- 15 Marks
AAA – Nov 2023 – L3 – SC – Q7 – Audit Planning and Strategy
Outlines audit strategies, factors for strategy selection, and distinction between audit strategy and audit plan for Orlando Professional Services.
Question
The overseas technical partners of Orlando Professional Services came for a review of operations and system of internal control of the firm. A number of audit engagement files regarding financial statements on which the firm had expressed audit opinion were selected for review. It was believed that the strategic review would be necessary to determine the appropriate audit approach for a detailed audit plan in the firm to bring efficiency and enhance good client service delivery. The review exercise also covered:
i. The firm’s basis of risk assessment on audit and assurance engagements;
ii. Determination of staff recruitment, training, reward, and evaluation;
iii. Previous audit opinions on financial statements and progress on ongoing jobs;
iv. System of archival and retrieval of documents;
v. Major risks and other factors such as industry issues;
vi. Procedures for engaging and monitoring experts both internal and external; and
vii. Reports from regulators.
The team interviewed partners, staff, and directors of major clients of the firm. It was believed that the outcome of the review exercise would help to reposition the firm and upscale strategies to get a fair share of the market in the upcoming mandatory rotation of auditors.
At the end of the exercise, it was reported that the audit strategy of the firm was not robust enough, too generic, and lacked focus to meet the firm’s need in the next decade. The team recommended that proactive steps should be taken to evolve a good strategy that would stand the test of time in the light of the increasing competition in the audit and assurance marketplace.
As a staff of the firm, you have been selected as a member of the committee to develop the new audit strategies for submission in the next two weeks for the consideration and approval of the executive council of Orlando Professional Services.
Required:
a. Outline the approaches to the main audit strategies your firm is expected to adopt.
(9 Marks)
b. Explain the factors that will be considered in the selection of audit strategies.
(4 Marks)
c. Explain the difference between Audit Strategy and Audit Plan.
(2 Marks)
Total: 15 Marks
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