Acca aaa s21 Notes

AUDIT PLANNING AND RISK ASSESSMENT
Chapter 10
AUDIT PLANNING
1. Overview
Plan the audit
Understand entity
Assess risk of material misstatement
Respond to risk
Expect effective controls
Expect ineffective controls
Unsatisfactory
Tests of controls
Report significant deficiencies 
to those charged with 
governance
Satisfactory
Full substantive 
procedures
Reduced substantive 
procedures
Overall review of FS
Report to management
Auditor’s report
Appointment
September 2021 to June 2022 exams
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All audits start by:
๏
Planning
๏
Understanding.
After these stages auditor can assess the risk of material misstatement and respond to that risk. We 
will see later how the risk of material misstatement can be broken down into several causes, but if you 
are dealing with a relatively new company with inexperienced staff, and which has high value, 
portable inventory and many cash transactions, you will probably see that the risk of material 
misstatement is relatively high. If the auditors conclude that is the case then they have to plan for 
their audit work to reduce the risk of material misstatement finding its way into the financial 
statements.
2. Audit planning
Audit planning is very important and the auditors state in the auditor's report that they 
planned
and 
performed their audit. ISA 300 
Planning an Audit of Financial Statements
is written in the context of 
recurring audits.