i) Difference between audit strategy and audit plan:

• Audit strategy: Sets the overall scope, timing, and direction of the audit and serves as a guide to develop a more detailed audit plan. It is broader and outlines high-level goals for the audit.
• Audit plan: A detailed procedure setting out the specific work to be done to achieve the audit strategy. It provides clear instructions to the audit team on the steps and audit procedures to be carried out.

(2.5 marks each = 5 marks)

ii) Contents of audit strategy:

• The characteristics of the engagement that define its scope (e.g., reporting standards).
• The industry-specific reporting requirements.
• Reporting objectives and deadlines.
• Communication and reporting requirements.
• The focus areas for the audit based on risk assessment.
• Materiality assessment.
• Nature, timing, and extent of audit resources needed (personnel, audit techniques, etc.).
• The overall audit approach (e.g., reliance on internal controls or substantive testing).
  (Any 5 points @ 1 mark each = 5 marks)

Contents of audit plan:

• Procedures for assessing risk of material misstatements.
• Detailed audit procedures in response to the assessed risks.
• Materiality levels.
• Use of analytical procedures for risk assessment.
• Test of internal controls.
• Detailed instructions for audit team members.
• Timing and extent of audit work.
  (Any 5 points @ 1 mark each = 5 marks)