Auditing and Planning
dAuditing an
enterprise requires proper planning keeping in mind the scope of the
assignment as per the terms of appointment and the governing laws of
the land. Planning has to be continuously evaluated and upgraded
throughout the engagement and involves developing an audit program
showing the nature, timing and extent of auditing procedures to be
carried out.
Changes in conditions or unexpected results out of the auditing
procedures may require revision of the overall plan and the auditing
procedures. The reasons for any such changes made in the audit plan
should be well documented.
While planning the auditors must consider factors such as complexity of
the audit, the environment in which the entity operates, his own
experience with the client and his knowledge of the client’s
business.
The auditor needs to obtain a level of knowledge of the
client’s business operations that will enable him to identify
the events, transactions and practices which in his judgment may have a
significant effect on the financial information. The auditor
must before starting the audit plan preparation, study in depth the
annual reports, minutes, internal auditor’s report and
observations, previous year’s audit working papers ,
operations and policies manual of the client and lastly give personal
visit to all the clients business establishments.
Not only these would help the auditor in establishing the overall audit
plan, but such knowledge would help the auditor to identify areas of
special audit consideration and attention. The knowledge would help the
auditor to evaluate the reasonableness of the accounting estimates,
managements representations and to make judgments regarding the
appropriateness of the accounting policies and disclosures.
The audit planning ideally commences at the conclusion of the previous
year’s audit, and along with the related program, it should
be reconsidered for modifications as the auditing progresses. Such
considerations are based on the auditor’s review of the
internal controls, his preliminary evaluation thereof and the results
of his compliance and substantive auditing procedures.