P & Co., Chartered Accountants, were appointed as statutory auditors of LMN Ltd. for the year ended 31 March 2025. Soon after completing the…

CA Intermediate · Auditing and Ethics · RTP · May 2026
P & Co., Chartered Accountants, were appointed as statutory auditors of LMN Ltd. for the year ended 31 March 2025. Soon after completing the audit for the previous year, the engagement team began discussions for the current year's audit. Before identifying and assessing the risks of material misstatement, the auditor planned the timing of certain activities such as applying analytical procedures, obtaining an understanding of the applicable legal and regulatory framework, determining materiality and considering the need for involvement of experts. Which of the following statements best explains the nature of audit planning as per the Standards on Auditing in the above case?
(A) Audit planning is a separate phase that begins only after the identification of risks of material misstatement.
(B) Audit planning is a continual and iterative process that includes consideration of analytical procedures, materiality, legal and regulatory framework and involvement of experts prior to performing further audit procedures.
(C) Audit planning is restricted to preparation of the audit programme and allocation of audit staff.
(D) Audit planning is required only in case of initial audit engagements.

Suggested Answer and Working Notes:

Correct Answer: Option (B)

Audit planning is a continual and iterative process that includes consideration of analytical procedures, materiality, legal and regulatory framework and involvement of experts prior to performing further audit procedures.

Topics: Audit Evidence, Audit Strategy, Audit Planning and Audit Programme

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