Audit planning is the process of gathering information and design audit strategies. The main output of audit planning is a tailored audit approach supported appropriate administrative arrangements.
Audit strategy is concerned with designing optimized audit approaches that seeks to achieve the necessary audit assurance at the lowest cost within the constraints of the information available. Audit procedures should be relevant to the important assertions, and as cost effective as possible to perform.
Audit strategy generally involves the following steps:
iii) Obtaining knowledge of client‟s business,
iv) Performing analytical procedures at initial stage,
v) Evaluating inherent risks,
vi) Evaluating internal control system for strategy purpose and
vii) Formulating the strategy.
The auditor should also develop the strategy considering the results of gathering or updating information about the client, and making preliminary judgment about materiality, inherent risk and control effectiveness.
The initial assessment of the quality and complexity of the client‟s system will affect the amount of the information the auditor needs to gather. Sometimes, on a new engagement, the appropriate strategy may be oblivious from a limited amount of investigation work.