AU-C Section 300: Planning an Audit

"Introduction

Scope of This Section

.01 This section addresses the auditor's responsibility to plan an audit of financial statements. This section is written in the context of recurring audits. Additional considerations in an initial audit engagement are separately identified in this section. Matters related to planning audits of group financial statements are addressed in section 600, Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors). (Ref: par. .A1–.A3)

The Role and Timing of Planning

.02 Planning an audit involves establishing the overall audit strategy for the engagement and developing an audit plan. Adequate planning benefits the audit of financial statements in several ways, including the following:

• Helping the auditor identify and devote appropriate attention to important areas of the audit

• Helping the auditor identify and resolve potential problems on a timely basis

• Helping the auditor properly organize and manage the audit engagement so that it is performed in an effective and efficient manner

• Assisting in the selection of engagement team members with appropriate levels of capabilities and competence to respond to anticipated risks and allocating team member responsibilities

• Facilitating the direction and supervision of engagement team members and the review of their work

• Assisting, when applicable, in coordination of work done by auditors of components and specialists

Effective Date

.03 This section is effective for audits of financial statements for periods ending on or after December 15, 2012.

Objective

.04 The objective of the auditor is to plan the audit so that it will be performed in an effective manner."

".05 The engagement partner and other key members of the engagement team should be involved in planning the audit, including planning and participating in the discussion among engagement team members. (Ref: par. .A4–.A5)"

".06 The auditor should undertake the following activities at the beginning of the current audit engagement:

a. Performing procedures required by section 220, Quality Control for an Engagement Conducted in Accordance With Generally Accepted Auditing Standards, regarding the continuance of the client relationship and the specific audit engagement

b. Evaluating compliance with relevant ethical requirements in accordance with section 220

c. Establishing an understanding of the terms of the engagement as required by section 210, Terms of Engagement (Ref: par. .A6–.A8)"

".07 The auditor should establish an overall audit strategy that sets the scope, timing, and direction of the audit and that guides the development of the audit plan.

.08 In establishing the overall audit strategy, the auditor should

a. identify the characteristics of the engagement that define its scope;

b. ascertain the reporting objectives of the engagement in order to plan the timing of the audit and the nature of the communications required;

c. consider the factors that, in the auditor's professional judgment, are significant in directing the engagement team's efforts;

d. consider the results of preliminary engagement activities and, when applicable, whether knowledge gained on other engagements performed by the engagement partner for the entity is relevant; and

e. ascertain the nature, timing, and extent of resources necessary to perform the engagement. (Ref: par. .A9–.A13)

.09 The auditor should develop an audit plan that includes a description of the following:

a. The nature and extent of planned risk assessment procedures, as determined under section 315, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement

b. The nature, timing, and extent of planned further audit procedures at the relevant assertion level, as determined under section 330, Performing Audit Procedures in Response to Assessed Risks and Evaluating the Audit Evidence Obtained

c. Other planned audit procedures that are required to be carried out so that the engagement complies with generally accepted auditing standards (Ref: par. .A14)

.10 The auditor should update and change the overall audit strategy and audit plan, as necessary, during the course of the audit. (Ref: par. .A15)

.11 The auditor should plan the nature, timing, and extent of direction and supervision of engagement team members and the review of their work. (Ref: par. .A16–.A17)"

".12 The auditor should consider whether specialized skills are needed in performing the audit. If specialized skills are needed, the auditor should seek the assistance of a professional possessing such skills,who either may be on the auditor's staff or an outside professional. In such circumstances, the auditor should have sufficient knowledge to communicate the objectives of the other professional's work; evaluate whether the specified audit procedures will meet the auditor's objectives; and evaluate the results of the audit procedures applied as they relate to the nature, timing, and extent of further planned audit procedures. Section 620, Using the Work of an Auditor's Specialist, addresses the auditor's use of the work of specialists in an audit. (Ref: par. .A18–.A19)"

".13 The auditor should undertake the following activities prior to starting an initial audit:

a. Performing procedures required by section 220

b. Communicating with the predecessor auditor when there has been a change of auditors, in accordance with section 210 (Ref: par. .A20)"

".14 The auditor should include in the audit documentation the following:

a. The overall audit strategy

b. The audit plan

c. Any significant changes made during the audit engagement to the overall audit strategy or the audit plan and the reasons for such changes (Ref: par. .A21–.A24)"