DEVELOPING THE

OVERALL AUDIT
STRATEGY
PSA 300 PLANNING AN AUDIT
OF FINANCIAL STATEMENTS

A. IDENTIFY THE CHARACTERISTICS OF THE

ENGAGEMENT THAT DEFINE ITS SCOPE

The financial reporting framework on which the financial information to be

audited has been prepared, including any need for reconciliations to another
financial reporting framework.

Industry-specific reporting requirements such as reports mandated by

industry regulators.

The expected audit coverage, including the number and locations of

components to be included (see PSA 600 Special Considerations-Audits of
Group Financial Statements Par 15, A17- A18, Appendix 2; PSA 315
(Redrafted)- Identifying And Assessing The Risks Of Material Misstatement
Through Understanding The Entity And Its Environment Par A15-A37)

The nature of the control relationships between a parent and its components
that determine how the group is to be consolidated (PSA 600 Par 10)

B. ASCERTAIN THE REPORTING OBJECTIVES OF

THE ENGAGEMENT TO PLAN THE TIMING OF THE
AUDIT AND THE NATURE OF THE
COMMUNICATIONS REQUIRED SUCH AS:

The entity's timetable for reporting, such as at interim and final stages.
(PSA 230 Audit Documentation Par 23, Par 5)

The organization of meetings with management and those charged with

governance to discuss the nature, timing and extent of the audit work
(PSA 260 Communication with Those Charged with Governance)

The discussion with management regarding the expected

communications on the status of audit work throughout the engagement.
(PSA 260 Communication with Those Charged with Governance)

C. CONSIDER THE FACTORS THAT, IN THE

AUDITORS PROFESSIONAL JUDGMENT, ARE
SIGNIFICANT IN DIRECTING THE ENGAGEMENT
TEAMS EFFORTS SUCH AS:

Determination of appropriate materiality levels (PSA 320 Materiality In

Planning And Performing An Audit)

Preliminary identification of areas where there may be higher risk of

material misstatements (PSA 450 Evaluation Of Misstatements Identified
During The Audit)

Evaluation of whether the auditor may plan to obtain evidence regarding

the effectiveness of internal control (PSA 315 Understanding the Entity
and its Environment and Assessing the Risks of Material Misstatement)

D. CONSIDER THE RESULTS OF PRELIMINARY ENGAGEMENT

ACTIVITIES AND, WHERE APPLICABLE, WHETHER
KNOWLEDGE GAINED ON OTHER ENGAGEMENTS
PERFORMED BY THE ENGAGEMENT PARTNER FOR THE
ENTITY IS RELEVANT.

Performing procedures required by PSA 220 Quality Control for

Audits of Historical Financial Information (Par 12-13) regarding the
continuance of the client relationship and the specific audit
engagement;

Evaluating compliance with ethical requirements, including

independence, as required by PSA 220 (Par 9-11) ; and

Establishing an understanding of the terms of the engagement, as

required by PSA 210, Terms of Audit Engagements.

A7. Performing these preliminary engagement activities

enables the auditor to plan an audit engagement for which,
for example:

The auditor maintains the necessary independence and

ability to perform the engagement.

There are no issues with management integrity that may

affect the auditors willingness to continue the
engagement.

There is no misunderstanding with the client as to the

terms of the engagement.

E. ASCERTAIN THE NATURE, TIMING AND EXTENT

OF RESOURCES NECESSARY TO PERFORM THE
ENGAGEMENT.
The selection of the engagement team (including, where

necessary, the engagement quality control reviewer) and

the assignment of audit work to the team members,
including the assignment of appropriately experienced
team members to areas where there may be higher risks
of material misstatement.
Engagement budgeting, including considering the

appropriate amount of time to set aside for areas where

there may be higher risks of material misstatement.

(PSA 220 Quality Control for an Audit of Financial

Statements)

ASSIGNMENT OF
ENGAGEMENT TEAMS

The engagement partner shall be satisfied that

the engagement team, and any auditors experts
who are not part of the engagement team,
collectively have the appropriate competence and
capabilities to:
Perform the audit engagement in accordance
with professional standards and regulatory and
legal requirements; and
Enable an auditors report that is appropriate in
the circumstances to be issued.

Auditing
Position

Tasks Performed

Plan and review all phases of the audit engagement

Sign the audit report
Approve the firms billing to the client
Obtain/establish contracts with clients
Determine office operating policies

Audit
Manager/
Supervisor

Act as liaison officer between partners and other members of the staff
Discuss with the client problems that may arise in the course of the audit
Exercise direct supervision on seniors in charge of specific audit engagements
Review working papers and drafts of audit report
Discuss reports and results of audit with clients
Take direct charge of training programs

In- Charge
(Senior)
Auditor

Preparation of Audit Program

Assign particular phases of audit work to staff and exercise direct supervision
over them
Perform certain audit procedures requiring skill and experience (e.g review of
articles of incorporation, by-laws and other nonfinancial records)
Take up with the client or with the partner or principal, problems or questions
that arise in the course of the audit
Assemble the working papers in an audit and prepare a draft of the report and
financial statements for review and approval by the partner and supervisor

Audit
Partner

Staff
Auditor

Prepare schedules and reports of findings

Work on tax returns
Check the accuracy of footings and extensions on books of accounts and other
records
Check the postings of entries from the journals to the ledgers
Examine vouchers supporting minor disbursements
Generally, serve as an assistant.

A11. WHEN CONSIDERING THE APPROPRIATE COMPETENCE

AND CAPABILITIES EXPECTED OF THE ENGAGEMENT TEAM
AS A WHOLE, THE ENGAGEMENT PARTNER MAY TAKE INTO
CONSIDERATION SUCH MATTERS AS THE TEAMS:

Understanding of, and practical experience with, audit

engagements of a similar nature and complexity through
appropriate training and participation.

Understanding of professional standards and regulatory and

legal requirements.

Technical expertise, including expertise with relevant

information technology and specialized areas of accounting or
auditing.

Knowledge of relevant industries in which the client operates.

Ability to apply professional judgment.

Understanding of the firms quality control policies and

procedures.

(PSA 620 Using the Work of an Auditors Expert)

DETERMINING THE NEED FOR

AN AUDITORS EXPERT

AUDITORS EXPERT
An individual or organization possessing
expertise in a field other than accounting
or auditing, whose work in that field is
used by the auditor to assist the auditor in
obtaining sufficient appropriate audit
evidence.

A1. EXPERTISE IN A FIELD OTHER THAN

ACCOUNTING OR AUDITING MAY INCLUDE
EXPERTISE IN RELATION TO SUCH MATTERS AS:

The valuation of complex financial instruments, land and

buildings, plant and machinery, jewelry, works of art, antiques,
intangible assets, assets acquired and liabilities assumed in
business combinations and assets that may have been impaired.

The actuarial calculation of liabilities associated with insurance

contracts or employee benefit plans.

The estimation of oil and gas reserves.

The valuation of environmental liabilities, and site clean-up costs.

The interpretation of contracts, laws and regulations.

The analysis of complex or unusual tax compliance issues.