## Nature of Audit Planning — Continuous and Iterative

### Key Characteristics

Audit planning is not a discrete one-time phase. It is:

A continual and iterative process
Begins shortly after the completion of the previous audit
Continues until the completion of the current audit engagement

### Pre-Procedure Planning: ROMEO

Certain matters must be considered before the auditor identifies and assesses risks of material misstatement (as required under SA 315):

Letter	Activity
R	Risk assessment analytical procedures — plan which analytical procedures will be used during risk assessment
O	Obtain understanding of the legal and regulatory framework applicable to the entity and how the entity complies
M	Materiality — determine overall materiality and performance materiality
E	Experts — consider whether specialist involvement is needed (e.g., valuation, IT, actuarial)
O	Other risk assessment procedures — plan any additional procedures needed to identify and assess risks

### Why Iterative?

New information emerges during fieldwork — a newly discovered related party, unexpected control failures, or changed circumstances. The auditor must update the plan accordingly. A plan set in stone at the start is a plan that will fail.

Worked example

### Example 1

An auditor completes Year 2 of a company's audit in March. Planning for Year 3 begins in April. During Year 3 fieldwork in October, the auditor discovers the company entered a new overseas market — bringing new regulatory compliance risks. The auditor revises the plan to add procedures covering foreign exchange regulations and cross-border transfer pricing. This revision demonstrates the iterative nature of audit planning.

⚠️ Common exam mistakes

Treating audit planning as complete once fieldwork begins — planning is iterative and must be updated as new information emerges
Forgetting that materiality determination (M in ROMEO) is part of the planning phase, not just a final-stage consideration
Narrowly interpreting SA 315 as covering only internal controls — it governs the entire process of identifying and assessing risks of material misstatement through understanding the entity

Reference: SA 315 — Identifying and Assessing the Risks of Material Misstatement through Understanding the Entity and Its Environment — SA 315

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Nature of Audit Planning — Continuous and Iterative Process with ROMEO

Worked example

⚠️ Common exam mistakes