## SA 300 — Planning an Audit of Financial Statements

### Why Planning Matters

Adequate planning allows the auditor to:

Focus attention on important/high-risk areas
Resolve potential problems on a timely basis
Properly organise and manage the engagement
Select team members with requisite capabilities
Co-ordinate work with component auditors and experts
Facilitate direction and supervision of the team
Provide a basis for billing clients for time and manpower

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### Three Core Requirements Under SA 300

#### A) Involvement of Key Team Members

Participate in discussions with the audit team
Leverage experience and insight of senior members
Increases both effectiveness and efficiency of planning

#### B) Preliminary Engagement Activities

1. Perform CAF/CCF procedures required under SA 220

2. Evaluate compliance with ethical requirements, including independence

3. Enter into Letter of Engagement (LOE) as per SA 210

#### C) Planning Activities

1. Planning of RAP (Risk Assessment Procedures) occurs early in the audit

2. Planning of SAP (Further Audit Procedures) depends on the outcome of RAP

3. Auditor may begin executing SAP for some classes before all SAP are planned

4. Audit strategy and plan must be updated when:

Unexpected events occur
New information comes to the auditor's attention

5. Plan direction, supervision, and review of team members

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### Audit Strategy vs. Audit Plan

	Audit Strategy	Audit Plan
Purpose	Sets overall Scope, Timing & Direction (STD)	Details specific procedures
Content	Engagement characteristics, reporting objectives, significant factors, preliminary activity results	NTE of RAP (SA 315), NTE of SAP (SA 330), other required procedures
Guides	Development of the audit plan	Execution of the audit

When establishing the overall audit strategy, the auditor shall:

1. Identify characteristics of the engagement that define its scope

2. Ascertain the reporting objectives

3. Consider factors significant in directing the team's efforts

4. Consider results of preliminary engagement activities

5. Ascertain the Nature, Timing & Extent (NTE) of procedures

Worked example

### Example 1

An auditor is planning the audit of a mid-sized manufacturing company. Preliminary engagement activities include renewing the LOE, confirming independence under SA 220, and reviewing the prior year audit file. The audit strategy then identifies key risk areas (inventory valuation, revenue recognition) and sets timing. Based on this, the audit plan details specific procedures — physical inventory count, receivables confirmation — with NTE defined for each.

### Example 2

Midway through an audit, the auditor discovers the client is under a tax investigation that was not previously disclosed. This constitutes 'new information' requiring revision to both the audit strategy and audit plan — the auditor must extend procedures to assess potential tax liabilities and contingent obligations.

⚠️ Common exam mistakes

Confusing audit strategy (broad STD framework) with audit plan (specific NTE of procedures) — the strategy guides the plan, not the reverse.
Treating planning as a one-time activity — planning is dynamic and must be updated when unexpected events or new information arise during the audit.
Skipping preliminary engagement activities as optional — CAF/CCF (SA 220) and LOE (SA 210) are mandatory before audit work begins.
Planning SAP before completing RAP — SAP must be designed based on the risks identified through RAP, not independently.

Reference:

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