Audit planning is an important audit process which should not be overlooked in every audit assignment.

Some of the pertinent points we need to understand about audit planning are:

(a)    Understand  the need to do Audit planning:

This is basically to ensure that:

·     The audit is carried out in an effective, efficient and timely manner;

·     appropriate attention is devoted to the different areas of the audit;

·     potential problems are identified;

·     audit review is facilitated;

·     audit resources will be used more efficiently in planned key focused areas;

·     assignment of work to the members of the audit team based on their varying degrees of skill and experience so that they are not required to carry out audit task which are beyond their level of competency;

·    at the planning stage, due consideration should be given to the co-ordination of work to be carried out by experts or other auditors if appropriate;

·    the fact that the audit assignment is the commercial activity of the audit firm should be recognised, and if the costs of carrying out the planned procedures are likely to exceed the client entity’s budgeted fee then this imbalance should be addressed at the planning stage by consultation with the management of the entity.

(b)   Formulation of A Documented Audit Plan

     We need to be aware that an audit plan is a structured plan of action mapping out the audit procedures to be carried out with the aim of reporting on whether a specified set of accounts show a true and fair view. It’s therefore is integrated with the normal standard documentation and check lists to ensure a comprehensive audit plan.

In formulating a documented plan the following matters need to be considered:

• Knowledge of the entity’s business;
• Risk and materiality;
• Nature, timing and extent of audit procedures;
• Co-ordination, direction, supervision and review of the audit.

( c ) An Audit Plan Is Not A Fixed Plan

We need to understand that the nature of an audit plan needs to be flexible and subject to change, dependent on the findings and events occurring during the audit process.

Examples of findings or events which might lead to a revision to an audit plan include:

• Significant errors found in the processing of invoices through a sales accounting system. This could lead to a revision of the extent of testing and audit resources to be applied to the sales area of the accounts.
• Notification from the management of an entity that audited accounts are required at a date earlier than previously notified. This could lead to revision of the timing of audit procedures with a consequent increase in audit resources being allocated to the assignment.
• The revelation during the audit of the bank and cash area, of the existence of an additional bank account held by the entity but not previously notified to the auditor. This would lead to additional audit procedures being carried out in this area.

In summary, planning is an integral part of the audit process. Whilst the audit procedures carried out on specified audits will vary depending on the nature, size and complexity of an entity’s operations, good audit planning is crucial if an auditor wishes to ensure that an audit is carried out in an effective, efficient and timely manner.