How audit planning shapes the entire engagement

A well-planned audit costs less, finishes sooner and finds more of what matters. A poorly planned one does the opposite. Here is how planning works in practice.

Why planning matters

Under U.S. auditing standards (AU-C 300), the auditor must plan the audit so that it is performed in an effective manner. Planning is where the auditor decides where the risks are and how much work each area deserves. Without it, effort gets spread evenly across low-risk areas while the areas that need attention receive too little.

Planning is not a one-off event at the start. It is a continuous process that is updated as the audit uncovers new information.

The key planning steps

1. Preliminary activities: confirm independence, the terms of engagement and whether any ethical issues need to be resolved.
2. Understand the entity: its industry, ownership, systems, controls and recent changes (AU-C 315).
3. Set materiality: decide the level of misstatement that would influence the decisions of users (AU-C 320).
4. Assess risks and design responses: identify where material misstatement is most likely and choose the nature, timing and extent of procedures (AU-C 330).
5. Assign the team: match experience to complexity, and agree the timetable with management.
6. Communicate: share the planned scope and timing with those charged with governance (AU-C 260).

Time spent planning is repaid many times over during fieldwork.

Planning at a glance

Illustrative example only. Actual risk assessments depend on each entity.

Key takeaways

• Plan around risk, not habit.
• Revisit the plan if circumstances change during the audit.
• Communicate early with those charged with governance.

This article is for general information only and is not professional advice. Please speak to an advisor about your specific situation.