Audit Planning

Understanding the business

The auditor starts by studying the company's operations: which transactions dominate, how the document flow works, which areas are automated and which are handled manually. Without this, it is impossible to tell a normal figure from an anomalous one.

Materiality

Materiality is the threshold beyond which a misstatement could influence the decisions of users of the financial statements. It is calculated from financial statement figures and determines both the depth of procedures and which errors found will need correcting and which will stay on the list of immaterial items.

Risk assessment and sampling

• Areas where the likelihood of material misstatement is higher are identified
• The reliability of internal control in those areas is assessed
• Where controls are reliable, the volume of substantive testing is reduced
• Where controls are weak, the sample is expanded, up to testing the whole population

Stages under ISA 300/315/320

• overall strategy — scope, timing, team;
• understanding the business, the industry and the internal control system;
• assessing the risks of material misstatement;
• calculating materiality;
• the audit plan — specific procedures for each area.

Contract and timing

• audit services are provided under a contract (Article 31 of Law ZRU-677 "On Auditing Activity");
• the company must create the conditions and provide documents within the contractual deadlines (Article 37);
• for a mandatory audit, the schedule is built around the deadline for publishing and submitting the financial statements with the audit opinion.

What the company can do

• close the books and carry out the inventory count before fieldwork begins;
• prepare a list of related parties and key contracts;
• appoint a person responsible for the auditor's requests.