ACCA AAA · Chapter 10
Audit planning
Your chapter at a glance. Open any section, or keep the whole map in view.
Strategy, understanding and risk assessment
Plan from risk understand, assess and respond
Purpose
- Plan an effective audit under ISA 300
- Focus on important areas and resolve problems promptly
People and resources
- Select competent team members and allocate time
- Coordinate experts, component and internal auditors
- Direct, supervise and review the engagement team
Audit overview
- Understanding supports assessment of RoMM
- Assessed risks shape strategy and audit responses
- Evaluate all results when forming the audit opinion
Overall audit strategy
- Sets scope, timing and direction
- Consider engagement characteristics and reporting objectives
- Use prior knowledge, significant factors and resources
Audit plan
- Nature, timing and extent of risk assessment procedures
- Nature, timing and extent of further procedures
Keep current
- Update strategy and plan as the audit progresses
- Document both and any significant changes
Apply to the scenario
- Match skills, locations, timing and supervision to risks
Obtain an understanding of
- Entity and environment; reporting framework
- System of internal control
Relevant matters
- Ownership, governance, business model and IT
- Industry, regulation, objectives and business risks
- Performance measures and accounting policies
Use the understanding to
- Identify and assess RoMM and choose materiality benchmark
- Assess accounting policies and develop analytical expectations
- Plan specialists, controls reliance and further procedures
- Challenge evidence inconsistent with management explanations
Required procedures
- Enquiries of management and others
- Analytical procedures for unusual transactions and trends
- Observation and inspection to corroborate enquiries
Existing information
- Use acceptance and prior year information if relevant
- Check prior year information remains reliable
Relevant controls
- Evaluate design: could a control prevent or detect and correct?
- Determine implementation: is it in use?
- Enquiry alone is insufficient for these assessments
Operating effectiveness
- Test separately if planning to reduce substantive work
Responses, materiality and less complex entities
Evidence-led plan revise as findings emerge
Controls strategy
- Test controls expected to operate effectively
- If confirmed, substantive extent may be reduced
- If ineffective, revise strategy and obtain more evidence
Always required
- Substantive procedures for each material class of transactions
- Also for each material account balance and disclosure
Communication
- Report significant control deficiencies to TCWG
When RoMM exists
- Reasonable possibility of a misstatement occurring
- Misstatement could be material if it occurs
Two levels
- Financial statement level: pervasive risks
- Assertion level: transactions, balances and disclosures
Assessment concepts
- Inherent and control risk are components of RoMM
- Inherent risk varies along a spectrum
- Relevant assertion has an identified RoMM
- Significant class, balance or disclosure has a relevant assertion
- Significant risk lies near upper end of inherent risk spectrum
Response
- Assess assertion risks to determine further procedures
Definition
- Omission, misstatement or obscuring may influence users
- Size and nature, individually or combined, matter
Starting benchmarks
- Revenue: 0.5%–1%; total assets: 1%–2%
- Profit before tax: 5%–10%
- Select benchmark and threshold using judgement
Performance materiality
- Below overall materiality to limit aggregate misstatement risk
- Lower level may apply to particular items or disclosures
Qualitative matters
- Consider entity, reporting framework and narrative disclosures
- Apply the specified exam basis and show the calculation
ISA for LCE
- Standalone, proportionate audit standard
- Same reasonable assurance as full ISAs
- Use requires adoption or permission by jurisdiction
Eligibility
- Depends on nature and complexity, not size alone
- Simple model, ownership, IT, transactions and estimates
Cannot use for
- Listed or public-interest entities
- Other engagements barred by standard or local authority
UK position
- Not adopted in the UK; cannot use under ISAs (UK)
Want it on paper? Download the PDF, or print this page.