Audit Planning Memorandum

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Audit Planning Memorandum
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Session objectives

• To explain the need of preparing the Audit
  Planning Memorandum
• To understand the elements of Audit Planning
  Memorandum

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Audit Planning Memorandum

• Audit Planning Memorandum is prepared
• To set out the objectives of the audit
• To spell out how the auditor aims to achieve
  these objectives
• It is also a tool to
• monitor the progress of the audit and
• promotes high quality and professional audit work.

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Elements of audit planning memorandum

• Background
• information about the audited entity
• Materiality
• the overall materiality level the auditor chose
  and
• any exceptions, e.g.if the auditor has chosen a
  separate, lower materiality level for certain
  figures
• Risk assessment
• the auditors assessment of risks, taking into
  account their opinion of the control environment
  together with the controls in place for each of
  the areas being reviewed

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Elements of audit planning memorandum

• Audit objectives
• General Objectives - set out the relevant
  constitutional and legal provisions
• Main Objectives - this will be the accuracy of
  the financial statements and the legality and
  regularity of the underlying transactions
• Specific Objectives - any audit work in addition
  to the main objective. For example, to
  investigate an area of special interest or to
  follow up a recommendation from a previous year

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Elements of audit planning memorandum

• Audit approach
• summarising the testing to be undertaken,
• the extent of substantive testing
• the extent to which the auditor intends to use
  analytical procedures, if at all.
• If yes, the auditor would set out the account
  figure they plan to test in this way, and how
  they will make the forecast. . For instance, for
  testing salaries, the auditor may use personnel
  records and salary rates to make a forecast and
  would therefore note the sources of information
  they aim to use.

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Elements of audit planning memorandum

• Resources and timing
• the date of starting and completing the audit
• the number of days the audit team would spend at
  the offices of the entity
• responsibilities and tasks allotted to the team
  members
• and dates of discussion with the auditee and to
  take into account the comments furnished by them
• the dates of finalisation of report.

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Elements of audit planning memorandum

• Key contacts at the entity
• listing one or more important persons within the
  audited entity, including names, department,
  postal address, telephone number, and e-mail
  address

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Case study