity and its environment, assessing risks, determining materiality, and developing an audit plan that addresses identified risks. The auditor must gain an understanding of internal controls, industry conditions, and the entity's financial reporting framework. Planning is iterative — the strategy may change as the auditor gathers more information throughout the engagement.
Key Points
- •Develop an overall audit strategy and detailed audit plan
- •Understand the entity, its environment, and internal controls
- •Planning is iterative and continues throughout the audit
Exam Tip
Remember that audit planning is an ongoing process, not a one-time event — auditors revise the plan as they learn new information.
Frequently Asked Questions
Related Topics
Audit Risk Model
The audit risk model expresses audit risk as a function of inherent risk, control risk, and detection risk: AR = IR × CR × DR.
Materiality
Materiality is the magnitude of an omission or misstatement that, individually or in aggregate, could reasonably influence the economic decisions of financial statement users.
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