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Thread: Standard on Auditing-300 (SA-300)- (Revised) "Planning an Audit of Financial Statements"

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    Post Standard on Auditing-300 (SA-300)- (Revised) "Planning an Audit of Financial Statements"

    Standard on Auditing (SA) 300, "Planning an Audit of Financial Statements"

    Standard on Auditing (SA) 300, "Planning an Audit of Financial Statements" should be read in the context of the "Preface to the Standards on Quality Control, Auditing, Review, Other Assurance and Related Services2," which sets out the authority of Standards on Auditing (SAs).
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    Default Introduction of Revised Standard on Auditing (SA) 300 - Planning an audit of financial statements

    Introduction of Revised Standard on Auditing (SA) 300 - Planning an audit of financial statements

    Scope of this SA

    1. This Standard on Auditing (SA) deals with the auditor's responsibility to plan an audit of financial statements. This SA is framed in the context of recurring audits. Additional considerations in initial audit engagements are separately identified. (Ref: Para.A1-A4)

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    Default Effective Date of Revised Standard on Auditing (SA) 300 - Planning an audit of financial statements

    Effective Date

    This SA is effective for audits of financial statements for periods beginning on or after 1st April, 2008

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    Default Objective of Revised Standard on Auditing (SA) 300

    Objective of Revised Standard on Auditing (SA) 300

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

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    Default Requirements of Involvement of Key Engagement Team Members of Revised Standard on Auditing (SA) 300

    Requirements of Involvement of Key Engagement Team Members of Revised Standard on Auditing (SA) 300


    4. The engagement partner and other key members of the engagement team shall be involved in
    planning the audit, including planning and participating in the discussion among engagement
    team members. (Ref: Para. A5)

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    Default Preliminary Engagement Activities of Revised Standard on Auditing (SA) 300

    Preliminary Engagement Activities


    5. The auditor shall undertake the following activities at the beginning of the current audit engagement:

    a. Performing procedures required by SA 2203, "Quality Control for Audit Work" regarding the continuance of the client relationship and the specific audit engagement;

    b. Evaluating compliance with ethical requirements, including independence, as required by A 220; and

    c. Establishing an understanding of the terms of the engagement, as required by SA 2104, "Terms of Audit Engagements". (Ref: Para. A6-A8)

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    Default Planning Activities of Revised Standard on Auditing (SA) 300

    Planning Activities


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

    7. In establishing the overall audit strategy, the auditor shall:

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

    b. Ascertain the reporting objectives of the engagement 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, where 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 (Ref: Para. A9-A12)


    8. The auditor shall develop an audit plan that shall include a description of:

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

    b. The nature, timing and extent of planned further audit procedures at the assertion level, as
    determined under SA 3306, "The Auditor's Responses to Assessed Risks".

    c. Other planned audit procedures that are required to be carried out so that the engagement complies with SAs. (Ref: Para. A13)

    9. The auditor shall update and change the overall audit strategy and the audit plan as necessary during the course of the audit. (Ref: Para. A14)

    10. The auditor shall plan the nature, timing and extent of direction and supervision of engagement team members and the review of their work. (Ref: Para. A15-A16)

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    Default Documentation of Revised Standard on Auditing (SA) 300

    Documentation


    11. The auditor shall document:

    a. The overall audit strategy;
    b. The audit plan; and
    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: Para. A17-A20)

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    Default Additional consideration in Initial Audit Engagements of Standard on Auditing (SA) 300

    Additional consideration in Initial Audit Engagements


    12. The auditor shall undertake the following activities prior to starting an initial audit:

    a. Performing procedures required by SA 220 regarding the acceptance of the client relationship and the specific audit engagement; and

    b. Communicating with the predecessor auditor, where there has been a change of auditors, in compliance with relevant ethical requirements. (Ref: Para.A21)

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    Default Application and Other Explanatory Material The Role and Timings of Planning of Standard on Auditing (SA) 300

    Application and Other Explanatory Material The Role and Timings of Planning (Ref: Prara.1)


    A1. 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 to 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 organise 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 the proper assignment of work to them.
    Facilitating the direction and supervision of engagement team members and the review of
    their work.
    Assisting, where applicable, in coordination of work done by auditors of components7
    and experts.

    A2. The nature and extent of planning activities will vary according to the size and complexity of
    the entity, the key engagement team members' previous experience with the entity, and changes
    in circumstances that occur during the audit engagement.

    A3. Planning is not a discrete phase of an audit, but rather a continual and iterative process that
    often begins shortly after (or in connection with) the completion of the previous audit and continues until the completion of the current audit engagement. Planning, however, includes consideration of the timing of certain activities and audit procedures that need to be completed prior to the performance of further audit procedures. For example, planning includes the need to consider, prior to the auditor's identification and assessment of the risks of material misstatement, such matters as:

    The analytical procedures to be applied as risk assessment procedures.
    Obtaining a general understanding of the legal and regulatory framework applicable to the entity and how the entity is complying with that framework.
    The determination of materiality.
    The involvement of experts.
    The performance of other risk assessment procedures.

    A4. The auditor may decide to discuss elements of planning with the entity's management to facilitate the conduct and management of the audit engagement (for example, to coordinate some
    of the planned audit procedures with the work of the entity's personnel). Although these discussions often occur, the overall audit strategy and the audit plan remain the auditor's responsibility. When discussing matters included in the overall audit strategy or audit plan, care is required in order not to compromise the effectiveness of the audit. For example, discussing the nature and timing of detailed audit procedures with management may compromise the effectiveness of the audit by making the audit procedures too predictable.

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