Planning Stage
Beyond just timely audit deliverables
The Process
We begin the audit by meeting with our client to reconfirm the terms of the engagement and co - develop the expectations for the audit. These expectations often go beyond just timely delivery of audit deliverables. We discuss with you up front exactly what's going to happen when and why, what we will need from you, and how we can achieve minimal disruption to your business throughout. Co-developing expectation is followed with detailed audit planning. Detailed audit planning is sub divided into four main areas;
Understanding the business (including the accounting and internal control system)
- Industry, regulatory, and other external factors, including the applicable financial reporting framework.
- Nature of the organization, including the selection and application of accounting policies.
- Objectives and strategies and the related business risks that may result in a material misstatement of the financial statements.
- Measurement and review of the Organization’s financial performance.
- Internal control system: - The client/project’s control environment. - The client/project’s risk identification and assessment process. - The information systems, including the related business processes, relevant to financial reporting, and communication. - Control activities. - Monitoring of controls
Assess the risk (risk assessment) & determine materiality. Some of the key procedures we perform at this stage include but not limited to the following.
- Assess inherent risk, control risk and combined risk (Audit risk) at the entity level and at the account level.
- Assess business risk, mapping it to the significant accounts, financial statements risk and the audit risk.
- Assess compliance risk.
- Assess fraud risk.
- Determine the materiality either based on funding or total expenditure.
- Determine significant accounts.
Determine audit strategy. Having understood the business/project set up including its internal control and accounting system and then carried out the risk assessment, we shall develop the overall audit strategy. The overall audit strategy will entail the following:
- Scope, timing & direction.
- Significant audit and accounting issues.
- Audit strategy (whether to perform test of controls plus analytical procedures or perform substantive procedures that is the test of details and analytical procedures).
Determine, the nature, timing and extent of audit procedures/develop the audit programme.
Other activities/procedures at the planning stage
- Continuously updating the overall strategy and the plan through the course of the assignments - We continuously update and change as necessary the overall audit strategy and the audit plan during the course of the audit.
- Directing and supervision the audit team and reviewing work - We plan the nature, timing and extent of direction and supervision of engagement team members and review of their work.
- Documenting the overall strategy and audit plan - We shall document the overall audit strategy and the audit plan, including any significant changes made during the audit engagement (audit strategy memorandum).
- Communicating with those charged with governance and management of the project/organization - We discuss elements of planning with those charged with governance and the entity’s management. Discussions with ordinarily include the overall audit strategy and timing of the audit, including any limitations thereon, or any additional requirements.