The Professional Standards on Audit Planning
Planning and Supervision, SAS No. 108, requires the auditor to:
• Obtain an engagement letter.
• Evaluate client continuance.
• Develop an overall audit strategy.
• Develop a written audit plan (audit program).
• Determining the extent of involvement of professionals possessing specialized skills
• Inform assistants of their responsibilities.
• Review the work of assistants.
Engagement planning is an on-going process; it takes place throughout an engagement. Original plans are often modified as additional information and unusual matters come to our attention while performing the engagement. SAS No.108 requires these specific components of the audit plan:
• A description of the nature, extent and timing of planned risk assessment procedures considering the requirements of:
SAS No. 107—Audit Risk and Materiality in Conducting an Audit
SAS No. 109—Understanding the Entity and its Environment and
Assessing the Risks of Material Misstatements
• A description of the nature, extent and timing of planned further audit procedures at the relevant assertion level for each material class of transactions, account balance and disclosure as determined under:
SAS No. 110—Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained
• A description of other audit procedures to be carried out for the engagement to comply with generally accepted auditing standards.
In the weeks ahead, we’ll drill down to the specifics of audit planning, particularly for small audits. Get your comments, problems and questions ready to post!
by Larry Perry, CPA, CPA Firm Support Services, LLC - Larry has over 40 years experience as a CPA practitioner, author of accounting and auditing manuals, author and presenter of live staff training seminars and author of webcast and self-study CPE programs. He is co-founder of CPA Firm Support Services, LLC (www.cpafirmsupport.com), an organization providing resources, training and consulting to smaller CPA firms. Larry writes a weekly blog on AccountingWEB.com focusing on small audits, reviews and compilations. He is currently developing documentation manuals and handbooks for small audits, reviews and compilations and related electronic practice aids.