## **Learning Outcomes**

After reading this article, you will be able to identify the main components of an overall audit strategy and audit plan. You will explain how these documents guide audit direction, scope, timing, and resource use. You will distinguish between the strategy and detailed plan, describe the typical contents of each, and understand their practical use for effective and efficient ACCA audit assignments.

## **ACCA Foundations in Audit (FAU) Syllabus**

For ACCA Foundations in Audit (FAU), you are required to understand the planning process in the audit of financial statements. In particular, you should be able to:

- Explain the need for planning an audit engagement and the advantages of proper planning
- Identify and describe the contents of the overall audit strategy and the audit plan
- Distinguish the scope, timing, and direction of the audit strategy from the details in the audit plan
- Describe planning considerations such as materiality, risk assessment, and availability of resources
- Recognise the link between planning, audit programmes, and audit documentation
- Explain how planning influences audit team assignments and scheduling

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. Which document sets out the general scope, timing, and direction of an audit engagement?
   a) Audit report
   b) Overall audit strategy
   c) Audit file
   d) Engagement letter

2. Which of the following is most likely to be found in the detailed audit plan?
   a) Audit partner's signature
   b) Sample size calculations for inventory testing
   c) Applicable accounting standards
   d) The names of client shareholders

3. True or false? The audit strategy is more detailed than the audit plan.

4. List two key factors that influence the development of the audit plan.

## **Introduction**

A well-planned audit is essential for achieving audit objectives efficiently and with suitable assurance. Careful planning allows auditors to focus attention and resources where the risk of material misstatement is greatest, minimising wasted effort and ensuring compliance with standards. This article explains the distinctions between the overall audit strategy and the audit plan, outlines the main elements of each, and describes how they guide the development of audit programmes and assignment of audit work.

## The Purpose of Audit Planning

Audit planning helps ensure that an audit is performed:

- Effectively: audit efforts are directed toward high-risk areas
- Efficiently: resources are used sensibly, avoiding duplication or unnecessary work
- In compliance: all International Standards on Auditing (ISAs) and legal or client requirements are met

Adequate planning enables:

- Early identification and resolution of potential problems
- Timely organisation of work and audit team assignments
- Appropriate allocation of experienced staff to complex areas

> **Key Term: audit strategy**
> The high-level approach that sets the scope, timing, and direction of the audit, serving as the overall guiding document for subsequent planning and procedures.
>
> **Key Term: audit plan**
> A detailed record outlining the specific audit procedures, the nature, timing, and extent of work at the assertion level, and allocation of tasks to engagement team members.

## The Overall Audit Strategy

The overall audit strategy is the framework for the audit. It outlines how the engagement will be approached and establishes:

- The key characteristics and requirements of the audit
- The objectives and deadlines to be met
- The types and sources of evidence to be collected

The strategy answers broad "what," "when," and "who" questions:

- What is the scope of the audit—are there complex group structures, multiple locations, or unusual transactions?
- When should the main phases of work take place (interim and final visits)?
- Who are the key staff members, specialists, or experts needed? Are internal auditors or external experts involved?

Areas typically covered in the audit strategy include:

- Relevant financial reporting framework and regulatory obligations
- Industry-specific factors and client operations that may affect risks
- Timeframes for audits and reporting commitments
- Communication protocols with client management and those charged with governance

## The Audit Plan

The audit plan is developed after the strategy is agreed. While the strategy provides the overall direction, the audit plan contains the detail required to execute the audit, including:

- Planned risk assessment procedures
- Timing for substantive and controls testing
- Nature and extent of tests (for example, how many purchase invoices will be examined)
- Allocation of tasks among team members, including supervision and review points

Common inclusions in the audit plan:

- Specific audit procedures for each area of the financial statements
- Sample sizes and testing methods
- Identification of key controls to be tested and how their effectiveness will be assessed
- Guidance for use of analytical procedures during planning and at review stages

> **Key Term: audit programme**
> A document setting out the precise audit procedures to be performed for each assignment area, including objectives, timing, and staff responsibilities.

## From Strategy and Plan to Audit Programmes

After finalising the strategy and plan:

- Detailed audit programmes are prepared for each area (e.g., revenue, inventory)
- These programmes specify the individual tests, sample sizes, and documentation required
- Programmes are tailored based on the risk assessments and materiality levels established in planning

### **Worked Example 1.1**

A new client operates in three countries. The audit manager identifies significant risk associated with foreign currency inventory and tight reporting deadlines. How might this influence the audit strategy and plan?

> **Answer:**
>
> - The audit strategy might highlight the need for foreign currency proficiency, specific regulatory considerations, and timings to ensure deadlines are met across jurisdictions.
> - The audit plan would include detailed procedures for testing inventory valuations in each currency, assign bilingual staff where needed, and schedule key procedures to fit the required timetable.

### **Worked Example 1.2**

The audit team is planning for a client with a complex IT system and significant automated transactions. How should this be reflected in the audit plan?

> **Answer:**
>
> - The audit plan should provide for tests of general IT controls and information processing controls.
> - It may require the use of data analytics or computer-assisted audit techniques, and the assignment of a specialist IT auditor for these procedures.

## Staffing, Resources, and Timing

Effective planning considers not only what work is to be done, but also who will do it and when. The plan should set out:

- The number and grade of staff needed for each phase
- The involvement of specialists or external experts for technical areas
- Scheduling of work, review meetings, and deadlines for completion

Regular team meetings keep all members informed and focused on key risk areas or issues.

### **Exam Warning**

> A frequent exam error is to assume the audit strategy contains all detailed procedures. Remember: strategy sets the direction; the plan and audit programmes provide the detail.

## Updating and Amending the Plan

Planning is not a one-off event. As new information arises (e.g., errors, control weaknesses, business changes), the audit strategy and plan must be reviewed and revised to address updated risks or requirements.

## **Summary**

The audit strategy and plan are essential planning tools. The strategy establishes the general approach and main priorities; the plan provides the detailed steps, resources, and scheduling needed to meet objectives. Together, they ensure the audit work is targeted, efficient, and compliant with standards.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Distinguish between overall audit strategy and the audit plan
- Identify what is included in the audit strategy: scope, timing, direction
- List the typical contents of an audit plan and audit programmes
- Understand the need to allocate resources and plan team assignments
- Recognise the importance of revising the strategy and plan when risks or circumstances change

## **Key Terms and Concepts**

- audit strategy
- audit plan
- audit programme

Audit strategy and plan - Contents of overall strategy and plan