CA Intermediate · Auditing and Ethics

Audit Strategy, Audit Planning and Audit Programme: formula sheet

Full chapter guide

Key formulas

Overall audit strategy: Overall audit strategy = scope + timing + direction of the audit; It guides the development of the detailed audit plan.
Audit plan: Audit plan = risk assessment procedures + further audit procedures + other procedures required by SAs (each with nature, timing and extent); It is more detailed than the strategy.
Planning is continual: Planning is iterative: strategy and plan can be updated during the audit; Document significant changes and the reasons for them.
Documentation requirement: Document: overall audit strategy, audit plan, and significant changes with reasons; This is the SA 300 documentation requirement.
Engagement partner involvement: Engagement partner and key team members take part in planning; This includes discussion among the team (SA 315 team discussion).
Three preliminary engagement activities: Continuance procedures (SA 220) + Ethics and independence evaluation + Understanding of engagement terms (SA 210); Performed at the start of the current audit. Learn all three; exams ask you to list them.
Planning is continual: Planning = continual and iterative process, from the end of the previous audit until completion of the current audit; Never write that planning is a one-time stage.
Strategy versus plan: Overall audit strategy = scope, timing, direction. Audit plan = nature, timing and extent of specific procedures; The plan is more detailed than the strategy. Strategy comes first.
Benefits of planning: Attention to important areas, timely problem resolution, efficient management, right team selection, direction and review, coordination of others' work; Use as a checklist for any advantages question.
Communication with TCWG on planning: Discuss scope and timing. Do not compromise effectiveness. Do not hand over detailed procedures; The auditor keeps responsibility for strategy and plan.
Planning hierarchy: Overall audit strategy → Audit plan → Audit programme; Strategy is broad, plan is more detailed, programme is the step-by-step procedures. Use this to answer difference questions.
What a programme states: Procedures + Nature + Timing + Extent + Responsible person + Sign-off; Use this as a checklist when asked what an audit programme contains.
Programme versus working papers: Programme = what is to be done; Working papers = what was done and found; A programme is forward-looking. Working papers are the record of work done.
Modification rule: New information or changed risk → revise procedures → document the change and reason; Planning continues throughout the audit. Changes must be recorded.
Purposes of audit procedures: Risk assessment procedures + Tests of controls + Substantive procedures; Inquiry alone does not suffice for any of them. Substantive procedures are tests of details and substantive analytical procedures.
Procedure list: Inspection, Observation, External confirmation, Recalculation, Reperformance, Analytical procedures, Inquiry; Learn this list as the seven procedures in SA 500. Know one example of each.
Reliability of evidence: External > Internal; Direct > Indirect; Documentary > Oral; Original > Copy; These are general rules, not absolute. Internal evidence from strong controls can be more reliable than external evidence from a doubtful source.
Sufficiency and appropriateness: Audit evidence = Sufficiency (quantity) + Appropriateness (relevance and reliability); Higher assessed risk needs more evidence. Better quality evidence reduces the quantity needed, but poor quality cannot be fixed by more quantity.
What planning documentation must contain (SA 300 with SA 230): Overall audit strategy + Audit plan + Significant changes during the audit and reasons; The audit plan covers risk assessment procedures, further audit procedures and other planned procedures to meet SAs.
Quality control elements (SA 220): Team with right competence and time + Direction + Supervision + Review, all ongoing and interlinked, under the engagement partner's overall responsibility for quality; These are not a strict sequence. Direction, supervision and review run together through the audit and feed into each other. The engagement partner is ultimately responsible for the direction, supervision and review of the engagement and for its overall quality.
Reliance on an auditor's expert (SA 620): At planning: plan to evaluate Competence + Capabilities + Objectivity. During the audit: evaluate Adequacy of the expert's work. Then rely.; Competence, capabilities and objectivity are planned and assessed early. Adequacy of the work is evaluated during the audit, before you rely on it. The auditor has sole responsibility for the audit opinion, and using an expert does not reduce this.
Reliance on a component auditor (SA 600): Professional competence + Independence + Involvement of group engagement team = Basis to use their work; Under SA 600 (Revised), the group engagement partner is responsible for the direction, supervision and review of component auditors' work and for the group audit opinion. Using component auditors does not reduce this responsibility.
Revision of plan: New information → Revise strategy and plan → Change nature, timing, extent → Document; Also communicate significant changes to those charged with governance where relevant.

Quick revision

Planning is a continuing process that begins at the start of the engagement and is updated as needed.
The overall audit strategy sets scope, timing and direction of the audit.
The audit plan is more detailed than the strategy and sets the nature, timing and extent of procedures.
The audit programme is the set of detailed audit steps for each area, giving instructions to the team.
Strategy and plan are closely linked, and changes in one may need changes in the other.
Preliminary activities include deciding on acceptance or continuance and agreeing the terms of engagement.
Audit procedures include inspection, observation, inquiry, confirmation, recalculation, reperformance and analytical procedures.
Inquiry alone is not enough to get sufficient appropriate audit evidence.
The engagement partner is responsible for direction, supervision and review of the work.
Document the strategy, the plan and any significant changes made during the audit.
A programme should be updated when the auditor's risk assessment changes.
MCQs have no negative marking, so attempt every one.

Common mistakes

Treating the strategy and the plan as the same thing. Fix: Remember: strategy is scope, timing, direction; plan is the detailed procedures. The strategy guides the plan.
Saying planning is a phase that ends before fieldwork. Fix: State that planning is continual and iterative and can be revised throughout the audit.
Treating planning as a one-time stage before fieldwork. Fix: Write that planning is continual and iterative, and the plan is updated as needed.
Listing fewer than three preliminary engagement activities, often missing the ethics and independence evaluation. Fix: Memorise: continuance, ethics and independence, terms of engagement.
Treating audit plan and audit programme as the same thing. Fix: Remember the order: strategy, plan, programme. The plan is the approach. The programme is the detailed procedures and who does them.
Saying the programme cannot be changed once approved. Fix: State that the programme is revised when risks or circumstances change, and that the change and reason are documented.
Treating recalculation and reperformance as the same thing. Fix: Recalculation is checking arithmetic accuracy. Reperformance is independently executing a procedure or control, such as re-doing a bank reconciliation.
Calling a physical stock count watched by the auditor 'inspection' instead of observation. Fix: If the auditor watches the entity's staff doing the count, it is observation. Examining the inventory items themselves is inspection.
Saying the auditor is relieved of responsibility when an expert or component auditor is used. Fix: Write that responsibility for the audit opinion is not reduced by using an expert or component auditor. For an expert, plan to evaluate competence, capabilities and objectivity, and evaluate the adequacy of the work during the audit. For a component auditor, understand competence, independence and involvement, and note that the group engagement partner directs, supervises and reviews their work.
Treating the audit plan as fixed after approval. Fix: State that planning is continuous and the strategy and plan are updated when new information arises, with the changes documented.

Exam tips

Expect a 'distinguish' or 'state the contents' question. Use headings and short bullets.
In MCQs, watch for options that say the plan cannot be changed. They are wrong.
In scenario questions, quote case facts and map each to strategy or plan.
Do not forget the engagement partner and key team members' involvement in planning, and the documentation requirement.
Link to SA 315 and SA 230 in one line when relevant, but do not go into detail.
Learn the three preliminary activities as a fixed list. They are a common short question.
In 'comment' or case questions, check first whether the action breaks a rule: one-time planning, partner absent, or detailed plan shared.
For benefits, write four to six crisp bullets. Do not write long paragraphs.