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b. Materiality assessment
1. The auditors should adequately plan, control, evaluate, and record their work. Adequate planning
includes investigating a prospective client before deciding whether to accept the engagement. Audit
work is to be adequately planned and assistants if any to be properly supervised.
2. The auditor should ascertain the enterprises system of recording and processing transactions and
assess its appropriateness as a basis for the preparation of financial statements.
3. The auditor should obtain appropriate, relevant and reliable audit evidence sufficient to enable
him to draw reasonable conclusions there from.
4. If the auditor wishes to place reliance on any internal controls he should ascertain and evaluate
those controls and perform compliance tests on the operations.
5. The auditor should carry out such a review of the financial statements as is sufficient in
conjunctions with conclusions drawn from other audit evidence obtained to give him a reasonable
basis for his opinion on the financial statements.
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AUDIT PLANNING
IS Standard 050 (Planning) states, The IT auditor should plan the information systems audit coverage
to address the audit objectives and comply with applicable laws and professional auditing standards.
Audit planning as the means of developing a general strategy and a detailed approach for the
expected nature, timing and extent of the audit. Planning helps the auditor to obtain a detailed
understanding of the client and its environment, develop an overall audit strategy to be able to
gather appropriate relevant and reliable evidence and also assess the risk of the material
misstatement on the financial statement.
The audit plan details the audit objectives and steps the auditor must take to ensure all of the
important issues in the audit are covered. The audit plan includes:
A basic framework for how the audit resources (budgeted audit hours) are to be allocated
throughout the audit
Audit procedures to be performed
The objective of the audit plan is to assist the auditor in conducting an effective and efficient audit.
While planning the audit work to meet the audit objectives, the auditor should identify relevant
control objectives and determine, based on materiality, which controls should be examined. Internal
control objectives are placed by management and identifies what the management strives to achieve
through their internal controls.
Where financial transactions are not processed, the following identifies some measures the auditor
should consider when assessing materiality:
A planning memo outlines for the auditor the tone and course of action the IT audit manager plans to
take. The memo outlines for the auditor the areas within the audit the auditor is planning to spend
most of their time, and it gives the auditor the opportunity to voice any concerns.
Importance of planning
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a. It enables the auditor to conduct an effective audit, in an efficient and timely manner as it ensures
that appropriate attention is devoted to important areas of the audit and also potential problems are
promptly identified and the work completed on time (Time management)
b.Planning assists in proper utilization of audit assistants and coordinating and assigning work to be
done i.e. knowing when, how and by whom to perform a specific task and the standard expectation.
c.Planning assists in coordination of work done by other auditors and experts such as asset valuers.
d.Planning enables the auditor to acquire sufficient knowledge of the client business so that he can
evaluate the reasonableness of both accounting estimates and management representation and to
make judgment regarding the appropriateness to the accounting policies and disclosures.
e.Planning act as a basis of self evaluation i.e. by dividing audit work into stages and one will be able
to know what is covered and what is not.
(i)Size and complexity of the organization - Organizations with many branch divisions, subsidiaries etc
or have complex and multiple transactions will make planning a difficult task.
(ii) Depth of coverage of the audit - Where the auditor has to perform in-depth audit, he should spent
more time to plan as compared to an audit where sampling will be used as a means of gathering
evidence.
(iii) Auditors experience with the entity and the knowledge of the business - Planning for a new client
takes more time as compared to planning for recurring audits.
i. The nature of the client including the clients application of the accounting policy
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i.The general economic factors and the industrial conditions affecting the entitys business.
c. SWOT analysis
ii. The client objectives and strategies and also the related business risk
iii. The methods used by the client to measure and review performance.
a. Get the reasonable assurance about the internal controls of the company