Of course you are no stranger to the term audit planning or audit planning which is one of the important stages in the audit.
In general, auditors make audit planning to ensure the implementation of the audit can run optimally.
Starting from determining audit goals, objectives, and much more to provide audit results that can help the sustainability of a business or company.
To better understand why audit planning is considered crucial in audit procedure, see the explanation of the following article!
Audit Planning
Audit planning is a design made by an auditor in conducting a thorough examination of an organization.
Where it starts from an early stage to recognize scope the client until the final stage to report the results of the audit to the management of the company or organization.
The main purpose of planning the audit is to allow various types of audits, such as operational audit, financial audits, compliance audits, other audits can be carried out effectively and optimally.
Audit planning has an important role in the audit process because it can help auditor. to present more accurate financial statements and help identify any discrepancies in the form of fraud or actions that do not benefit the company.
If the audit planning is done well, then the implementation of the audit will also pocket the success that drives the sustainability of your company.
Good Audit planning steps
Audit planning steps into stages that begin the audit process overall to the stage of preparation of audit reports.
Among the audit planning procedures that you need to know before carrying out the audit are the following:
1. Acceptance of the client and the continuation of the relationship with the client
In this case, the auditor will carry out initial planning based on policies and procedures set by the public accounting firm, namely procedures Client Acceptance and Continuance.
Such procedures are carried out to ensure that auditors will only accept clients with standards that are in accordance with the policy.
Based on International Standard on Quality Control 1, the auditor will review the procedure of client acceptance or continuation of the relationship based on the following factors:
- Ascertain the background of the client's company, such as structure, type, reputation, and more
- Communicating with previous auditors (if klein was audited by another auditor previously)
- Involves the help of experts in a particular field
- Selecting audit team members
- Receive an engagement letter to express agreement and understanding
2. Understanding The Audit Process
This audit planning stage includes the auditor and client's understanding of the roles, responsibilities, and provisions in the attached engagement letter such.
3. Audit Strategy Development
In the planning stage of this audit, the auditor will develop a strategy as a weapon to face the risk of misrepresentation in the financial statements, such as errors or fraud.
The development of the strategy is carried out to ensure the effectiveness and efficiency of the audit process based on the results of analytical procedures on the condition and scope of the client's business.
As a dynamic audit progresses, strategies may change based on generating different information than before. The development of the strategy includes the following aspects:
- Understand characteristics related to the audit process, such as financial statement framework and Industry Type
- Set reporting dates, such as audit deadlines and team work schedules
- Determining the level of materiality based on assets, net income, or business revenue
- Identify audit risk and evaluate internal control
- Planning the use of resources
4. Selection Of Audit Members
The next stage of audit planning is to select members audit team based on its competence to the client's business industry.
In addition to its expertise aspects, the usual audit team consisting of colleagues, managers, senior audit staff, and junior staff must understand the Professional Standards and code of ethics of accountants.
Read Also: Internal Audit Code of ethics as a standard in the implementation of Internal Audit
5. Consideration Of Expert Assistance
Based on ISA (International Standard of Auditing) 620, an expert is said if he has the ability, expertise, and experience that is qualified in a particular field outside the competence of an auditor.
Considering involving experts is one of the things that must be done in building an audit strategy, especially in the valuation of certain accounts in material financial statements.
6. Understanding Of Client's Business Environment
Based on ISA 310, the client's business environment conditions include the internal and external environment of the business, the economic conditions of the industry, financial reporting regulations, and the impact of business competition.
Understanding the condition of the client's business environment is important, because it allows auditors to assess the risk of misstatement in the financial statements of each industry and company.
An understanding of the conditions of the business environment and the results of the risk assessment can be used to determine the amount and scope audit evidence that needs to be collected.
7. Risk Assessment
This audit planning stage is carried out after the auditor understands the scope of the client company.Where risk assessment is used to review the effectiveness of implementation internal control which refers to kerangka COSO (Committee of Sponsoring Organizations of the Treadway Commission).
8. Analytical Procedure
Based on ISA (International standard Auditing) 520 which states that auditors need to consider the client's financial statements with several other considerations in carrying out analytical procedures.
Among those that need to be considered to identify any irregularities in the financial statements are the following:
a. Company and Auditor expectations
Where the auditor will compare the financial statements with the expectations of the company in the form of budget or forecast report and expectations of the auditor in the form of calculation of the auditor regarding the estimated amount of depreciation expense by the method used by the company
b. Financial information of companies in similar industries
Where the auditor will compare the financial ratios of the client company with other companies from the same industry to identify differences.
c. Financial information of the company in the previous period
Where auditors will look at the company's financial data from year to year to identify significant increases and decreases in certain accounts.
This allows the auditor to review the causes and design procedures to deal with them.
Audit Planning Example
Based on planning audits conducted by SILK or a timber legality Information System that includes information on the initial assessment audit plan.
The audit plan includes verification of timber legality against each part of the Auditee management system, document verification, field reviews, and interviews.
In the audit planning of PT Thaka Sukses Mandiri, there is some information about the company, such as the type of business license, production capacity, office address, factory location, scope of certification, acua standards, and others.
Audit planning for this type of initial assessment audit is carried out remotely, precisely on November 2, 2020 – November 3, 2020.
Audit planning also encloses the name of the auditor, the language used during the audit, and the area of certification, which in this case are all parts of the timber legality verification management system (VLK).
Furthermore, the audit planning also allocates audit time for 2 to 3 November 2020.
On November 2, 2020, at 10.00-12.00 WIB there are several activities, such as: 1. Opening meeting; 2. Interview with a partner; 3. Verification of documents P1 (legality), P2 (raw materials and production), P3 (sales), P4 (K3, employment).
At 13.00-15.00 WIB will be carried out several activities, such as: 1. Verification of documents P1 (legality) and P4 (K3); 2. Verification of documents P2 (raw materials, production) and P3 (sales).
As for November 3, 2020, at 10.00-12.00 WIB, field observation activities will be carried out (raw materials, production processes, and K3 implementation).
At 3 o'clock 15.00-17.00 WIB on the same day, an activity to confirm documents and closing meeting.
Conclusion
Such is a complete explanation of audit planning before carrying out a thorough examination of certain aspects.
In carrying out audits, you and the company's audit team can use Audithink to conduct audit planning, task management, filling audit paper, reporting audit results, to the monitoring phase of the implementation of the action plan.
In the audit process, Audithink is an application that allows you to optimize operations and mitigate risks, so as to produce quality output.
Then what are you waiting for? Immediately schedule an app demo to try Audithink!
