Audit Plan
Last Updated :
21 Aug, 2024
Blog Author :
Wallstreetmojo Team
Edited by :
Ashish Kumar Srivastav
Reviewed by :
Dheeraj Vaidya
Table Of Contents
Audit Plan Meaning
An audit plan refers to the design of an audit describing the overall audit strategy and guidelines to follow while performing the audit. It helps in the successful completion of the audit process.
Planning for auditing is the initial step in an audit. It helps the auditor efficiently manage the audit by analyzing the prime focus areas, proactive problem management, and allocating responsibilities to team members.
Table of contents
- An audit plan represents a blueprint for conducting an audit. It addresses why, when, how, where, and by whom questions associated with audit performance.
- A good audit design identifies all the risks involved in the operations and employs specific audit procedures to minimize them.
- Successful planning for audit necessitates the cooperation of the management. Auditor has the authority to question the concerned personnel in case of any discrepancies.
- Auditors follow more or less the same procedure for auditing most of the companies by adhering to the standard auditing procedures.
Audit Plan Process
According to the international standard of auditing (ISA), an audit plan should be based on an overall audit strategy. The audit strategy must explain the scope, timing, and direction of the audit. In addition, strategy formulation depends on the features of audit engagement like its characteristics, reporting objectives, auditor's professional judgment, the outcome of preliminary engagement activities, and the resources necessary to perform the audit engagement.
According to ISA, in addition to client information, audit planning steps should contain the description for nature, timing, and extent of:
- Planned risk assessment procedures
- Programmed further audit procedures at the assertion level
- Other programmed audit procedures that are required to accomplish so that the engagement complies with professional standards
The auditor can update the audit design according to the development during the audit. Moreover, the auditor also includes supervising and reviewing team members' work in the plan. The resulting documentation primarily contains the overall strategy and plan. In addition, it may consist of the changes applied to the overall strategy and audit plan processes during its implementation and the reason for changes.
Sample Audit Plan
Let's look at the sample below to understand better the structure, layout, contents, and overall audit plan template.
To comprehend each business element relevant to the audit, the auditors collect and evaluate information about the company, such as financial, legal, and investment facts. In addition, they utilize risk assessment techniques to analyze the risks of anomalies in business governance, notably financial statement misstatements.
The audit team utilizes audit techniques to collect audit evidence once the risks have been recognized. This audit evidence assists them in forming a judgment on the company's financial statements. Audit techniques often employed by auditors include analytical procedures, investigation, examination of records and assets, observation, reconciliation, and reperformance. The auditor's assessment of the risks influences the audit method's nature, timing, and scope.
Furthermore, the knowledge and experience of the auditors will undoubtedly reflect in the conversations throughout the work plan development. This knowledge transfer method guides audit engagement teams throughout different processes such as information evaluation and risk identification.
Audit Plan Example
Having a punctiliously crafted audit design helps auditors achieve efficient engagement, risk mitigation, and compliance with standards set by authorized governing bodies. In addition, the company being audited should be ready and offer coordination to assist in the efficient completion of the audit. Let us look into the significance of a well-informed design with the help of an audit plan example.
During one of their client's previous year audits, the auditor of a CPA firm reported the deficiency in internal control when he found out the existence of fictitious vendor invoices related to inventory. The auditor painstakingly considers the issue in the current year by addressing it in the risk assessment or designed audit procedures to ensure that the management rectified the problem. The auditor plans to assess the risk of inventory fraud with the help of observation of physical inventory and analytical procedures and describes its nature, time, and extent. Hence, what is more important is the treatment of planning as a continuous process commencing from the end of the previous year audit and comes to an end with current audit engagement completion.
Frequently Asked Questions (FAQs)
The vital thing is to develop an overall audit strategy. The plan should be in line with the audit strategy so that the plan entails the successful completion of the audit objectives. Generally, the audit design must encompass the nature, timing, and extent of risk assessment procedures, further audit procedures at the assertion level, and other planned audit procedures to complete the process while ensuring professional standards.
The two elements of planning are creating an overall audit strategy and the associated plan. Following different activities like collecting client requirements and information and verifying the applicable laws is vital in preparing an audit strategy. It should align with audit objectives and contribute to the act of curating an audit work plan.
An audit design contains a list of guidelines for auditors to follow while conducting an audit. In contrast, an audit program is the description of detailed steps to complete the audit procedure. Both deeds give direction to auditors and other team members while auditing.
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