Managing a purposeful audit planning process

With the changed audit landscape, a lot more goes into audits now than in the past. Aine Morgan takes us through a purposeful audit planning process.

In working with my clients over the last few weeks, I considered what could be improved during the busy season. One issue that presented repeatedly was insufficient audit planning. It is apparent to me that we are not making time for audit planning as we often undervalue the importance of this critical process. These days, the planning sections of our digital files are significantly more comprehensive than the skinny section of the lever arch file when many of us trained as auditors. The regulatory environment in which we work has evolved and the way we audit has changed radically, making audit planning an even more important task. The best way to ensure that you perform planning procedures for the next busy season is to start planning for planning today.

Today

Block off two hours in your calendar sometime in the next two weeks to plan for planning. 

Your brain will very likely tell you that this pre-planning isn’t necessary and two hours is too much time, but you will thank yourself later in the year.  

Your instinct might be to invite the whole team go to this meeting. I encourage you to think carefully about whether or not you want to invite others to this session. 

To the extent that you feel it would be helpful to have the input of someone else, be very specific about the exact inputs you’re require from them. 

Someone really needs to own planning and that’s going to be you. Consider doing this first session alone and getting input from the rest of the team later.

Within two weeks

Honour the slot in the calendar when it is time to plan. Close your door and get to work. 

You don’t need to check your phone and you don’t need to keep your emails open. These two hours are for planning. It’s going to pay off hugely as you move into the 2019/2020 season.

During this planning session, map out what outcomes would comprise a really successful audit plan in as much detail as you can, including acceptance and continuance, internal and external planning meetings, meaningful materiality calculation and fraud risk assessments, control environment testing (taking into account the three year rule), and specialist or expert involvement. This will require you to go into last year’s file and critically consider the work you did. 

Ask yourself : how would I feel about this file if it had just been pulled for external review? From there you will know exactly what you want to drill down into this year, and what planning procedures that will require.

With a clear view in mind of what you need to plan, make sure you have the staff you’ll need. Make a list of the meetings you will need to have as part of planning procedures,  including a kick-off meeting, taking-stock meetings and client meetings. Make a list for team members who will need to be invited to these meetings. 

Close out this session by scheduling time in the partner’s calendar to bring her up to speed on the upcoming audit plan and get her input. Schedule time with your senior as well, so that you can delegate and get him or her started.

Within the next month

It’s important to meet with the partner as planned and get her input in the next month.

The meeting does not need to be formal, but document all discussions and file them to demonstrate the partner’s involvement at all stages of the audit workflow.

Meet with your audit senior and have him calendar all the meetings that you planned two weeks ago, both internally and externally. Your brain will think that it’s too early in the year to do this. It isn’t. The earlier you have those meetings carried out, the more ease you bring to the whole audit workflow, and the more meaningfully you can incorporate the outcome of those meetings into your audit plan. Have your senior schedule these meetings well ahead of time, and make the invitation to other staff non-optional. 

ISA 300 requires all team members to be at the planning meeting and properly onboarded by agreeing the nature and extent of deliverables from specialists, and timing, so make sure they are actively engaged in key audit strategy discussions.
Delegate the work you require your senior to complete ahead of the kick-off meeting to your audit senior and have him put it in his calendar. He should also schedule time in your calendar for review of this work together and to create an agenda for the kick-off meeting. 

Within the next three months

Review planning procedures in the next three months.

If you usually conduct the kick-off meeting in a presentation style, consider moving away from this. Instead, file client/audit history/background information on a shared drive where the team members can read about it ahead of the meeting. Using valuable meeting time for this kind of re-cap may not be the best use of the team’s time.

When crafting the kick-off meeting’s agenda, ensure the team members’ time can be optimised and that the key ISA-relevant planning meeting issues of materiality, fraud and audit strategy planning are addressed. Keep minutes documenting key outcomes, making sure to always take note of the partner’s involvement in those discussions so that her footprint is evident.

Tailoring your approach

For smaller entities, the above process will be too much given the risk profile. That said, just having the kick-off meeting on the first day of the audit is no longer sufficient. As soon as you can, schedule time in the calendar to consider what the success factors of the audit planning process would be for you. Delegate and schedule meetings as above, using well thought out agendas, maximising everyone’s time. A 30-minute engaged kick-off meeting where meaningful inputs are exchanged and risks discussed and documented is a sound basis for a smaller, risk-focused audit that will keep everyone’s focus in check from the get-go.