What is the audit plan?
After outlining the audit strategy, the audit team should outline in writing, the audit plan based on the previously outlined nature, extent, and timing requirements in the audit strategy. The audit plan should be made in writing and specific procedures must be documented. The audit plan consists of risk assessment procedures, testing of controls, and substantive procedures (evidence gathering activities).
The audit team should outline the following in the audit plan:
1) Risk assessment procedures that will be used to obtain an understanding of the client. Required risk assessment procedures consist of analytical procedures and inquiries. Risk assessment procedures are applied to better understand areas of materiality, heightened risks of material misstatements, operating effectiveness of internal controls etc.
2) Test of controls that will be used to evaluate the overall design and operating effectiveness of internal controls in attempting to prevent or detect material misstatements by the client’s management.
3) Substantive procedures will be used to detect material misstatements which will include various tests of details (e.g. reconciliation, confirmation, footing etc.)
4) The timing of the audit procedures should be documented in the audit plan.
5) The overall necessity of information technology to the financial reporting entity.
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