Question

In all walks of life, it is necessary to plan actions before those actions are performed. The Audit Standard Guidelines states that the Auditors should adequately plan, control, and record their work:

a) What are five of the purposes of planning an audit assignment?

b) Describesubstantivetestingandgiveexamplesfortheadoptionofthisprocedureforthe

detailed audit work.

c) What key stakeholders should the auditor consult during the planning stage?

Answer 1

1.Purpose of audit planning:

• Devotes appropriate attention to important areas of the audit;
• Identifies and resolves potential problems on a timely basis;
• Organizes and manages the audit so that it is performed effectively and efficiently;
• Selects team members with appropriate capabilities and competencies;
• Directs and supervises the team and reviews their work; and
• Effectively coordinates the work of others, such as experts and internal audits.

2. A substantive procedure or testing is a process, step, or test that creates conclusive evidence regarding the completeness, existence, disclosure, rights, or valuation (the five audit assertions) of assets and/or accounts on the financial statements. To qualify as a substantive procedure, enough documentation must be collected so that another competent auditor could conduct the same procedure on the same documents and make the same conclusion.

Examples of substantive testing

• Bank confirmation.
• Accounts receivable confirmation.
• Inquire of management regarding the collectibility of customer accounts.
• Match customer orders to invoices billed.
• Match collected funds to invoices billed.
• Observe a physical inventory count.
• Confirm inventories not on-site

3. Key stakeholders consult during the planning stage

• Management.
• IT Personnel
• legal counsel
• compliance officers
• contracted third parties, and others.