QUESTION

(A)
Audit planning is an essential
process that is conducted before
commencement of actual audit work.
Discuss the advantages and
disadvantages of audit planning.

By Zhi Yen
Advantages of Audit Planning
Assists the auditors to identify and devote proper attention to important areas
of the audit.
■ Audit planning also makes it much easier for auditors to give appropriate
documentation for any peer review and for making future engagements
plans.
Avoids misunderstandings.
■ A focused and well-organized audit plan can help in avoiding
misunderstandings with the firm. Spending sufficient time during the
planning of an audit can bring out a more adequate and realistic picture of
what the whole audit will entail. This could avoid any misunderstandings
with the firm.

By Zhi Yen
Avoids over auditing.
■ A focused and well-organized audit plan could also help in avoiding
“over auditing,” or spending unnecessary time during the substantive
audit procedures by staring at areas which are irrelevant.
Encourages the supervision of different engagement team partners and also
helps in reviewing their work.
■ Assist in choosing engagement team partners with the right capability
and competency to respond to any anticipated risks and also in allocating
responsibilities to a team member. It also assists the auditor manage and
organizes the engagement so that is carried out effectively and efficiently.

By Zhi Yen
 Disadvantages of Audit Planning
Rigidity
■ An audit plan adheres to set patterns and standard approach. This might stifle initiative
and flexibility, therefore disrupting professional judgment of the people involved.
■ Rigidity could make the entire process too mechanistic and undermining the audit staff’
creativity abilities, and talents. This will eventually leave them with little or no freedom
for carrying out their task as well as being technically challenged.
Overlooking the capabilities of audit staffs
■ An audit plan will make the whole audit process automated thus loosening the sense of
duties and responsibility for audit staff. It could decrease inventiveness and initiative,
with fee application of audit staff abilities and talents.  They therefore do not reinforce
the plan with any improvements, which will lower its future effectiveness. The
automation also leaves the staff performing their task with normality, which can cause
boredom.

By Zhi Yen
Incompatibility
■ The strategies and procedures adopted from an audit plan may not be in accordance
with a client's standards. An auditor will likely need to prepare a new procedural plan
that meets the needs of the client; in some cases, this backtracking may cause the client
to lose faith and/or trust in the auditor. Staff may also feel manipulated since they will
have to participate in the preparation of the new plan, which can vary significantly from
the standard audit.
Constant Update
■ An audit plan needs to change regularly -- usually each year -- to keep it current with
the changing economic environment and business structures. If this change is not done,
the plan may turn out to be too rigid in nature and its application in an audit process
may be ineffective and outdated. This updating requires more time and resource
devotion to the plan, which would be better used in other productive activities.

By Zhi Yen