The Planning Document is a vehicle for guiding planning activities and the engagement team’s brainstorming/planning meeting. A standardized format ensures uniformity of the planning activities among engagements and provides engagement leaders assurance that the in-charge accountant has considered all aspects of planning. The Planning Document can be presented to the engagement leader during or after the engagement team meeting or, to save time, a draft can be submitted in advance for the leader’s reading.
During the team meeting, changes in information or strategies can be reflected in the document for the leader’s final approval before fieldwork begins. Creating the planning document on a word-processing template will facilitate its revision and completion.
Here is an illustrative outline of the administrative contents of a planning document:
• Documentation of matters discussed during the engagement leader’s meeting to deliver the engagement letter.
• Planned use of client assistance or paraprofessionals.
• Planned workspace at the client’s facility.
• Assignment of staff personnel.
• Target dates.
• Use of specialists and/or other outsourced assistance.
• Electronic auditing opportunities.
• Summary of the audit time budget.
The planning document should also include summaries of these technical planning decisions:
• The assessed level of risk of material misstatement at the financial statement level, including documentation of the risk factors.
• The risk of material misstatement at the account classification levels, including documentation of the risk factors.
• A summary of tolerable misstatement and the lower limit for individually significant items at both the financial statement and account classification levels, including the auditor’s calculations and rationale.
• A summary of sampling and non-sampling decisions and rationale.
• A summary of audit strategies for material account classifications and related planned procedures.
• Significant time saving opportunities.
• Other engagement matters discussed at the engagement team meeting.
Each of these categories for a planning document will be discussed in more detail in future blogs. My Small Audit Series of webcasts and self-study courses also include detailed discussions of these subjects. You can access syllabuses and register for the webcasts or self-study courses by clicking the applicable link on the left side of my home page, www.cpafirmsupport.com