Answer
Audit planning refers to the development of a strategy and detailed approach of the audit in respect of expected nature, timing and extent of the audit.
Adequate audit planning facilitates the appropriate attentions required for the important areas of audit and prompt identification of potential problems. The adequate plan expedites the timely completion of the work with proper utilization of assistants. It also facilitates the coordination of work done by other auditors and experts.
Adequate audit planning involves:
development of overall plan for the expected scope and nature of audit, and
development of audit programme showing the nature, timing and extent of procedure to be performed with works to be assigned to the audit personnel
The areas which the auditors consider in planning the audit in an attempt to conduct the audit in most efficient and timely manner are:
Knowledge of client‟s accounting system, policies and internal control systems/ procedures and expected degree of reliance to be placed on these
Assessment of inherent and control risks and the identification significant audit areas
General economic factors and industry conditions
His experience of similar kind of clients and the past record of the client and evaluation of possibility of material misstatement
The work of internal auditing and expected effect on external audit procedures
Details of audit procedures to be followed with work to be performed by the assistants/staffs of the auditor