The external audit planning process in a Maltese medium-sized audit firm : a case study

Abstract

Purpose: The purpose of this study is to identify the different stages of the external audit planning process carried out by a selected audit firm. The study also aims to determine the level of importance given to such a process and its related costs and benefits. Moreover, it analyses any changes to the audit planning process in recent years. Design: The objectives of this study were achieved through an in-depth, semi-structured qualitative interview with one of the partners at the audit firm selected for this case study. Findings and Conclusions: The study ascertains that the external audit planning process generally begins with information gathering to determine whether to accept the engagement or not. Once accepted, a number of stages lead to the establishment of an overall audit strategy and the development of a detailed audit plan. The study reveals that such steps are interconnected and their purpose is to assist the auditor in performing the audit efficiently and effectively. It also establishes that the extent of audit planning differs when the assurance engagement is a recurring one. Furthermore the study determines the various benefits and costs of audit planning and concludes that the latter are outweighed by the benefits achieved due to proper planning, both for the engagement in question and for the firm in the long run. Finally, the study establishes the changes made to the external audit planning process in recent years and ascertains these were affected as a result of quality reviews by external regulatory bodies. This study also concludes that over-auditing in areas not identified as risky by the planning process may well deprive the firm from performing audits efficiently. ii Value: It is hoped that this study will generate future research and developments in the area, particularly with respect to devoting more attention to the planning process and understanding its importance in relation to the engagement in its entirety while making appropriate use of the results obtained by such process to enhance audit quality.