Question

Mr. Khalil was appointed as an auditor for audit Majan Company. He is to be assisted by 2 assistants. Mr. Said, one of the appointed assistants is suggesting other method of audit which Mr Khalil did not agree. The team is expected to start audit based on their target calendar. Based on the above scenario:

1. Describe the preparations required for an audit planning that the team may use.

2. Justify practically why an audit planning is vital for Majan Company?  

Answer 1

The audit plan needs to include certain preliminary checks, such as the updating of all pertinent information, a review of risk, and, if possible, coordination of the process. Carry out a preliminary audit overview. This process gives insight into the audit plan and the entire scope of the audit. Discuss with relevant stakeholders matters such as the completion date, the process of the audit, and even any matter relating to tax office guidelines. It is important to know exactly what role each member within the audit team will play.

For evidential purposes, the information collected needs to be confirmed.

Review all gathered information. This helps to identify whether or not the audit scope should be redefined. As this is the final step prior to the actual audit, the auditor must ensure that all key issues are addressed and that a risk hypothesis has been developed. As the auditor will now begin to develop a position, any necessary adjustments to the audit scope should be made.

1. Research the Audit Area

It is essential to understand the business process or function to be audited. If not familiar with it, thoroughly research the process or function to fully understand the subject matter. Review internal procedures, search the internet for resources, and seek help from subject matter experts.

2. Maintain Open Communications Throughout the Planning Process

The sooner the audit team reaches out to the auditee, the better. There is a certain amount of trepidation involved in any audit. Working with an auditee prior to the audit helps ease concerns the auditee may have. Communicating in person is always preferable. If this is not possible, telephone calls are the next best thing. Avoid communicating by email if possible.

3. Conduct Process Walk-Throughs

Armed with a working understanding of the process or function, conduct a face-to-face walkthrough with the auditee. Identify key business objectives, methods employed to meet objectives, and applicable rules or regulations. A walkthrough may include a tour of facilities. You may gather background information relative to nature, purpose, volume, size, or complexity of automated systems, processes, or organizational structure. You might scan documents or records for general conditions. All these activities provide opportunities to interface with the auditee and build rapport before the formal entrance conference.

4. Map Risks to the Organization, Process, or Function

Ask the auditee what his concerns are, what "keeps him up at night." Through research and interviews, identify risks to meeting business objectives and controls employed to mitigate those risks. Rate risks with the auditee based on probability of occurrence and potential impact. Consider control design, gaps, or mitigating factors to determine if the control system effectively mitigates risks.

5. Obtain Data Prior to Fieldwork

This has become a principal focus for us recently. We emphasize data in our initial requests for information. We perform data analytics before we begin fieldwork. Identifying anomalies to confirm a condition or weakness early helps us target testing and optimize sample selections.

Importance of Audit Planning for Majan Company

Audit planning is a vital area of the audit primarily conducted at the beginning of audit process to ensure that appropriate attention is devoted to important areas, potential problems are promptly identified, work is completed expeditiously and work is properly coordinated.

Our emphasis on audit planning has yielded worthwhile results. And I will say improving audit planning has been an investment. We now begin our audit planning eight weeks prior to the Entrance Conference. The following are some of the dividends:

• Improved credibility and relationships with our stakeholders
• More in-depth and significant issues
• An increased number of process improvements
• Reduced fieldwork time

• It helps the auditor obtain sufficient appropriate evidence for the circumstances.
• It helps to keep audit costs at a reasonable level.
• It helps to avoid misunderstandings with the client.
• It helps to ensure that potential problems are promptly identified.

Audit planning is the audit phase in which we can best influence audit results. It is a key but too easily overlooked component of the audit process. It is something that needs to be emphasized and institutionalized into a habit. This habit ultimately leads to audit success.