Compiled Auditing Standard | ASA 300 |
Auditing Standard ASA 300
Planning an Audit of a Financial Report
This compilation was prepared on 11 November 2013 taking into account amendments made by ASA 2011‑1 and ASA 2013‑2
Prepared by the Auditing and Assurance Standards Board
The most recently compiled versions of Auditing Standards, original Standards and amending Standards (see Compilation Details) are available on the AUASB website: www.auasb.gov.au
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ISSN 1833‑4393
COMPILATION DETAILS
AUTHORITY STATEMENT
CONFORMITY WITH INTERNATIONAL STANDARDS ON AUDITING
Paragraphs
Application......................................................Aus 0.1-Aus 0.2
Operative Date............................................................Aus 0.3
Introduction
Scope of this Auditing Standard..................................................1
The Role and Timing of Planning.................................................2
Effective Date...............................................................3
Objective..................................................................4
Requirements
Involvement of Key Engagement Team Members......................................5
Preliminary Engagement Activities................................................6
Planning Activities.........................................................7-11
Documentation..............................................................12
Additional Considerations in Initial Audit Engagements................................13
Application and Other Explanatory Material
The Role and Timing of Planning.............................................A1-A3
Involvement of Key Engagement Team Members....................................A4
Preliminary Engagement Activities............................................A5-A7
Planning Activities.......................................................A8-A15
Documentation.........................................................A16-A19
Additional Considerations in Initial Audit Engagements...............................A20
Appendix 1: Considerations in Establishing the Overall Audit Strategy
This compilation takes into account amendments made up to and including 11 November 2013 and was prepared on 11 November 2013 by the Auditing and Assurance Standards Board (AUASB).
This compilation is not a separate Auditing Standard made by the AUASB. Instead, it is a representation of ASA 300 (October 2009) as amended by other Auditing Standards which are listed in the Table below.
Standard | Date made | Operative Date |
ASA 300 [A] | financial reporting periods commencing on or after 1 January 2010 | |
27 June 2011 | financial reporting periods commencing on or after 1 July 2011 | |
11 November 2013 | financial reporting periods commencing on or after 1 January 2014 |
[A] Federal Register of Legislative Instruments – registration number F2009L04077, 11 November 2009
[B] Federal Register of Legislative Instruments – registration number F2011L01379, 30 June 2011
[C] Federal Register of Legislative Instruments – registration number F2013L01939, 14 November 2013
Paragraph affected | How affected | By … [paragraph] |
Appendix 1 | Amended | ASA 2013-2 [55] [56] [57] |
Auditing Standard ASA 300 Planning an Audit of a Financial Report (as amended to 11 November 2013) is set out in paragraphs Aus 0.1 to A20 and Appendix 1.
This Auditing Standard is to be read in conjunction with ASA 101 Preamble to Australian Auditing Standards, which sets out the intentions of the AUASB on how the Australian Auditing Standards, operative for financial reporting periods commencing on or after 1 January 2010, are to be understood, interpreted and applied. This Auditing Standard is to be read also in conjunction with ASA 200 Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance with Australian Auditing Standards.
Dated: 11 November 2013
This Auditing Standard conforms with International Standard on Auditing ISA 300 Planning an Audit of Financial Statements issued by the International Auditing and Assurance Standards Board (IAASB), an independent standard‑setting board of the International Federation of Accountants (IFAC).
Paragraphs that have been added to this Auditing Standard (and do not appear in the text of the equivalent ISA) are identified with the prefix “Aus”.
Compliance with this Auditing Standard enables compliance with ISA 300.
Auditing Standard ASA 300
The Auditing and Assurance Standards Board (AUASB) made Auditing Standard ASA 300 Planning an Audit of a Financial Report pursuant to section 227B of the Australian Securities and Investments Commission Act 2001 and section 336 of the Corporations Act 2001, on 27 October 2009.
This compiled version of ASA 300 incorporates subsequent amendments contained in other Auditing Standards made by the AUASB up to and including 11 November 2013 (see Compilation Details).
Aus 0.1 This Auditing Standard applies to:
(a) an audit of a financial report for a financial year, or an audit of a financial report for a half‑year, in accordance with the Corporations Act 2001; and
(b) an audit of a financial report, or a complete set of financial statements, for any other purpose.
Aus 0.2 This Auditing Standard also applies, as appropriate, to an audit of other historical financial information.
Aus 0.3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 January 2010. [Note: For operative dates of paragraphs changed or added by an Amending Standard, see Compilation Details.]
2. Planning an audit involves establishing the overall audit strategy for the engagement and developing an audit plan. Adequate planning benefits the audit of a financial report in several ways, including the following: (Ref: Para. A1‑A3)
3. [Deleted by the AUASB. Refer Aus 0.3]
4. The objective of the auditor is to plan the audit so that it will be performed in an effective manner.
5. 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. A4)
6. The auditor shall undertake the following activities at the beginning of the current audit engagement:
(a) Performing procedures required by ASA 220 regarding the continuance of the client relationship and the specific audit engagement;[1]
(b) Evaluating compliance with relevant ethical requirements, including independence, in accordance with ASA 220;[2] and
(c) Establishing an understanding of the terms of the engagement, as required by ASA 210.[3] (Ref: Para. A5‑A7)
8. 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 judgement, 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 of resources necessary to perform the engagement. (Ref: Para. A8‑A11)
9. 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 ASA 315.[4]
(b) The nature, timing and extent of planned further audit procedures at the assertion level, as determined under ASA 330.[5]
(c) Other planned audit procedures that are required to be carried out so that the engagement complies with the Australian Auditing Standards. (Ref: Para. A12)
10. The auditor shall update and change the overall audit strategy and the audit plan as necessary during the course of the audit. (Ref: Para. A13)
11. 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. A14‑A15)
12. The auditor shall include in the audit documentation:[6]
(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. A16‑A19)
13. The auditor shall undertake the following activities prior to starting an initial audit:
(a) Performing procedures required by ASA 220 regarding the acceptance of the client relationship and the specific audit engagement;[7] and
(b) Communicating with the predecessor auditor, where there has been a change of auditors, in compliance with relevant ethical requirements. (Ref: Para. A20)
* * *
A1. 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.
A2. 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:
A3. The auditor may decide to discuss elements of planning with the entity’s management, or those charged with governance, to facilitate the conduct and management of the audit engagement (for example, to co‑ordinate 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, or those charged with governance, may compromise the effectiveness of the audit by making the audit procedures too predictable.
A4. The involvement of the engagement partner and other key members of the engagement team in planning the audit draws on their experience and insight, thereby enhancing the effectiveness and efficiency of the planning process.[8]
A5. Performing the preliminary engagement activities specified in paragraph 6 at the beginning of the current audit engagement assists the auditor in identifying and evaluating events or circumstances that may adversely affect the auditor’s ability to plan and perform the audit engagement.
A6. Performing these preliminary engagement activities enables the auditor to plan an audit engagement for which, for example:
A7. The auditor’s consideration of client continuance and relevant ethical requirements, including independence, occurs throughout the audit engagement as conditions and changes in circumstances occur. Performing initial procedures on both client continuance and evaluation of relevant ethical requirements (including independence) at the beginning of the current audit engagement means that they are completed prior to the performance of other significant activities for the current audit engagement. For continuing audit engagements, such initial procedures often occur shortly after (or in connection with) the completion of the previous audit.
A9. Appendix 1 lists examples of considerations in establishing the overall audit strategy.
A10. Once the overall audit strategy has been established, an audit plan can be developed to address the various matters identified in the overall audit strategy, taking into account the need to achieve the audit objectives through the efficient use of the auditor’s resources. The establishment of the overall audit strategy and the detailed audit plan are not necessarily discrete or sequential processes, but are closely inter‑related since changes in one may result in consequential changes to the other.
A12. The audit plan is more detailed than the overall audit strategy in that it includes the nature, timing and extent of audit procedures to be performed by engagement team members. Planning for these audit procedures takes place over the course of the audit as the audit plan for the engagement develops. For example, planning of the auditor's risk assessment procedures occurs early in the audit process. However, planning the nature, timing and extent of specific further audit procedures depends on the outcome of those risk assessment procedures. In addition, the auditor may begin the execution of further audit procedures for some classes of transactions, account balances and disclosures before planning all remaining further audit procedures.
A13. As a result of unexpected events, changes in conditions, or the audit evidence obtained from the results of audit procedures, the auditor may need to modify the overall audit strategy and audit plan and thereby the resulting planned nature, timing and extent of further audit procedures, based on the revised consideration of assessed risks. This may be the case when information comes to the auditor’s attention that differs significantly from the information available when the auditor planned the audit procedures. For example, audit evidence obtained through the performance of substantive procedures may contradict the audit evidence obtained through tests of controls.
A14. The nature, timing and extent of the direction and supervision of engagement team members and review of their work vary depending on many factors, including:
ASA 220 contains further guidance on the direction, supervision and review of audit work.[9]
A15. If an audit is carried out entirely by the engagement partner, questions of direction and supervision of engagement team members and review of their work do not arise. In such cases, the engagement partner, having personally conducted all aspects of the work, will be aware of all material issues. Forming an objective view on the appropriateness of the judgements made in the course of the audit can present practical problems when the same individual also performs the entire audit. If particularly complex or unusual issues are involved, and the audit is performed by a sole practitioner, it may be desirable to consult with other suitably‑experienced auditors or the auditor’s professional body.
A16. The documentation of the overall audit strategy is a record of the key decisions considered necessary to properly plan the audit and to communicate significant matters to the engagement team. For example, the auditor may summarise the overall audit strategy in the form of a memorandum that contains key decisions regarding the overall scope, timing and conduct of the audit.
A17. The documentation of the audit plan is a record of the planned nature, timing and extent of risk assessment procedures and further audit procedures at the assertion level in response to the assessed risks. It also serves as a record of the proper planning of the audit procedures that can be reviewed and approved prior to their performance. The auditor may use standard audit programs or audit completion checklists, tailored as needed to reflect the particular engagement circumstances.
A18. A record of the significant changes to the overall audit strategy and the audit plan, and resulting changes to the planned nature, timing and extent of audit procedures, explains why the significant changes were made, and the overall strategy and audit plan finally adopted for the audit. It also reflects the appropriate response to the significant changes occurring during the audit.
A19. As discussed in paragraph A11, a suitable, brief memorandum may serve as the documented strategy for the audit of a smaller entity. For the audit plan, standard audit programs or checklists (see paragraph A17) drawn up on the assumption of few relevant control activities, as is likely to be the case in a smaller entity, may be used provided that they are tailored to the circumstances of the engagement, including the auditor’s risk assessments.
A20. The purpose and objective of planning the audit are the same whether the audit is an initial or recurring engagement. However, for an initial audit, the auditor may need to expand the planning activities because the auditor does not ordinarily have the previous experience with the entity that is considered when planning recurring engagements. For an initial audit engagement, additional matters the auditor may consider in establishing the overall audit strategy and audit plan include the following:
(Ref: Para. 7‑8 and A8‑A11)
This appendix provides examples of matters the auditor may consider in establishing the overall audit strategy. Many of these matters will also influence the auditor’s detailed audit plan. The examples provided cover a broad range of matters applicable to many engagements. While some of the matters referred to below may be required by other Auditing Standards, not all matters are relevant to every audit engagement and the list is not necessarily complete.
[1] See ASA 220 Quality Control for an Audit of a Financial Report and Other Historical Financial Information, paragraphs 12-13.
[2] See ASA 220, paragraphs 9-11.
[3] See ASA 210 Agreeing the Terms of Audit Engagements, paragraphs 9-13.
[4] See ASA 315 Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment.
[5] See ASA 330 The Auditor’s Responses to Assessed Risks.
[6] See ASA 230 Audit Documentation, paragraphs 8-11 and paragraph A6.
[7] See ASA 220, paragraphs 12-13.
[8] ASA 315, paragraph 10, establishes requirements and provides guidance on the engagement team's discussion of the susceptibility of the entity to material misstatements of the financial report. ASA 240 The Auditor's Responsibilities Relating to Fraud in an Audit of a Financial Report, paragraph 15, provides guidance on the emphasis given during this discussion to the susceptibility of the entity's financial report to material misstatement due to fraud.
See ASA 102 Compliance with Ethical Requirements when Performing Audits, Reviews and Other Assurance Engagements.
[9] See ASA 220, paragraphs 15-17.
[10] See ASA 510 Initial Audit Engagements—Opening Balances.
[#] See ASA 610 Using the Work of Internal Auditors, paragraph Aus 1.2. The use of internal auditors to provide direct assistance is prohibited in an audit or review conducted in accordance with the Australian Auditing Standards.
[11] See ASA 320 Materiality in Planning and Performing an Audit.
[12] See ASA 600 Special Considerations—Audits of a Group Financial Report (Including the Work of Component Auditors), paragraphs 21‑23 and 40(c).