This article entails the auditor’s duties as laid down in standards on auditing SA 300 while planning the Nature, timing and scope of Audit of the Financial Statements especially in case of recurring audit engagements.
SA 300 deals with the auditor’s responsibility towards planning for an audit of financial statements and its context is focused more on a recurring audit. This standard also prescribes the additional considerations required for an initial audit engagement.
Objective of the standard & Requirement laid down
The objective is to plan the audit in accordance with the size and complexity of the entity to perform the audit in an effective manner.
Partner and key members of the engagement team are required to be involved in the audit planning through discussion which will enhance the audit effectiveness and efficiency.
Preliminary Engagement & Planning Activities
Following preliminary activities are to be undertaken at the beginning of the current audit engagement:
i. Client relationship and specific audit engagement procedures are to be performed in accordance with SA 220 (Quality Control for Audit Work)
ii. Evaluate ethical requirement compliance including independence per SA 220
iii. Understand the terms of engagement as required by SA 210 (Terms of Audit Engagements)
Planning Activities :
Overall audit strategy sets the scope, direction and timing of the audit and in turn, develops the Audit plan.
* SA 315 – Identifying and assessing the risk of material misstatement through understanding the entity and its environment
* SA 330 – The auditor’s responses to assessed risks
During the audit, the overall audit strategy and audit plan can be updated or changed when unexpected events occur or any change in conditions etc. Auditor has to plan the direction, timing, supervision and review of the engagement teamwork depending on the following:
i. Size and complexity of the entity
ii. Audit area
iii. Competencies and capabilities of the engagement team members
iv. Level of assessed risk of material misstatements etc
Following are the list of requirements which are to be documented:
i. Overall audit strategy which exhibits the key decision of the audit planning
ii. Audit Plan which includes standard audit program and audit completion checklist
iii. Any significant changes made during the audit engagement to the above and the reasons for the same
Additional Considerations in Initial Audit Engagements
With respect to initial audit, certain additional considerations to be followed prior to the start of the audit:
i. Acceptance of the client relationship and the specific audit engagement per SA 220
ii. If there is any change of auditors, communicate with the predecessor auditor in compliance with relevant ethical requirements
iii. Audit procedures necessary to obtain appropriate audit evidence for opening balance
Effective Date: SA 300 is applicable for the audit of financial statements for periods beginning on or after 1st April 2008.