Audit planning is defined as the process in which the strategy is designed or conducts to achieve the expected result, which also defines the scope of audit inside the company. The size, nature and the time for the audit plan may vary.
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.
The audit plan converts the audit strategy into a more detailed plan and includes the nature, timing and extent of audit procedures to be performed by engagement team members in order to obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level.

1. Audit planning helps the auditor to devote appropriate attention to important areas of the audit.
2. Audit planning helps the auditor to identify and resolve potential problems on a timely basis.
3. Audit planning helps the auditor to properly organize and manage the audit so it is performed in an effective manner.

4. Audit planning assists in the selection of appropriate team members and assignment of work to them
5. Audit planning facilitates the direction, supervision and review of work
6. Audit planning assists in coordination of work done by other auditors and experts.
7. Audit planning establishes the means of achieving the objectives of the audit in efficient and effective manner.
8. Setting of materiality levels
9. Determination of audit time table
10. Reliance on internal audit and client staff to provide schedules.

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Preliminary analytical review is used at the planning stage of an audit to help the auditor to obtain an understanding of the financial circumstance of the client, e.g. a reduction in gross profits percentage may indicate that the company may eventually make a net loss or increase in the debt collection period may indicate risk of uncollectible receivables.
Identify potential risk areas to which an attention should be paid during the audit. For example liquidity and profitability ratios can point to going concern problems which may need to be evaluated.
Determine the nature, timing and extent of audit procedures. For example evidence obtained from preliminary analytical procedures may enable the auditor to determine what audit procedures to perform to respond to the risks identified.

Factors to consider when assessing the reliance that can be placed on the results of analytical procedures.
(1) Materiality of the items involved
If inventory balances are material, then auditors should not rely solely on analytical procedures.
(2) Other audit procedures
In the audit of receivables, other audit procedures such as the review of subsequent cash receipts may confirm or dispel questions arising from the application of analytical procedures to an aged profile of customers’ accounts.
(3) Accuracy of predictions
Auditors would expect greater consistency in comparing the relationship between gross profit and sales from one period to the next than in comparing discretionary expenses such as research costs or advertising expenditure.
(4) Frequency with which relationship is observed
A pattern repeated monthly as opposed to annually (for example, payroll costs).
(5) Assessments of inherent and control risks
If internal controls over sales order processing are weak, and control risk is assessed as high, the auditors may rely more on test of individual transactions or balances than on analytical procedures.
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Walk through tests are performed by the auditors to confirm that their recording and understanding of the system is correct. They are often performed as the recording of the system takes place or in conjunction with the tests of controls.
The process involves the tracing of a sample of transactions from the start of the operating cycle to the end and vice versa. For example a sales transaction could be traced from the initial order through to the entry in the nominal ledger accounts.

Audit sampling involves the application of audit procedures to a selection of transactions with a population (ie, rather than applying the procedures to 100%). The auditor then obtains and evaluates the evidence in order to form a conclusion about the population as a whole.
Sampling is normally adopted for practical reasons as in most cases it would be too time consuming to audit the whole population. A number of different techniques can be used in order to select the sampling including random, systematic or haphazard selection. When designing the size and the structures of the audit sample the auditor will need to consider sampling risk – the risk that the sample is not representative of the population as a whole, meaning that results cannot be extrapolated.

‘Audit software’ consists of computer programs used by auditors to process data of audit significance from the client’s accounting system. It may comprise generalised audit software or custom audit software. It is used for substantive procedures.
‘Test data’ involves entering data such as a sample of transactions into the client’s accounting system and comparing the results obtained with pre-determined results. Test data is used for tests of controls.
Advantages of CAATs

• Auditors can test program controls as well as general computer controls.
• A greater number of items can be tested more quickly and accurately.
• Transactions can be tested, rather than paper records that could be incorrect.
• CAATs are cost-effective in the long-term if the client does not change its systems.
• Results can be compared to results from traditional testing and if correlation exists, overall confidence is increased.

• To review the control system and to identify weaknesses, breakdown and to report to management with recommendations.
• To design checks to reveal the existence of frauds or to prevent frauds.
• To rationalize accounting policies within a group and to design and implement new accounting systems.
• To conduct management efficiency audits and post implementation audits of capital projects.
• To describe key risks facing the business activities within scope of audit and to identify control procedures used to ensure each key risk is properly controlled and monitored.
• To develop and execute risk based sampling and testing approach to determine whether most important controls are operating as intended.
• To report issues/make recommendations/negotiate action plans with Management to address issues.
• To follow up on reported findings periodically
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Interim audit:
In case of larger client the auditor will often find it necessary to proceed with the audit on an interim basis in view of the volume of testing to be undertaken in order to reach an opinion on the reliability of the records. Interim audit as arranged with the co-operation of the client may be biannual, quarterly or even monthly, depending on the volume of audit of audit work considering necessary. In this case the auditor decides to conduct an audit to a particular period within the accounting period.
Advantages
1. It is possible to produce interim accounts for dividend payment.
2. Interim Accounts can be used for application for extra finance (overdraft or Short term loan)
Disadvantages
1. Figures may be altered after the audit work. (2.5 marks)
Final and Completed audit applies to smaller concerns where the volume of transaction and complexity of records do not require the auditor’s attendance more than once each year. This visit normally takes place as soon as the business’s financial year ends and continues until it has been completed and the audit report signed.
Advantages

• It enables the audit to be planned more efficiently in that audit staff can follow the audit program or the timetable without interruption.
• The work is done at a go thus avoid the need to return to uncompleted work
• Alteration of figures may be avoided
  Disadvantages
• There may be difficulty in allocating staff if the Audit Firm has many clients who have the same accounting period.
• Delay may occur if the client does not have competent staff and there are problems with the schedules or the internal controls. This may affect the completion of the accounts to be presented to shareholders.

My duties as an auditor of a company as set out in the Companies Code are as follows:

• To make a report to the members on all Accounts laid before them at annual general meeting, Stating whether the Accounts – give a true and fair view and have been properly prepared in accordance with the provisions of the Companies Code.
• To investigate, and form an opinion on, whether: (a) Proper accounting records and returns have been kept and (b) the Accounts are in agreement with the accounting records and returns
• To modify any opinion on the financial statements if I cannot report affirmatively in respect of the requirements in the 5th schedule to the companies code.
• The Companies Code requires that the auditors gives certain information on the remuneration of and other transaction of the company’s directors, if these are not given in the accounts
  My rights as auditor as mentioned in the Companies Code are:
• Right of Access at all times to the books, accounts and vouchers of the company
• Right to such information and explanation as l think necessary for the performance of my duties
• Right to receive notice of, attend and speak at meetings of the members
• Right to apply to the court for direction on any aspect of his work.
• Right to communicate with the previous auditor in the case of an initial audit and request any information l may need for my assignment.
• Right to ensure that before being removed, the provisions in the Companies Code have been followed.

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