Audit and Assurance Essentials: For Professional Accountancy Exams, + Website

CHAPTER 3

HOUSEKEEPING: PLANNING, MATERIALITY AND DOCUMENTATION

Covering: ISA 300 Planning an Audit of Financial Statements, ISA 320 Materiality in Planning and Performing an Audit, ISA 230 Audit Documentation.

Why do I need to read this section?

Planning, materiality and documentation are easy areas for examiners to set questions in, and they often do. It is rare for a paper not to cover at least one of the three areas. Understanding these areas will also help make sense of the remainder of the audit process.

What is important in this section?

• Understanding that planning and risk assessment are iterative processes, i.e. they need to be updated throughout the audit.
• Understanding the difference between the overall audit strategy and the audit plan and the content of these planning documents.
• The definitions of materiality, performance materiality, the concept of ‘clearly trivial’, and how they affect the audit work performed.
• The content of audit documentation, why it is needed, examples of audit documentation, what it is used for, and what is considered adequate.

What sort of questions come up in this area?

• Examiners often ask for the information about the audited entity auditors need to gather when planning and performing risk assessments.
• Questions in higher level papers may cover the administrative tasks that need to be performed, including timetabling and co-ordinating the many people involved in large or complex group audits.
• You are more likely be asked to suggest or ...