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

Sunrise Textiles Ltd. has appointed M/s Rao & Co. as statutory auditor for the first time. The audit partner is drawing up the audit plan for the year. Which of the following is the correct statement about the timing and nature of the auditor's planning activities under SA 300?

Under SA 300, audit planning is a continual and iterative process that runs through the whole engagement, not a one-time phase. The auditor updates the strategy and plan when circumstances change, and the engagement partner and key team members take part in it.

  1. APlanning is a discrete phase that starts only after the audit of the previous year is signed off and ends when fieldwork begins
  2. BPlanning is a continual and iterative process throughout the audit, and the auditor may need to update the strategy and plan as circumstances changeCorrect
  3. CPlanning is the responsibility of the audit staff alone and the engagement partner need not take part in it
  4. DPlanning is required only for first-year audits; for continuing engagements, the previous year's plan may be reused without change

Explanation

SA 300 states that planning is not a discrete phase but a continual and iterative process, often starting soon after the previous audit is completed and continuing until the current audit ends. The plan may be updated as unexpected events or conditions arise. The option calling it a discrete phase is wrong because it contradicts this iterative nature.

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