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CA Intermediate · Auditing and Ethics · Audit Strategy, Audit Planning and Audit Programme

Sharma & Co. has been appointed auditor of Kaveri Textiles Ltd. for the first time. The audit partner proposes to prepare the audit plan only after the field work begins, so that it can be based on the actual findings. Under SA 300 (Planning an Audit of Financial Statements), what is the correct position?

The auditor must develop the audit plan at the start of the engagement and keep updating it as the audit proceeds. SA 300 treats planning as a continual, iterative process, not a one-time phase that ends when field work begins or one that can be left to management.

  1. APlanning is a continuous process and the plan should be developed at the start of the audit, with updates as needed during the engagementCorrect
  2. BPlanning is a discrete phase that ends once field work commences, so no updates to the plan are allowed afterwards
  3. CPlanning is needed only for a first-year audit and can be skipped for the audit of a continuing client
  4. DPlanning is the responsibility of the management of the company, and the auditor only reviews it

Explanation

SA 300 requires the auditor to plan the audit so that it is performed effectively. Planning is not a discrete phase but a continual and iterative process that begins soon after the previous audit ends and continues until completion. The plan is updated as circumstances change, so building it only after field work begins is wrong.

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