KRT & Co., Chartered Accountants, have been appointed as the statutory auditors of First Heavy Engineering Ltd., a company engaged in the…

Concept of overall audit strategy: As per SA 300 – Planning an Audit of Financial Statements, the auditor shall establish an overall audit strategy that sets the scope, timing and direction of the audit and that guides the development of the audit plan. In the given case, since First Heavy Engineering Ltd. has multiple locations and complex transactions such as specialised inventory and long-term contracts, the auditor is required to determine the appropriate deployment and management of audit resources while planning the audit. The process of establishing the overall audit strategy assists the auditor to determine, subject to completion of the auditor's risk assessment procedures, such matters as: (i) The resources to deploy for specific audit areas, such as the use of appropriately experienced team members for high-risk areas or the involvement of experts on complex matters like valuation of specialised inventory or long-term contract accounting. (ii) The amount of resources to allocate to specific audit areas, such as the number of team members assigned to observe inventory counts at major warehouses, the extent of review of other auditors' work in case of multiple locations, or the audit budget in hours to allocate to high-risk areas. (iii) When these resources are to be deployed, such as whether certain procedures should be performed during the interim audit stage or at the year-end and key cut-off dates. (iv) How such resources are managed, directed and supervised, such as scheduling team briefing and debriefing meetings, determining how engagement partner and manager reviews will take place (on-site or off-site), and deciding whether an engagement quality control review is required. Therefore, while auditing First Heavy Engineering Ltd., the auditor should establish an appropriate overall audit strategy to ensure proper allocation, timing, and supervision of audit resources so that the audit is conducted efficiently and in accordance with SA 300.