Planning refers to developing a general strategy and a detailed approach for the expected nature, timing and extent of the audit.

The auditor should plan his work to enable him to conduct an effective audit in an efficient and timely manner. The form and nature of the planning required for an audit will be affected by the size and complexity of the organization, the commercial environment in which it operates, method of processing transactions and reporting requirements to which it is subject.

Advantages of good audit planning

1. It establishes the intended means of achieving the objectives of the audit.
2. It assists in the direction and control of the work. A good plan assists in the proper utilization of assistants and in the coordination of work done by other auditors and specialists.
3. It helps to ensure that attention is devoted to important areas of the audit. The planning process identifies potential problematic areas. E.g. areas with weak internal controls where more detailed substantive testing should be carried out.
4. It helps to ensure that audit work is completed expeditiously through more efficient use of time and proper allocation of work to audit staff.
5. Ensures proper division of work between interim and final audit to avoid repetition of work already done.
6. The audit plan takes into consideration times when information needed for audit purposes is available and when the client is not very busy. This encourages co-operation by ensuring less disruption of client’s work.

Audit planning covers;

1. Developing an overall plan for the expected scope and conduct of the audit. The overall plan is recorded in a planning memorandum.
2. Developing an audit programme showing the nature, timing and extent of audit procedures to be applied at every level of audit testing.

In order to plan his work adequately the auditor need to understand the nature of the clients business, its organization, its methods of operating and the industry in which it operates. This is to enable the auditor appreciate which events and transactions are likely to have a significant effect on the financial statements.