Question

Audit Strategy consists of

1- Audit Scope

2- Timing

3- Direction

explain each phase

Answer 1

Audit Strategy consists of

1- Audit Scope

Before starting an audit engagement, it is very important to define its scope. While some smaller audit engagements may have smaller scope, the audit of considerably larger organisations may have a wide scope which should be thoroughly analysed and documentation by way of an engagement letter. A very simple example to clarify this is the difference in scope of audits of sole proprietorship firm vs a corporate entity. Some of the key steps involved in defining the audit scope include defining the audit objectives, understanding the client’s business segments, ensuring the availability of client’s personnel for co-ordinating the audit engagement between auditors and the audit entity, holding regular meetings for discussing audit results. The scope of audit depends upon a number of factors such as nature of business entity, volume and type of data and approachability of client.

2- Timing

It is very important for an auditor to manage the timing of audit of every entity. Different audits may have different reporting requirements depending on the statute applicable on it. For instance, some larger sized organisations may have additional compliances to be made on account of applicability of corporate governance and corporate social responsibility regulations on it. It is for this reason that an auditor should define the time required for conducting an audit and agree upon the same in line with the objectives of the management.

3- Direction

Director in the field of audit means ‘strategy’. After the scope and timing of an audit is defined, the next important step is to plan the strategy of the audit. Amongst various other steps, planning the strategy includes deciding the frequency of meetings to be held, organising data, resource management, assigning responsibilities and reviewing work.