Annual Audit Manual
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4022 Develop and document the audit strategy
Apr-2018
CAS Requirement
The auditor shall include in the audit documentation: the overall audit strategy (CAS 300.12(a))
CAS Guidance
The documentation of the overall audit strategy is a record of the key decisions in managing quality at the engagement level and a means to communicate significant matters to the engagement team. For example, the auditor may summarize the overall audit strategy in the form of a memorandum that contains key decisions regarding the overall scope, timing and conduct of the audit (CAS 300.A19).
OAG Guidance
We use the following processes and recording features to document the audit strategy.
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In the audit working paper software, various planning Procedure steps
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The Audit Planning Template, which links our understanding of business objectives and risks to the impact on the audit, and links significant risks identified to our planned responses
Develop and document the audit strategy
OAG Guidance
The table below lists key elements of the audit strategy and where these are documented in the audit working paper software. To effectively perform these procedures, an understanding of the entity and its environment is needed.
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Key stages in developing the audit strategy |
Documented in folders |
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Identify the characteristics of the engagement that define its scope |
Client Acceptance and Engagement Management |
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Determine reporting objectives for the audit and resulting timelines |
Client Acceptance and Engagement Management |
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Determine nature of communications to be made, with whom those communications will be made and the timelines |
Client Acceptance and Engagement Management |
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Identify any external factors (e.g., industry or economic developments) that affect the entity and which could result in a risk of material misstatement |
Understand the Business and Assess Risk |
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Determine overall materiality, performance materiality, materiality for particular classes of transactions, account balances or disclosures and the de minimis SUM posting level |
Materiality template in the Materiality folder |
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Carry forward significant risks and control environment considerations from A&C |
Audit Planning Template |
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Identify areas where there may be higher risk of material misstatement (i.e., significant risks) and the impact of the assessed risks of material misstatement at the overall financial statement level on direction of the audit, the supervision of the engagement team and the review of work |
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Update the understanding of the entity, e.g., management’s commitment to the design, implementation and maintenance of sound internal control and significant business developments affecting the entity. |
Understand the Business and Assess Risk |
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Perform preliminary identification of In Scope FSLIs |
Audit Planning Template |
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Evaluate expectation to place any reliance on the operating effectiveness of controls and consequently the evidence expected to be gathered from substantive testing (which collectively can be described as our testing strategy) |
Audit Planning Template |
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Determine the impact of IT on the audit procedures, including the availability of data and the expected use of CAATs |
Understand the Business and Assess Risk |
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Determine whether we expect to place reliance on the work of internal audit, service organizations or audit evidence obtained in previous audits |
Develop Strategy and Plan |
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Determine nature, timing and extent of resources necessary to perform the audit, including the need to involve specialists in accounting or auditing and experts |
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Assign work to engagement team members with appropriate levels of capabilities and competence to respond to anticipated risks |
Client Acceptance and Engagement Management |
Related Guidance
For guidance on the Audit file structure, see OAG Audit 4023.
For guidance on materiality, see OAG Audit 2100.
For guidance on scoping FSLIs, see OAG Audit 4031.
For guidance on the Audit Planning Template, see OAG Audit 4031, OAG Audit 4032, and OAG Audit 5043.1.