Acca aa s21 Notes

September 2021 to June 2022 exams
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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.
2.1 Reasons why planning is important
๏
If you don’t plan it you won’t carry out the audit effectively. You would not know something as 
obvious as when the year end is, or how many branches or factories a company has, or how 
many staff members you may need to conduct the audit, or whether the company has a lot of 
valuable inventory.
๏
You have to think both of a general strategy in a detailed approach. For example, in some very 
large companies auditors do not visit all the branches every year. They may visit only a quarter 
of the branches one year, another quarter the next year and so on. They have to decide whether 
or not to attend a physical inventory count. They may have to decide whether or not opinions 
from other experts are required (e.g. if management revalues property during the year).
2.2 Objectives of adequate planning
๏
To give appropriate attention to important areas. Is there a high inventory? Is there a high 
volume of cash transactions? Are trade receivables particularly significant?
๏
To identify potential problems. For example, if the company has recently changed its 
computerised accounting system there may well have been problems at the switch-over time, 
and staff may still be inexperienced.
๏
To carry out the work expeditiously. That really means reasonably quickly and efficiently.
๏
To ensure that the right numbers of staff are in the audit team with the right skills. They have to 
be timetabled so that the work for this client and other clients can be accommodated.
๏
To coordinate, if necessary, with other parties. For example, the internal audit department of the 
company.
๏
To facilitate the direction and supervision of the audit team and the review of their work. The 
work performed in an audit is subjected to many reviews. The audit senior will review working 
papers prepared by audit trainees, then the audit manager will review them, and finally the 
partner in-charge will review them. All of this has to be timetabled and time must also be left to 
clear the review points, for example, if additional work is required.