Audit strategy is concerned with designing optimized audit approaches that seek to achieve the necessary audit assurances 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:
i) Obtaining knowledge of business.
ii) Performing analytical procedures at initial stages.
iii) Evaluating inherent risks.
iv) Evaluating internal control system for strategy purpose.
v) Formulating the strategy – identifying risk areas, development of appropriate audit strategy for those areas.