## Audit Planning: Continuous Nature and Preliminary Engagement Activities
### Nature of Audit Planning — Continuous and Iterative
Audit planning is not a one-time exercise performed at the start of an engagement. It is continuous and iterative — updated as new information emerges throughout the audit.
Matters considered prior to risk identification and assessment:
| Matter | Description |
|---|---|
| 1. Analytical procedures | Procedures to be applied as risk assessment tools |
| 2. Legal and regulatory framework | Understanding the applicable framework and entity's compliance |
| 3. Determination of materiality | Setting materiality thresholds for the engagement |
| 4. Involvement of experts | Identifying whether specialist input is required |
| 5. Other risk assessment procedures | Additional procedures to understand the entity and its environment |
### Preliminary Engagement Activities
Three core activities performed before the main audit planning and fieldwork:
| Activity | Description |
|---|---|
| (A) Client relationship continuance | Procedures to evaluate whether to continue/accept the client relationship |
| (B) Ethical compliance (including independence) | Evaluating compliance with independence and other ethical requirements |
| (C) Terms of engagement | Establishing a clear mutual understanding of engagement terms |
Purpose: These activities help the auditor identify events or circumstances that may affect the ability to plan and perform the engagement — they are a prerequisite gate before full planning begins.
### Independence Compliance — Engagement Partner's Responsibilities
When evaluating independence (Activity B), the engagement partner shall:
1. Obtain relevant information from the firm to identify relationships and circumstances creating independence threats
2. Evaluate identified breaches of the firm's independence policies — determine whether they create a threat to independence for this specific engagement
3. Take appropriate action:
- Apply safeguards to eliminate threats or reduce them to an acceptable level, OR
- Withdraw from the engagement (where permitted by law/regulation)
- Promptly report to the firm any inability to resolve the matter
> Critical point: Independence threats cannot be left unresolved. The engagement partner must escalate promptly if threats cannot be reduced to an acceptable level.