What is Audit Planning

What is Audit Planning?

Audit planning is a vital area of the audit primarily conducted at the beginning of audit process to ensure that appropriate attention is devoted to important areas, potential problems are promptly identified, work is completed expeditiously and work is properly coordinated.

Audit planning is a vital area of the audit primarily conducted at the beginning of audit process to ensure that appropriate attention is devoted to important areas, potential problems are promptly identified, work is completed expeditiously and work is properly coordinated. “Audit planning” means developing a general strategy and a detailed approach for the expected nature, timing and extent of the audit. The auditor plans to perform the audit in an efficient and timely manner.

Definition of Audit plan

An Audit plan is the specific guideline to be followed when conducting an audit. It helps the auditor obtain sufficient appropriate evidence for the circumstances, helps keep audit costs at a reasonable level, and helps avoid misunderstandings with the client.

It addresses the specifics of what, where, who, when and how:

  • What are the audit objectives?
  • Where will the audit be done?
  • When will the audit(s) occur?
  • Who are the auditors?
  • How will the audit be done?
  • Benefits of Audit Plan

It helps the auditor obtain sufficient appropriate evidence for the circumstances

It helps keep audit costs at a reasonable level.

It helps avoid misunderstandings with the client.

It helps to know the scope of audit program by an Auditor.

Process of Audit Planning

It includes following procedures

  • Knowledge of client’s business
  • Development of audit strategies or overall plan
  • Preparation of audit program me

Internal auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

Internal auditing is a catalyst for improving an organization’s governance, risk management and management controls by providing insight and recommendations based on analyses and assessments of data and business processes. With commitment to integrity and accountability, internal auditing provides value to governing bodies and senior management as an objective source of independent advice. Professionals called internal auditors are employed by organizations to perform the internal auditing activity.

History of internal auditing

The Internal Auditing profession evolved steadily with the progress of management science after World War II. It is conceptually similar in many ways to financial auditing by public accounting firms, quality assurance and banking compliance activities. While some of the audit technique underlying internal auditing is derived from management consulting and public accounting professions, the theory of internal auditing was conceived primarily by Lawrence Sawyer (1911-2002), often referred to as “the father of modern internal auditing and the current philosophy, theory and practice of modern internal auditing as defined by the International Professional Practices Framework (IPPF) of the Institute of Internal Auditors owes much to Sawyer’s vision.

Internal audit reports

Internal auditors typically issue reports at the end of each audit that summarize their findings, recommendations, and any responses or action plans from management. An audit report may have an executive summary a body that includes the specific issues or findings identified and related recommendations or action plans and appendix information such as detailed graphs and charts or process information.


What is the particular problem identified?


What is the standard that was not met? The standard may be a company policy or other benchmark.


Why did the problem occur?


What is the risk/negative outcome (or opportunity foregone) because of the finding?

Corrective action:

What should management do about the finding? What have they agreed to do and by when?

The recommendations in an internal audit report are designed to help the organization achieve effective and efficient governance, risk and control processes associated with operations objectives, financial and management reporting objectives; and legal/regulatory compliance objectives.

Quality of Internal Audit Report


The comments and opinions expressed in the Report should be objective and unbiased.


The language used should be simple and straightforward.


The information contained in the report should be accurate.


The report should be concise.


The report should be released promptly immediately after the audit is concluded, within a month. A financial audit is conducted to provide an opinion whether financial statements are stated in accordance with specified criteria. Normally, the criteria are international accounting standards, although auditors may conduct audits of financial statements prepared using the cash basis or some other basis of accounting appropriate for the organization. In providing an opinion whether financial statements are fairly stated in accordance with accounting standards, the auditor gathers evidence to determine whether the statements contain material errors or other misstatements.

The audit opinion is intended to provide reasonable assurance, but not absolute assurance, that the financial statements are presented fairly, in all material respects, and give a true and fair view in accordance with the financial reporting framework. The purpose of an audit is to provide an objective independent examination of the financial statements, which increases the value and credibility of the financial statements produced by management, thus increase user confidence in the financial statement, reduce investor risk and consequently reduce the cost of capital of the preparer of the financial statements.

Cost auditing

Cost Audit represents the verification of cost accounts and check on the adherence to cost accounting plan. Cost Audit as certain the accuracy of cost accounting records to ensure that they are in conformity with Cost Accounting principles, plans, procedures and objective. Cost Audit comprises following Verification of the cost accounting records such as the accuracy of the cost accounts, cost reports, cost statements, cost data and costing technique and Examination of these records to ensure that they adhere to the cost accounting principles, plans, procedures and objective.

Types of Cost Audit

  • Cost Audit on behalf of the management:
  • Cost audit on behalf of a customer
  • Cost Audit on behalf of Government
  • Cost Audit by trade association
  • Format of Cost Audit Report

We have been appointed as Cost Auditor(s) under Section 233B Companies Act of M/S Haryana Power Generation Corp. Ltd. We have not obtained all the information and explanations, which to the best of my/our knowledge and belief were necessary for the purpose of this audit.

In my opinion, proper cost records, as per companies rule, 2011 prescribed under clause of sub section (1) of section 209 of the companies act 1956, have not been maintained by the company so as to give a true and fair view of the cost of production cost of sales and margin of the product groups under reference.

In my opinion, proper returns adequate for the purpose of the Cost Audit have not been received from the branches not visited my opinion and to the best of my information, the said books and records give/do not give the information required by the Companies Act, in the manner so required.

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Tassadaq Ali Editor at Bankingpk
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