The company must initiate an audit plan before drawing up the agreement and before entering into an audit contract.
Planning, which is the initial stage of an audit, is a program that determines the scope, type and sequence of audit procedures necessary to develop an overall audit plan indicating the expected size, schedule and timing of the audit and to form an objective and rational opinion on the financial statements of the organization.
The audit plan should be carried out in accordance with the general principles of audit and the following specific principles:
- Professional competence and integrity;
- Professional behavior.
During the planning stage, the internal audit companies in India identify external and internal factors that affect the customer’s business.
The audit organization and individual auditors have a duty to plan their work to ensure that the audit is conducted effectively.
Auditors have the right to discuss certain sections of the general audit plan and specific audit procedures with employees, as well as members of the board of directors and members of the audit committee of the audited organization, in order to increase the effectiveness of the audit and coordinate the audit procedures with the work of the audited employee.
In this case, the internal audit companies in India are responsible for the accurate and complete development of the entire audit plan and program.
At the same time, the format and content of a general audit plan may vary depending on the size and details of the activities being audited, the complexity of the audit, and the specific skills used by the auditor.
Principles for preparing the overall audit plan and program
The organization of the audit, beginning the development of the general plan and program, should be based on prior knowledge of the economic entity, as well as the results of the analytical procedures performed.
Analytical procedures require companies to identify areas relevant to the audit. The complexity, volume and timing of the analysis procedure should depend on the volume and complexity of the financial statements of the economic entity.
In preparing the general plan and program, the audit organization evaluates the effectiveness of the internal control system and assesses its risks (control risks).
Internal control systems can be considered effective if they timely warn of the occurrence of inaccurate information and disclose such information.
When evaluating the effectiveness of the internal control system, the audit organization must collect sufficient evidence.
If an enterprise decides to rely on internal controls and accounting systems to gain sufficient confidence in the accuracy of its accounting records, then the scope of its future audit should be adjusted accordingly.
In preparing the general plans and programs of the audit organization, it is necessary to establish an acceptable level of importance and audit risk so that the accounting statements can be considered reliable.
When planning risks, the transaction advisory services determines the risks in the business of the financial statements and the control risks inherent in these statements, regardless of the audit of the economic entity.
Using the identified level of risk and materiality, the company identifies areas relevant to the audit and plans the necessary procedures. During an audit, situations may arise that affect changes in the level of risk and materiality identified during planning.