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Establish the Overall Audit Strategy

Establish the Overall Audit Strategy :

Standard on Auditing (SA) 300, “Planning an Audit of Financial Statements’’ states that the objective of the auditor is to plan the audit so that it
will be performed in an effective manner. For this purpose, the audit engagement partner should:

 establish overall audit strategy, prior to the commencement of an audit; and

 involve key engagement team members and other appropriate specialists while establishing the overall audit strategy depending on the characteristics of the audit engagement.

The overall audit strategy sets the scope, timing and direction of the audit as it guides the development of detailed audit plan. The establishment of the overall audit strategy involves:

 Identifying the characteristics of the audit engagement that define its scope, such as the financial reporting framework used (Third Schedule to the Banking Regulation Act, 1949), additional reporting requirements at various locations of the components of the bank prescribed by the RBI, etc.

 Consider the various RBI Circulars, Master Circulars and Master Directions issued from time to time, as applicable.

 Consider the requirements of various Accounting Standards, Guidance Notes and Standards on Auditing, to the extent applicable, to assess the
nature and extent of audit procedures to be performed.

 Ascertaining the reporting objectives of the audit engagement to plan the timing of the audit and the nature of the communications required, such as deadlines for interim and final reporting, key dates for expected communications with the management and with those charged with
governance.

 Considering the important factors that will determine the focus of the engagement team’s efforts, such as determination of appropriate audit materiality, preliminary identification of significant risks, preliminary identification of material components and significant account balances and disclosures.

 Consider the factors that, in the auditor’s professional judgment, are significant in directing the engagement team’s efforts.

 Consider the results of preliminary engagement activities and, where applicable, whether knowledge gained on other engagements performed by the engagement partner for the bank is relevant.

 Ascertain the nature, timing and extent of resources necessary to perform the engagement.

The auditor should document the overall audit strategy, including any significant changes thereto. The documentation of the overall audit strategy
records the key decisions considered necessary to properly plan the audit and to communicate significant matters to the engagement team. For example, the auditor may summarise the overall audit strategy in the form of a memorandum that contains key decisions regarding the overall scope, timing and conduct of the audit. Ordinarily, following are documented as part of establishing the overall audit strategy:

 Summarisation of significant matters relating to overall audit strategy.
 Significant risks identified.
 Other decisions considered necessary to properly plan the audit.

 

 

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