General guide for preparing an overall audit strategy and audit plan:
Should include the following:
i. Cover page – refer to sample audit plans for inspiration
ii. Introductory page – includes date, addressee, content, name and signature of the auditor/partner, and name of audit firm. Refer to
sample audit plans for inspiration.
1. Scope of the audit – includes the financial reporting framework, industry-specific reporting requirements and locations of the
components of the entity. Location is not specified in the case, so you have the freedom to decide the location/s.
2. Significant audit risks and planned audit approach – areas with higher risk, material components/account balances
3. Audit materiality – set overall materiality and planning materiality
4. Audit team
5. Audit timeline
Scroll down below for the template and other guiding notes:
Cover page
Introductory page
Scope of the audit
Significant audit risks
Area of risk
(Based on available
information in the
case)
1.
2.
3.
4.
5.
6.
(continue if there are
more)
Why is the risk
significant
(Explain why you
listed it as a risk)
Planned Audit
Approach
(Nature, timing
and extent)
Accounts in the
Financial
Statements
Amount
Is the account Significant
material
account
(Y/N)
(Y/N)
1.
2.
3.
4.
5.
6.
Continue if there
are more
Audit approach:
Since we are discussing risk-based audit process, the auditor focuses on areas with higher audit risk.
For each area of risk, state the nature (what risk assessment procedures, tests of controls or substantive tests), timing (interim or year-end) and
extent (more detailed or less detailed)
Risk assessment procedures – this will be discussed in detail in Module 4, but to be able to complete this audit plan, you must note that the
following are the procedures in the risk assessment phase.
1. Observation and inspection
2. Inquiries of management or others in the client entity who may help the auditor identify risks of material misstatement.
3. Analytical procedures – comparing the information of the client entity with that of previous period, with budgets. with industry averages, etc.
Tests of control - this will be discussed in detail in Module 4, but to complete this audit plan, the following is explained:
1. If internal controls of the client company seem to be strong, preliminary assessment of control risk is low, therefore, there would be more tests
of control and lesser substantive testing.
2. However, if preliminary assessment of control risk is high (meaning internal controls of the client, seems to be weak), then there would be lesser
tests of control and more on substantive testing.
3. If preliminary assessment of control risk is set between low and high, then adjust accordingly.
Substantive tests – will depend on the assessment of combined level of inherent and control risk.
Audit materiality
Materiality level
Overall materiality
Performance materiality
Amount
Basis for setting the amount
Audit Team
Role
Audit team member
Audit partner
Audit manager
Senior auditor
Staff auditor
Specialists (if necessary)
Quality control reviewer
If team members are not enough (ex. There are only 5 in your group), you can add fictitious team members.
Audit Timeline
Shall include the following, but not limited to:
Audit phase
Planning
Risk Assessment
Risk Response
Year-end audit procedures
Submission of audit report
Timetable
Deliverables (output)