ISA 300: Audit Planning

• The International Standard on Auditing (ISA) 300 addresses the auditor's responsibility to plan the audit of financial statements, particularly in recurring audits, with separate considerations for initial audit engagements
• Effective for audits of financial statements for periods beginning on or after December 15, 2009
• The auditor's objective is to plan the audit for effective execution

Scope of ISA 300

• Focuses on an auditor’s duty to plan financial statement audits conducted regularly, while pointing out extra factors for first-time audits
• Planning an audit includes setting an overall audit approach and creating a detailed audit plan
• Quality management, as per ISA 220 (Revised), along with proper planning, enhances the audit of financial statements
• Adequate planning ensures due attention to important audit areas
• Adequate planning helps in the prompt identification and resolution of potential issues
• Proper planning ensures structured, effective and efficient audit execution
• Selection of team members are made based on skills to handle expected risks
• Planning streamlines direction, supervision, and review
• A planned process facilitates coordination among auditors specializing in various components

Requirements

• Key members, including the engagement partner, should discuss and participate in audit planning
• At the audit's start, auditors should follow ISA 220 (Revised) for client relationship and specific audit engagement approval
• Auditors should assess ethical and independence compliance per ISA 220 (Revised)
• Auditors should understand engagement terms, as required by ISA 210

Planning Activities

• Auditors must establish an audit strategy that defines the audit’s scope, timing, and direction, influencing the audit plan's creation
• Auditors should use insights from ISA 220 (Revised) to establish an audit strategy, along with identifying engagement characteristics that define scope
• An audit strategy consists of determining reporting goals to schedule the audit and communications
• An audit strategy considers significant factors influencing the team's efforts, reviews preliminary activities' results, and uses relevant insights from other engagements
• An audit strategy ascertains resources needed for the engagement
• An audit plan should describe planned direction and supervision of team members
• An audit plan should include planned risk assessment procedures, as determined under ISA 315 (Revised 2019)
• An audit plan should include further audit procedures at the assertion level, as determined under ISA 330
• An audit plan should ensure ISA compliance
• Strategy and plan should be updated as needed during the audit

Documentation

• All documentation should have the overall audit strategy recorded
• All documentation should have the audit plan included
• All documentation should have noteworthy changes and their reasons recorded

Initial Audit Engagements

• Auditors should do initial client relationship checks and audit engagements
• Auditors should correspond with the prior auditor, given ethical standards are met

Insights from ISA 220 (Revised)

• ISA 220 (Revised) details the auditor’s quality management duties and engagement partner responsibilities
• Information obtained from complying with the requirements of ISA 220 (Revised) is relevant
• Engagement partners must ensure the team has enough resources, considering the audit's nature
• This determination affects resource allocation in the overall audit strategy

Nature and Extent of Planning Activities

• Planning activities vary with entity size, complexity, team familiarity, and changing conditions
• Project management techniques in planning can improve engagement quality, as noted in ISA 220 (Revised)
• Analytical procedures are risk assessment methods
• An understanding of the legal and regulatory framework and compliance
• Auditors consider the timing of procedures before further actions, like analytical procedures for risk assessment, and determination of materiality

Discussions with Management

• Discussing planning elements with management can improve conduct, management, and quality, such as aligning audit procedures with the entity's work
• However, the audit strategy and plan remain the auditor's responsibility
• Care is needed to avoid compromising the audit's effectiveness when discussing the audit strategy/plan

Preliminary Engagement Activities

• Preliminary tasks include client continuation assessments and ethical evaluations
• Ensure independence and ability to engage
• Determine management integrity issues
• Determine client/auditor terms are understood
• Initial procedures completed before other significant ones

Overall Audit Strategy Matters

• The audit strategy formalization includes resource considerations, specifically, experienced teams for high-risk areas
• Address complex issues, resource allocation, and timing
• Address onsite or offsite engagement partner and manager reviews

Audit Plan Details

• The audit plan builds upon the audit strategy with detailed procedures
• Assessment procedures occur early, while further ones depend on risk assessment results
• Execution of some procedures may start before full planning

Disclosures Importance

• Determining the nature, timing, and extent of procedures for disclosures is important
• Consider wide-ranging information and detail levels
• Early disclosure consideration helps plan and address them thoroughly, like other elements
• This early consideration helps determine the effects of new or revised disclosures

Strategy Changes

• Auditors may adjust strategy and plan due to unexpected events or audit evidence
• Change adjustments are based on reassessed risks
• Substantive procedure evidence may contradict control tests

Documentation Rationale

• The audit strategy documentation records decisions for quality and communicates matters to the team
• For instance, a memorandum summarizes key decisions on scope, timing, and conduct
• The audit plan documentation records risk assessment and further procedures at the assertion level
• The audit plan serves as a record of properly planned procedures that can be reviewed
• Significant changes in overall strategy and audit plan should be documented to explain why and reflect the appropriate action

Small Entity Considerations

• Smaller entities' audits are conducted by small teams
• Clear communication is easier, but the strategy need not be complex
• A brief memo from the prior audit, updated with current discussions, can serve as the strategy

Special circumstances for Initial Audits

• Initial audits may need more extensive planning
• This is because of lack of previous experience with the entity
• Communication with predecessor auditors is required
• Communication with management during the auditor selection process, especially regarding accounting principles and auditing standards, is required
• There is an increased need to gain evidence regarding the opening balances of accounts