Having considered the above factors the auditor should prepare the audit-planning memorandum. This sets out;

The outline audit approach;

• How, by whom and when each item in the financial statements will be audited;
• Timing requirements to be met for each item;
• Staff usage with time budgets for each set of audit work
• Contents of an audit-planning memorandum

The nature of information contained in an audit-planning memorandum will vary from one audit to the other, but generally may include:

• A summary of the terms of engagement to lay out the nature and scope of the work;
• Job timetable giving the provisional dates of the timing of the audit e.g. date of planned commencement of the audit.
• Record of any changes in the client since the last audit e.g. changes in the nature of the client’s business, change in management structure;
• Details of the planning decisions such as areas identified as having weak internal controls requiring more detailed audit work, areas where the advise of an expert is needed e.t.c
• Extent of reliance expected on internal audit;