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

While planning the audit of Kaveri Pharma Ltd., the auditor CA Mehta decides to use the work of the company's internal auditor and to rely on controls to reduce substantive testing in the receivables area. Which of the following is the best description of where this decision is documented in the planning process?

The decision to rely on controls and to use the internal auditor's work is documented in the overall audit strategy and the detailed audit plan under SA 300. These documents record the nature, timing and extent of planned procedures, and the auditor must keep them on file.

  1. AIt is recorded only in the management representation letter obtained at the end of the audit
  2. BIt forms part of the overall audit strategy and the detailed audit plan, which address the nature, timing and extent of further audit proceduresCorrect
  3. CIt is recorded only in the audit report under Key Audit Matters
  4. DIt need not be documented as it is a matter of the auditor's professional judgment

Explanation

The overall audit strategy sets the scope, timing and direction, including the nature of reliance on controls and use of internal audit work. The audit plan is more detailed and covers the nature, timing and extent of planned procedures. The representation letter is obtained at the end and is not a planning document, and SA 300 requires documentation of the strategy and plan.

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