The Audit Planning Memo on the UFE

Most people will be into their UFE study period now and possibly be seeing their first UFE mock marks. If they are not what you hoped, don’t worry too much yet, most people quickly improve in the first week or two before leveling off.

Today’s topic is something you will almost definitely see on the UFE, and probably more than once so it’s good to master it from the beginning. The Audit Planning Memo.

Although there are some different approaches out there, the most common elements and approach of an Audit Planning Memo is the RAMP approach (Risk, Approach, Materiality and Procedures). For most audit planning memos you don’t need to discuss all three and often two or three is enough with a discussion of risk and procedures being the most important.

Audit Risk Discussion

It’s important, first of all, to state what the audit risk is exactly based on the case facts. Generally the risk is either high or low but it can also be medium at times. If you’ve forgotten, audit risk the risk that the financial statements are materially misstated after a clean audit opinion is given an is usually calculated as Audit Risk = Inherent Risk * Control Risk * Detection Risk.

Next, you must support your conclusion by specific evidence from your simulation. The amount of evidence depends on the simulation but a general rule of thumb is that you should support your conclusion with at least three specific risks from the case. This is only my opinion so use your own judgment and experience to determine how many is enough! If prior year risk is mentioned or the risk is changing from a prior year, it is important to be specific about what has changed to increase or decrease the audit risk this year.

Some examples of risks:

  • New management or ownership may introduce new biases to misstate
  • Complex accounting issues may be prone to error
  • Weak controls discovered or problems reported by employees with the financial information


Audit Approach

This is often the least discussed area because most UFE simulations don’t have significant approach issues. You have three options here and must state which you will take and support it with case facts. The three options are substantive approach (you will be reviewing transactions), controls reliance (you are relying on the controls) or a combined approach (for some areas you will rely on controls).

If there are very weak controls all around you will take a substantive approach and support it with information from the case as to why. If all controls are functioning fine you can take a controls reliance approach but this will probably never occur so you are most likely to take a combined approach which will rely on controls in some areas and take a substantive approach in the weak areas.



Materiality is usually the easier to score a quick few points over audit approach. Materiality is a number which is based on the financial statements so you must calculate it and state why you are calculating it this way. Materiality is mostly linked to users of the financial statements and not risk so when discussing materiality it is important to discuss how it relates to users of the financial statements. Quick reminder: an amount is material if it could influence the decision of a user of the financial statements. Typical materiality amount go-tos are 5% of Net Income from continuing operations or 0.5-1% of total assets but obviously use your judgment at the time.

Some examples of issues around materiality:

  • New users of the financial statements – they may have a lower or higher materiality than previous users
  • Loans or covenants are involved which are based on the financial statements – amounts which breach these covenants are material
  • Whenever there is a sale or purchase of a company occurring, materiality is often a factor since the purchase price is based on the financial statements


Last thing: with all of the above, I want to stress that it’s important to use case facts often and clearly when discussing each element. Generic discussion or knowledge “dumps” are seldom rewarded on the UFE so get in the habit early of using lots of case facts in your discussions.

Come back tomorrow where I’ll tackle procedures, the most important part of the RAMP and a critical element of scoring well on the UFE.

Did I miss anything? What else do you include in your Audit Planning Memos and why?


  1. Very helpful post!!! Thanks for the acronym “RAMP”, it will be much easier to remember all the components of planning now. Also, i have a few generic elements that I think about whenever I plan an audit: gaining an understanding/knowledge of the business/industry (if the client is new) and also performing some analytical procedures in order to determine which areas of the audit needs particular attention (this might be in the risk component of RAMP, not sure). Thanks :).

    • Hey Serge – Thanks for the comment!

      You are right that analytical procedures might be discussed in the risk part of an audit planning memo but make sure to tie this in with case fact and not to only state that analytical procedures should be performed. Which procedures and why? In most cases you will actually spot issues within the exhibits given and state, in your response, what you’ve discovered. i.e. “The working capital has decreased significantly from the prior year and therefore the risk of breaching the covenant has increased which elevates the risk that management may misstate revenue.”

      I’ve writing up a post in the near future, and you’ve touched on it in your comment, is that I think is useful to consider as well is where in the audit process you are. Before acceptance, before planning, after planning and after the audit is complete. Each of these points in time may change how you approach your audit and response.

      Hope your cases are going well. Happy studying!

  2. What is the format of the audit memo?

  3. Thanks! This really helped me prepare for my Core 1 exam.

  4. Wonderfull explaination, thanks UFIBLOGGER 🙂

  5. Perfect for week 4 of Core 1! Thanks

  6. I often check this web page (this is such a great resource) but I always have trouble finding the P in RAMP.

    Here is the link for me and others.

  7. Thanks A lot, I’m writing my first audit planning memo in Core 1 today , and I didnt know how I should begin and what to include where. This post helped me a lot.

  8. An awesome summary for an audit memo as “RAMP”. This blog should definitely be carrying on!!!

  9. that’s so helpful for core 1 week 4 PC!! thank you so much

  10. Thanks for this – very helpful in Week 4 of Core 1 in Canada!

  11. Please i want a discussion on PROCEDURES as this will help a lot

  12. For materiality, can we just calculate overall and performance materiality when asked to write an audit planning memo, or do we have to give specific and specific performance materiality too?

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