Annual Audit Manual
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4023 Planning activities
Sep-2016
Overview
This section explains:
- Audit file structure related to planning activities
- How to determine whether to perform full planning and completion* activities in respect of an audit unit
- The deletion of a Procedure step
*Aspects of completion activities work are explained here because the processes follow the same principles as for planning activities; therefore duplication in the Audit Manual is avoided. To understand the completion stage context for executing these activities refer to OAG Audit 9001.
OAG Guidance
Planning activities include those procedures that are performed during the planning phase of the audit. Within the Annual Audit procedures cabinet, the procedures are organized under the following folders and subfolders:
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Client Acceptance and Engagement Management (Annual Audit cabinet) |
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Understand the Business and Assess Risk (Annual Audit cabinet) |
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Develop Strategy and Plan (Annual Audit cabinet) |
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Group Audit (Annual Audit Procedures—Supplement cabinet) |
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Smart Planning libraries phases (sections)
- Plan for Planning. This phase defines the tasks, sequence, resources, and timetable necessary to complete planning to meet the goals of the engagement, incorporating key prerequisite activities needed to confirm that we can accept or continue the engagement.
- Initial Procedures. This phase focuses primarily on other planning procedures, such as independence and ethics and on the engagement letter, which teams complete early in the planning process.
- Identify Risks. This phase focuses on updating our understanding of the entity to help identify risks and provide a basis for risk assessment. A thorough understanding of your client is critical to identifying risks and developing the most appropriate response to those risks.
- Develop Strategy. This phase focuses on the team’s use of information gathered in previous phases to assess the risks and determine the overall audit strategy. The engagement leader leads a team discussion to assess the risks of material misstatement due to fraud or error (including significant risks) and to agree on the overall strategy for addressing the assessed risks.
- Develop Audit Approach. This phase focuses on the development of a detailed audit plan in response to the assessed risks, including determining the appropriate controls and substantive testing strategies, and the allocation of team roles and responsibilities.
- Build Workplan. This phase builds on phases 4 and 5 and includes the documentation of the specific nature, timing, and extent of planned procedures to be performed in response to the assessed risks, including tailoring the procedures, and the finalization of a number of operational engagement matters.
- Finalize Plan. Teams, management, and those charged with governance discuss and agree on the audit plan, including timing and deliverables, and finalize planning.
OAG Guidance
At the start of the audit, determine which audit units require planning and completion activities. Even when it is not required to perform all planning and completion activities for an individual audit unit, it may still be necessary to perform certain activities.
Typically, on each engagement we perform full planning and completion activities for:
- The lead audit unit (because this audit unit represents the overall engagement and compliance with the CASs and OAG methodology is typically demonstrated at an overall engagement level).
- Each audit unit for which a separate third-party audit report is issued.
- Each audit unit that is a component for which an audit of the financial information of the component will be performed (this will apply to financially significant components and some of the components that are significant due to their risks—OAG Audit 2335).
However, there may be circumstances when it is not necessary to follow this approach. Consider the following examples:
- When the audit unit is an intermediate holding or head office company with limited transactions and no separate management or employees, we may not perform all planning activities at this level but rather at the level where operations take place.
- When audit units represent components that are not significant components, full planning and completion activities may not be necessary for each audit unit.
As noted above, the decision whether to perform full planning and completion activities is influenced by the organization of the audit (i.e., which audit units we will do work at), and also the entity’s own organization (e.g., locations, process, service). In many cases, although planning and completion activities are performed and documented in one audit unit, they may include information relating to other audit units. For example, the planning and completion activities for the lead audit unit may cover all audit units in the engagement. In such a case, some or all of the other audit units may not have any planning or completion activities, but the Audit Planning Template will contain documentation of the audit strategy and the nature of the work we intend to do for those audit units.
OAG Guidance
Procedure steps included in the Annual Audit Procedures cabinet should not be deleted. If they are not applicable to the specific audit engagement, an explanation should be provided in the Procedure steps.