Which of the following is a step in audit planning?

The step in audit planning that is most critical involves determining the audit criteria. Audit criteria are essential as they serve as the benchmarks against which the auditable entity's performance, processes, or controls are assessed. Establishing clear and relevant criteria allows the audit team to evaluate compliance with applicable regulations, standards, and best practices effectively.

Determining audit criteria involves identifying the specific frameworks, regulations, and policies that will guide the audit process, which is foundational for ensuring the audit's effectiveness and relevance. Proper criteria assist auditors in finding gaps in compliance and areas for improvement, thus setting the stage for a thorough audit.

While conducting risk assessments, preparing audit test plans, and establishing audit objectives are also important components of audit planning, they are subsequent steps that depend on having defined audit criteria. Without clear criteria, the risk assessment may lack direction, audit test plans may not be valid, and audit objectives may be misaligned. Thus, the establishment of audit criteria plays a pivotal role in the overall audit planning process.