Question

How does a company with stronger internal control impact audit planning?

Answer 1

Audit planning is the process in which the audit team plans the whole time schedule and the extent of checking to be done to conclude the audit. Audit planning is to be done throught out the audit period. As the number of transactions have increased in a organisation, the auditors uses sampling techniques to check the records of the entity in such a way that the maximum assurance can be obtained in order to unable the auditor to comment on the Financial statement and the internal controls employed within the entity.

The auditors performs control procedures or the compliance procedures to check the internal controls of the entity. Based on compliance procedures, the auditors decide nature timing and extent of substantive procedures or test of Details. If in an entity the controls are strong and are working within the framework of the entity, the auditor can rely upon the documents of the entity and will reduce the extent of checking. On the other hand, if the internal controls are weak the auditor will have doubt on the documents maintained by the entity and will increase the extent of checking in order to gain more and concrete assurance regarding the financial statements and internal controls of the entity.