ISA 300 Planning an Audit of Financial Statements
ISA 300 requires auditors to plan their audit to ensure it is performed effectively. This guide covers the overall audit strategy, the audit plan, materiality in planning, and how planning is updated throughout the engagement.
Good audits are won or lost in planning. The time invested upfront in understanding the client, assessing risks, and designing an appropriate approach determines the quality of everything that follows. ISA 300 sets out the requirements — but effective planning goes well beyond minimum compliance.
The Overall Audit Strategy
The audit strategy is a high-level document that sets the scope, timing, and direction of the engagement. It covers: the characteristics of the engagement (listed or unlisted, group or standalone, industry); the reporting objectives and key deadlines; significant factors that will influence the team's approach; and the resources and skills required. For complex groups or highly regulated entities, the strategy may run to many pages. For a simple owner-managed business, it might be brief.
The Detailed Audit Plan
The audit plan translates the strategy into specific procedures. For each significant assertion in each material area, the plan sets out the nature of the procedure (test of control or substantive), the timing (interim or final), and the extent (sample size or full population). The plan should be proportionate to risk — more work where risk is higher, less where risk is low and controls are reliable.
Materiality in Planning
Planning materiality is set before detailed work begins and guides the design of procedures. Performance materiality — typically 50–75% of overall materiality — is used to determine sample sizes and ensure that uncorrected misstatements do not in aggregate become material. Specific materiality may be lower for particular disclosures (related parties, directors' remuneration) where users have heightened interest.
Preliminary Engagement Activities
Before planning begins, the engagement team must: confirm that ethical requirements including independence are met; assess whether to continue the engagement; and confirm the terms of the engagement with management. For new clients, client acceptance procedures — including background checks and consideration of integrity risks — are the foundation that everything else rests on.
Keeping the Plan Live
Planning is iterative. When unexpected issues arise — a material error discovered at interim, a significant business event, management changes — the strategy and plan must be updated and the rationale documented. An audit plan that never changes from start to finish is a plan that wasn't responsive to what the audit actually found.
Further Reading
Study with Learnsignal: Audit CPD for qualified accountants. Browse CPD.
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