Audit strategy and plan - General planning issues including ...

Learning Outcomes

After studying this article, you will be able to explain the purpose and process of audit strategy and planning, identify general issues such as resource allocation and staff roles, and assess how information technology influences audit work. You will also understand how planning ensures effective, efficient, and compliant audits in line with ISAs—essential knowledge for the ACCA FAU exam.

ACCA Foundations in Audit (FAU) Syllabus

For ACCA Foundations in Audit (FAU), you are required to understand the main principles of audit planning and strategy and their impact on audit quality and efficiency. In particular, focus your revision on:

• The need for planning an audit and its benefits
• The distinction between overall audit strategy and the audit plan, including key content
• General planning considerations: team composition, resource allocation, and role of experts
• Effects of information technology on audit procedure and documentation
• The purpose of audit programmes, including use and limitations of standardised programmes

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 detailed planned audit procedures at the assertion level?
   1. Audit engagement letter
   2. Audit planning memorandum
   3. Audit programme
   4. Permanent audit file

2. True or false? The audit strategy is only concerned with identifying specific audit tests for each account balance.

3. What are two main effects of using IT in an audit client's systems on the planning process?

4. Who is responsible for ensuring that the audit team is appropriately resourced in terms of skill and experience?

Introduction

Effective audit planning is essential to achieving the audit objective of providing a reliable opinion on financial statements. This begins with setting a clear audit strategy and continues with a detailed audit plan. Both must address a range of general planning issues, including how to organise staff, allocate resources, manage time, and respond to the challenges of auditing in an IT environment.

Key Term: audit strategy
The set of decisions that establishes the scope, timing, and direction of the audit, providing a framework for the development of a detailed audit plan.

THE NEED FOR AUDIT PLANNING

Auditing standards (e.g., ISA 300) require auditors to plan so that the audit is effective and efficient. Planning helps auditors:

• Prioritise high-risk areas
• Allocate appropriate resources and staff
• Anticipate and resolve issues early
• Coordinate work, internal meetings, and expert involvement
• Ensure compliance with auditing standards

Key Term: audit plan
The detailed description of the nature, timing, and extent of audit procedures at the individual assertion level, based on the overall strategy.

OVERALL AUDIT STRATEGY AND AUDIT PLAN

The overall audit strategy sets out the broad approach for the audit, determining:

• The characteristics of the engagement (industry, locations, reporting deadlines)
• Audit objectives and reporting requirements
• Key areas of risk
• The resources (people and skills) required and their timing

The audit plan translates strategy into practical steps, describing:

• Specific risk assessment, control, and substantive procedures
• Assignment of responsibilities within the team
• Timing and deadlines for each stage
• Needs for specialist input or use of experts

Worked Example 1.1

A new audit client operates three separate warehouses across two countries and has implemented a new IT system for recording inventory in the current year. What planning issues must the audit team address?

Answer:

• The audit team must factor in the complexity of locations and plan for visits to all warehouse sites.
• The new IT system may require involvement from IT audit specialists.
• Additional audit time and resources should be allocated for understanding and testing the new inventory system.
• The plan should specify who will attend each location and deadlines for each visit.

GENERAL PLANNING ISSUES

Staffing and Resource Allocation

Audit quality relies on assigning tasks based on staff skills and experience. Complex or high-risk areas should be handled by more experienced auditors. Planning should cover:

• Number and level of staff needed
• Time allocations for each audit phase
• Involvement of specialists (e.g., IT, valuations)

A clear chain of supervision and review ensures juniors receive guidance and their work is checked by seniors or managers.

Timetable and Budget

A detailed timetable ensures all work is performed in time for the reporting deadline. Planning includes:

• Scheduling attendance at client sites
• Allowing for peak periods (such as year-end counts)
• Preparing a time budget to control hours and costs

Key Term: audit programme
A document that records the specific audit tests and procedures to be performed in each audit area, specifying the staff responsible and the timing of those procedures.

Communication

Planning meetings and regular updates keep the engagement team and the client aligned. Audit leaders must communicate:

• Scope and timing of the audit
• Key areas of focus
• Any changes in approach or issues arising

INFORMATION TECHNOLOGY: IMPACT ON AUDIT PLANNING

IT affects both client accounting systems and auditor methods. Planning must consider:

• The reliability of client IT systems and controls
• The need for IT specialists to test controls or interpret data
• Risks from loss of audit trails in electronic systems
• Use of automated audit tools, such as audit software and data analytics

Where IT is significant, the audit plan may include computer-assisted audit techniques (CAATs) for testing large volumes of transactions or performing analytical procedures.

Key Term: computer-assisted audit techniques (CAATs)
Audit methods that use computer software or tools to test controls, process data, or perform substantive testing.

USING STANDARDISED AUDIT PROGRAMMES

Standardised audit programmes are pre-prepared lists of audit tests commonly used for recurring audit areas (e.g., revenue, payroll). These can:

• Improve efficiency and help delegate audit work
• Serve as checklists to ensure all critical steps are covered

However, auditors must adjust programmes to the client's unique circumstances and exercise professional judgment; overreliance on standard programmes can lead to missed risks.

Worked Example 1.2

The senior assigns a standard payroll audit programme to a junior auditor. The client, however, introduced a new bonus scheme not covered in the programme. What should be done?

Answer:

• The audit programme must be adapted to include tests relevant to the new bonus calculations.
• The team should discuss new risks arising from changes in payroll.
• Professional judgment ensures audit work addresses the actual situation, not just follows a checklist.

Exam Warning

It is a common error to assume that standard audit programmes cover all risks. Examiners may ask how to respond when client circumstances change—always explain the need to tailor audit procedures to address specific risks identified during planning.

Summary

Proper planning is essential for a high-quality audit. This involves setting an effective strategy, developing a detailed plan, addressing staffing and resource requirements, and adapting to IT environments. The use of standard programmes aids efficiency, but must not replace professional judgment. All planning decisions should be documented and regularly reviewed as the audit progresses.

Key Point Checklist

This article has covered the following key knowledge points:

• Explain the distinction between audit strategy and audit plan
• Describe general planning issues: team, resources, timetable, supervision
• Identify the effects of information technology on audit planning
• Define and discuss the use and limitations of standardised audit programmes
• Recognise the need to assign tasks according to staff competence and experience
• State the importance of adapting audit work to changes in client systems and circumstances

Key Terms and Concepts

• audit strategy
• audit plan
• audit programme
• computer-assisted audit techniques (CAATs)