Planning an Audit of Financial Statements

CAS 300

Planning an Audit of Financial Statements

CAS 300

General

The engagement partner and other key members of the engagement team should be involved in planning the audit

Preliminary engagement activities
  • The auditor does following at the beginning of the current audit engagement:
    • Perform procedures regarding the continuance of the client relationship and the specific audit engagement (see CAS 220)
    • Evaluate compliance with relevant ethical requirements, including independence (see CAS 220)
    • Establishing an understanding of the terms of the engagement (see CAS 210)
Planning activities
  • Establish an overall audit strategy that sets the scope, timing and direction of the audit, and that guides the development of the audit plan
  • In establishing the overall audit strategy, the auditor should:
    1. Identify the characteristics of the engagement
    2. Determine the reporting objectives of the engagement to plan the timing of the audit and the nature of the communications required
    3. Consider the factors that are significant in directing the engagement team’s efforts
    4. Consider the results of preliminary engagement activities and, whether knowledge gained on other engagements performed by the engagement partner for the entity is relevant
    5. Determine the nature, timing and extent of resources needed to perform the engagement
      • Use of experienced team members for high-risk areas
      • The involvement of experts
      • # of team members assigned to observe the inventory count at material locations
      • When resources are to be deployed; at an interim date or key cut-off dates
  • Once the overall audit strategy has been established, an audit plan can be developed to address the matters identified in the overall audit strategy
  • Develop an audit plan that includes a description of:
    1. The nature, timing and extent of planned risk assessment procedures (CAS 315)
    2. The nature, timing and extent of planned further audit procedures at the assertion level (CAS 330)
    3. Other planned audit procedures required to be carried out to comply with CASs
  • Update and change the overall audit strategy and the audit plan as necessary during the course of the audit
  • Plan the nature, timing and extent of direction and supervision of engagement team members and the review of their work
    • i.e. more risk of material misstatement = more supervision and review of work
Documentation
  • Document the overall audit strategy, audit plan, and any significant changes made to the overall audit strategy or the audit plan, and the reasons for the changes
Additional Considerations in Initial Audit Engagements
  • Perform acceptance of client and engagement procedures
  • Communicate with the predecessor auditor, where there has been a change of auditors

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