In the context of International Standards on Auditing (ISA) 300 (Planning and Audit of Financial Statements); a) Explain when audit planning takes place b) List four items that...

      

In the context of International Standards on Auditing (ISA) 300 (Planning and Audit of Financial
Statements);
a) Explain when audit planning takes place
b) List four items that should be included in audit planning memorandum
c) i) Suggest four practical problems that could be encountered in implementing audit
plan.
ii) Explain four ways in which you would mitigate the effects of the problems
identified in (c) (i) above

  

Answers


Kavungya
(a) When audit planning takes place
It is reasonable to assume that planning occurs towards the start of an audit engagement.
However, according to ISA 300, planning should not be seen as discrete and separate part of the
overall audit. Planning often begins shortly after, or in connection with the completion of the
previous audit, for example, with a review of issues that were discussed with management, such
as control deficiencies or un adjusted errors. Such matters are relevant to the next years audit and
need to be considered when planning.
Similarly, the audit plan may be revised as the audit progresses and should not be viewed as
being fixed in place once the main planning phase has ended. For example a significant event
may take place as the audit is in progress, meaning that the audit plan needs to be changed.
The nature and extent of planning activities depends on the size and complexity of the audit
clients, previous experience of the audit firm with the clients, and any changes in circumstance
that may occur during the audit.

(b) Four items to include in an audit planning memorandum
i. Preliminary analytical review
ii. Preliminary review or risk.
iii. Materiality levels.
iv. Consideration of fraud
v. Sampling.
vi. Scope of work to be done
vii. Staff requirements
viii. Back ground information
ix. Timetable for audit
x. Budgets for the audit

(c) (i)Practical problems encountered in planning
• Abrupt changes in government regulations
• Complexity of:the clients accounting system
• Special assignments affecting the auditor/staff turnover.
• Work may not be evenly distributed
• Lack of preparedness on the art of the client for the audit exercise
• Staff (audit or client ) also are key to the audit progress may resign
• Lack of cooperation by ,management /staff of the client
• Lack of audit evidence
(ii) Solutions to the problems
• Plan well in advance.
• Train the client on what to expect well in advance
• Motivatio.n of stall
• On the job training
• Use of experts
• Subcontracting
• Use of joint audits
• Institute a close liaison with client.
• Plan staffing requirements well in advance.
Kavungya answered the question on May 14, 2019 at 12:43


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