PLANNING THE AUDIT: IDENTIFYING AND RESPONDING TO THE RISKS OF MATERIAL MISSTATEMENT

Аннотация

Practice shows that if you have a well-built and organized internal control system, it also shows an assessment of its effectiveness both in terms of achieving the set goals and in terms of cost-effectiveness. Audit planning is a set of actions to select an option that allows this goal to be achieved, i.e., selecting a strategy and tactics for conducting an audit, selecting the types, volumesand sequenceof audit procedures. Key words: audit planning, internal control, material misstatements, audit risks, preliminary planning, business risk. Introduction. An audit is a fairly complex process, and it is also limited in time. Therefore, to ensure high quality work, it is necessary to prepare for it thoroughly. A necessary means of such preparation is a comprehensively thought-out plan that would create confidence in the performers that themost effectiveand efficient audit procedures are used. The audit organization and the individual auditor are required to plan their work so that the audit is carried out effectively. Clear planning is also necessary for selecting the proposed approaches to achieving the audit objectives; performing and monitoring the work; ensuring that attention is drawn to themain aspects, that thework iscarried out completely. Much depends on what procedures, in what volume and in what sequence the auditor applies: whether the results of the audit will be sufficiently objective or not, whether the audit will be moreor less labor-intensive, more orless risky, etc. The regulatory framework for the audit planning stage is established by international standards ISA 300 “Planning”, planning involves the development of a general strategy and a detailed approach to theexpected nature, timingand scopeof audit procedures. The purpose of planning is to ensure that the audit is carried out in the best (optimal) way from the point of view of the selected criterion. The auditor, starting the audit, always faces the so- called optimization problem, i.e. the problem of choosing from a variety of possible solutions (options)thebest oneaccording tosome criterion. The question of which criterion should be selected as the "target function" (optimization parameter) is within the competence of the audit firm conducting the audit. For example, labor costs (then the optimization task is reduced to finding conditions that ensure minimum labor costs with acceptable risk), or audit risk (ensuring minimum risk with acceptable labor costs), or some other criterion, including a combined one, can be selected as the "target function". The question of choosing such a criterion (or criteria) is the subject of the relevant internal audit standard. In order to carry out high-quality preparation of an audit and optimally solve the tasks facing auditors at the planning stage, audit organizations need to develop their own internal standard “Audit Planning” and define in it the procedure for the auditor’s actions: from the moment of receiving an application for an auditto theissuance ofan auditor’s report. http://www.internationaljournal.co.in/index.php/jasass 157 Volume15Issue03, March2025 Impact factor: 2019: 4.679 2020: 5.015 2021: 5.436, 2022: 5.242, 2023: 6.995, 2024 7.75 Audit planning is a set of actions to select an option that allows this goal to be achieved, i.e., selecting a strategy and tactics for conducting an audit, selecting the types, volumes and sequence ofaudit procedures. Thefollowing basicprinciples can be usedwhen planning an audit: 1) comprehensiveness. The principle of comprehensiveness assumes ensuring the interconnection and coordination of all stages of planning – from the preliminary stage to the final procedures; 2) continuity. The principle of continuity is expressed in establishing related tasks for a group of auditors and linking the planning stages by deadlines and related business entities (structural divisions,branches, representative offices); 3) optimality. The principle of optimality allows for planning variability in order to select the optimalversion of thegeneral plan and audit program. Audit experience confirms the validity of these principles and the need to adhere to them when planningan audit. The main documents prepared during audit planning are: a working document on studying the client's economic activity, a letter on conducting an audit, an agreement to conduct an audit, a general plan anda general audit program. The results of the planning process are formalized in two documents: an audit plan and an audit program. In accordance with the data obtained during planning (cost and duration of the audit), an agreement is drawn upand concluded. Established practice identifies a number of key stages in the planning process, which are carried outinacertain sequence: 1)preliminary study ofthe economicentity and its business (preliminary planning); 2) formalization of relations with the economic entity (drawing up and providing the client with aletterof commitment,concluding an agreement)