Flashcards in Overall Audit Plan and Audit Program Deck (3):
Explain the scope of an Audit Plan
The scope of the audit plan depends on the size of the company, the complexity of the audit, and on the previous experience of the auditor with the audited company and his knowledge about the company’s business and environment.
An important component of the audit plan is the acquisition of knowledge about the business and the environment of the organization. This knowledge serves the external auditor to identify events, transactions or practices that may have a significant influence on the financial statements.
It may be useful to discuss parts of the audit strategy or certain procedures with the management, the supervisory board, the internal audit or other employees of the organization in order to:
(1) Increase the effectiveness and efficiency of the audit
(2) Coordinate audit procedures within the organization
How about the Audit Strategy?
The external auditor has to develop and document an audit strategy which focuses on the expected scope and the expected procedures of the audit.
Aspects which must be considered regarding the development of the audit strategy:
(1) Knowledge of the business and the environment of the organization
(2) Understanding of the organization’s accounting and its internal control system
(3) Risk and probability
(4) Type, time and scope of procedures
(5) Coordination, guidance, supervision and control
(6) Further related aspects (e.g., going concern criterion)