MOD003377 - Financial Auditing

Running head: AUDIT STRATEGY
Audit strategy
Name of the student
Name of the university
Student ID
Author note

1AUDIT STRATEGY
Table of Contents
Introduction................................................................................................................................2
Knowledge and Understanding of Audit Strategy Document as per ISA 300...........................2
Knowledge and Understanding of ISA 320 Materiality............................................................3
Knowledge and Understanding of ISA 520 Analytical Procedures..........................................4
Audit Risk..................................................................................................................................4
Calculation of materiality...........................................................................................................5
Analytical Procedure for Determining Risk of Audit................................................................6
Ratio Analysis............................................................................................................................6
Trend Analysis...........................................................................................................................6
Reasonable Tests........................................................................................................................7
Timetable for reporting..............................................................................................................9
Audit Budget............................................................................................................................10
Conclusion................................................................................................................................11
Reference..................................................................................................................................12

2AUDIT STRATEGY
Introduction
In today’s business organizations, auditing is considered as a major aspect. Under the
process of auditing, the responsibility of the auditors is to examine and inspect the financial
statements of the companies with the aim to find any material misstatements in them caused
by fraud and errors (Louwers et al. 2015). It needs to be mentioned in this context, it is on the
auditors to consider the formulation of a audit strategy before conducting the audit
procedures. After the formulation of audit strategies, the auditors are needed to document
them. In this whole process, the auditors are needed to comply with some specific standards
and regulations at the time to develop the audit strategy and to conduct the audit operations
(Knechel and Salterio 2016). There are three specific standards that the auditors are needed to
comply with; and they are International Standards of Auditing (ISA) 300 Planning and Audit
of Financial Statements, ISA 320 Materiality in Planning and Performing an Audit and ISA
520 Analytical Procedures. The main aim of this report is the development of the overall
audit strategy document for Unite Group Plc. For this reason, this report involves in the
analysis of the concepts of audit risks of the financial statements of the companies.
Knowledge and Understanding of Audit Strategy Document as per ISA 300
According to ISA 300, the main objective of the auditors is the effective planning of
the audit program with the aim to perform it in the effective manner (ifac.org 2018). ISA 300
puts some specific requirements on the auditors that they are needed to consider at the time of
auditing and they are discussed below.
As per ISA 300, it is the major requirement for the audit engagement partner as well
as other key members of the audit team to involve in the process of audit planning. After that,
the auditors are needed to undertake certain engagement activities prior to the audit

3AUDIT STRATEGY
engagement operations. They are the to perform the procedures as stated in ISA 220 related
to the continuance of the relationship of the clients; to evaluate the compliance with the
required ethical standards like audit independence and others; and to establish an
understanding about the required terms of audit engagement as per ISA 210 (ifac.org 2018).
After that, according to ISA 300, the need for the auditors is to formulate an audit
strategy including scope, timing as well as direction of the audit process. Some specific
aspects that the auditors are needed to consider; they are identification of the engagement
characteristics; ascertainment of the objectives of reporting in the audit process, consideration
of the crucial factors that can affect the audit judgments and others (ifac.org 2018). After the
development of the audit strategy, ISA 300 puts the obligation on them to document them. In
this document, the auditors are needed to include certain aspects like the overall audit
strategy, the audit plan and any significant changes in the audit engagement process during
the engagement time. Lastly, the auditors are needed to consider some additional aspects like
the requirements as per ISA 220, communication with the previous auditors and others
(ifac.org 2018).
Knowledge and Understanding of ISA 320 Materiality
As per ISA 320, it is the objective of the auditors for the application of the concept of
materiality in effective manner while planning and performing audit. According to the
concept of materiality in ISA 320, materiality is considered as an amount set by the auditors
at less than the materiality level of the financial statements with the aim to reduce the
probability that the amount would not affect the financial statements of the companies
(ifac.org 2018).
There are some specific requirements in ISA 320 that the auditors are needed to
follow while determining materiality. As per ISA 320, it is needed for the auditors to