Planning an Audit of Financial Statements - Completed

  • Planning an Audit of Financial Statements - Completed

    Project Status

    Project completed - June 2004.

    Staff

    Ken Siong

    Objective(s) of project

    The objective of this project was to revise ISA 300, Planning, in light of the Audit Risk Standards and recent trends in firms' audit methodologies.

    Scope

    The project dealt with the audit procedures and activities performed to properly plan the audit and supervise engagement team members to ensure that the audit is performed in an effective manner.

    Background

    Audit planning is a continual process throughout the audit engagement. In order to recognize audit planning as a continual process, and to align the guidance on audit planning with the new Audit Risk Standards, the IAASB approved a project to revise ISA 300.

    Issues

    ISA 300 (Revised) deals with planning an audit of financial statements. The revised ISA:

    • Requires the auditor to plan the audit so that the engagement will be performed in an effective manner.
    • Recognizes that planning involves the engagement partner and other key members of the engagement team to benefit from their experience and insight.
    • Recognizes that planning is not a discrete phase of the audit but, instead, a continual and iterative process that continues until the completion of the audit.
    • Requires the auditor to perform preliminary engagement activities regarding engagement acceptance and continuance, evaluation of compliance with ethical requirements including independence, and establishing an understanding of the terms of the engagement.
    • Requires the auditor to establish an overall audit strategy for the audit that sets the scope, timing and direction of the audit, and that guides the development of the more detailed audit plan.
    • Provides guidance on the overall audit strategy in terms of consideration of the resources to deploy for specific audit areas, the timing of when these resources are used, and how such resources are managed, directed and supervised.
    • Requires the auditor to develop a detailed audit plan based on the high-level direction provided by the overall audit strategy.
    • Requires the auditor to update and change the overall audit strategy and audit plan as necessary during the audit.
    • Requires the auditor to plan the nature, timing and extent of direction and supervision of engagement team members and review of their work.
    • Establishes documentation requirements.

     

    Task Force progress / Board discussions to date

    The IAASB approved the proposed ISA 300 (Revised) in June 2004. The revised ISA is effective for audits of financial statements for periods beginning on or after December 15, 2004.

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