Page 34 - CA Inter Audit PARAM

CA Ravi Taori
the more detailed audit plan. The process of establishing the overall audit strategy assists the auditor to
determine such matters as for example - the resources to deploy for specific audit areas, such as the use
of appropriately experienced team members for high risk areas or the involvement of experts on complex
matters. Explain the other three such matters."
OR
Describe how the process of establishing the overall audit strategy assists the auditor in marshalling his
human resources.
Answer ➢ 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.
➢ The process of establishing the overall audit strategy assists the audit or to determine, subject to
the completion of the auditor’s risk assessment procedures, such matters as:
The amount of resources to allocate to specific audit areas, such as the number of team
members assigned to observe the inventory count at material locations, the extent of
review of other auditors’ work in the case of group audits, or the audit budget in hours to
allocate to high-risk areas;
The resources to deploy for specific audit areas, such as the use of appropriately
experienced team members for high-risk areas or the involvement of experts on complex
matters;
When these resources are to be deployed, such as whether at an interim audit stage or at
key cut-off dates; and
How such resources are managed, directed and supervised, such as when team briefing,
and debriefing meetings are expected to be held, how engagement partner and manager
reviews are expected to take place (for example, on-site or off-site), and whether to
complete engagement quality control reviews.

QNO-- Factor Significant in Directing Engagement Team's Efforts New Course – (M24E/J25M)
300.07.500 Bhaskar CNO – SA300.040

B Ltd. is a company manufacturing bed-sheets and pillow covers. They have appointed M/s C & Co.,
Chartered Accountants, as their auditors. The auditor is establishing audit strategy with his team
members. As the work progressed, they came to know that the company has diversified its business and
now they are also planning to manufacture wooden furniture. The auditor, in his professional judgement,
considers this to be a significant factor in directing the engagement team’s efforts. Give examples of
factors that, in auditor’s professional judgement, are significant in directing the engagement team’s
efforts.
Answer Consider the factors that, in the auditor’s professional judgment, are significant in directing the
engagement team’s efforts: The auditor needs to direct efforts of engagement team towards matters that
in his professional judgment are significant. Preliminary identification of material classes of transactions,
account balances and disclosures help auditor in establishing overall audit strategy. More energies need to
be devoted to significant matters to obtain desired outcomes. Few examples are listed as under: -

(i) Volume of transactions which may determine whether it is more efficient for the auditor to rely on
internal control.
(ii) Significant industry developments such as changes in industry regulations and new reporting
requirements.
(iii) Significant changes in the financial reporting framework, such as changes in accounting standards.
(iv) Other significant relevant developments, such as changes in the legal environment affecting the
entity.

QNO Relationship between Overall Audit Strategy & Audit Plan Old Course -- (SM17/M19M/SM20/SM21)
300.15 Bhaskar CNO SA300.100 New Course—(S24E/J25M)
The engagement partner, of a firm of auditors, is explaining to his audit team, undergoing practical
training, the inter relationship between audit strategy and audit plan. Discuss the points which the
engagement partner will explain to his team in this regard.

OR

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