## SA 300: Planning an Audit of Financial Statements
### Core Requirement
The auditor shall establish an overall audit strategy that sets the scope, timing, and direction of the audit, and guides the development of the audit plan.
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## Purpose of the Audit Strategy
The audit strategy:
- Sets scope, timing, and direction
- Guides development of the detailed audit plan
- Helps determine key resources to be employed
- Assists in directing and assigning engagement team members
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## Audit Strategy vs Audit Plan
| Audit Strategy | Audit Plan | |
|---|---|---|
| Level | High-level / strategic | Detailed / tactical |
| Covers | Overall scope, timing, direction | Specific procedures at the assertion level |
| Documented as | Key decisions and significant matters | Planned nature, timing, extent of each procedure |
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## Key Factors in Establishing Audit Strategy
| Factor | Description |
|---|---|
| Characteristics of the engagement | Nature of entity, reporting framework, industry specifics |
| Significant matters | Factors requiring professional judgment that direct the team's efforts |
| Legal and regulatory framework | Understanding applicable laws/regulations and the entity's compliance |
| Resource planning | Identifying nature and extent of resources required |
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## Legal and Regulatory Framework — Critical Point
SA 300 requires the auditor to consider, prior to risk assessment, the following:
> Obtaining a general understanding of the legal and regulatory framework applicable to the entity and how the entity is complying with that framework.
### Practical Implication
If a regulation imposes significant compliance obligations (with material financial consequences such as fines), the auditor must:
1. Incorporate compliance assessment into the overall audit strategy
2. Identify and assess the risk of non-compliance
3. Plan appropriate inquiry or procedures to understand how the entity is complying