Some people may think that conducting an audit is nothing more than checking whether the company has prepared its financial statements correctly. However, this is not true. Audits require more than what you think, and the auditors from audit firms in Johor Bahru will need to plan and prepare for the audits carefully before they can start doing their job (Also see Characteristics of an Excellent Auditor). Among all, setting audit strategy is one of the most critical steps.
In general, audit strategy is the combination of the allocation and management of resources, the audit approach, the way of managing the audit management, as well as the timing of the audit. For instance, the auditor may choose to use the top-down approach or the risk-based audit approach to perform the audit. (Also see What is an External Audit?)
One more example is that the auditors have just engaged with their new audit customer (Also see Introduction to Audit Engagement). However, they decided that they are not going to conduct tests of controls as they made up their mind not to depend on their customer’s internal control over financial statements. Thus, they go for a substantive test straight away, and this is what an audit strategy means.
Typically, the auditors will identify and set the audit strategy before or when they perform the audit plan, but after they have set the audit objective (Also see Interim Audit and Its Advantages). The correct audit strategy may bring a lot of advantages, such as to meet audit deadlines, reduce auditor risks, and allow the auditors to use the audit resources effectively.
The auditors need to ensure that they do not only complete the audit work on time as per the request of the customer, but they should also ensure that there is enough time so that they could maintain excellent audit quality.
The objective of Setting Audit Strategy:
– To arrange and handle the audit properly and efficiently
– To establish the appropriate audit approach
– To specify the scope of an audit engagement
– To record audit methodology
– To fix the audit’s time frame
Ways to Set Audit Strategy
– The auditor needs to determine the traits of the engagement as well as the audit scope. This is an extremely crucial point before the auditor progress to the next procedures. For instance, the auditor sets that the customer should prepare their financial statements based on Financial Reporting Standard (FRS) and the audit process should comply with the International Standards on Auditing.
– The audit strategy also demands the auditors to determine or find out the vital elements or areas in the audit engagement, which needs professional judgement. If there are any elements or areas which need such judgements, the auditor needs to think about whether they possess sufficient resources with high expertise (Also see The Importance of Conducting Human Resource Audits) to accomplish the tasks. If not, the auditors should consider withdrawing from the engagement or looking for other resources.
– When setting the audit strategy, the auditors should never underestimate the importance of audit evidence. They need to think about the probabilities that they may acquire audit evidence, its nature, as well as any limitations on that.
In short, audit strategy is how the auditors would set the timing of audit engagement, establish the scope of the audit, develop a plan for the audit, as well as set the strategy to direct the audit engagement to that the engagement can be successful.