3.1. Audit Documentation

Question 1

What is audit documentation?

Answer 1

As per SA 230 “Audit Documentation”, audit documentation refers to the record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached. (terms such as “working papers” or “work papers” are also sometimes used.)

Question 2

Nature of audit documentation

Answer 2

Audit documentation provides:

a) Evidence of the auditor’s basis for a conclusion about the achievement of the overall objectives of the auditor; and

b) Evidence that the audit was planned and performed in accordance with SAs and applicable legal and regulatory requirements.

Question 3

Purpose of audit documentation

Answer 3

The following are the purpose of Audit documentation:
1. Assisting the engagement team to plan and perform the audit.

2. Assisting members of the engagement team to direct and supervise the audit work, and to discharge their review responsibilities.
3. Enabling the engagement team to be accountable for its work.
4. Retaining a record of matters of continuing significance to future audits.
5. Enabling the conduct of quality control reviews and inspections in accordance
   with SQC 1.
6. Enabling the conduct of external inspections accordance with applicable legal, regulatory or other requirements.

Question 4

Factors on which Form, content and extent of audit documentation depends

Answer 4

The form, content and extent of audit documentation depend on factors such as:

1. The size and complexity of the entity.
2. The nature of the audit procedures to be performed.
3. The identified risks of material misstatement.
4. The significance of the audit evidence obtained.
5. The nature and extent of exceptions identified.
6. The need to document a conclusion or the basis for a conclusion not readily determinable from the documentation of the work performed or audit evidence obtained.
7. The audit methodology and tools used.

Question 5

Examples of audit documentation

Answer 5

Audit Documentation include:
i) Audit programmes.
ii) Analyses.
iii) Issues memoranda.
iv) Summaries of significant matters.
v) Letters of confirmation and representation.
vi) Checklists.
vii) Correspondence (including e-mail) concerning significant matters.

(MT:- CLAASIC)

Question 6

What is audit file

Answer 6

Audit file may be defined as one or more folders or other storage media, in physical or electronic form, containing the records that comprise the audit documentation for a specific engagement.

Question 7

Assembly of final audit file

Answer 7

1. The auditor shall assemble the audit documentation in an audit file on a timely basis after the date of the auditor’s report.
2. SQC 1 requires firms to establish policies and procedures for the timely completion of the assembly of audit files.
3. An appropriate time limit within which to complete the assembly of the final audit file is ordinarily not more than 60 days after the date of the auditor’s report.
4. The completion of the assembly of the final audit file after the date of the auditor’s report is an administrative process that does not involve the performance of new audit procedures or the drawing of new conclusions.
5. Changes may, however, be made to the audit documentation during the final assembly process, if they are administrative in nature.

Question 8

Retention period

Answer 8

After the assembly of the final audit file has been completed, the auditor shall not delete or discard audit documentation of any nature before the end of 7 years.

Question 9

Ownership of audit documentation

Answer 9

a) Standard on Quality Control (SQC) 1 provides that, unless otherwise specified by law or regulation, audit documentation is the property of the auditor.

b) He may at his discretion, make portions of, or extracts from, audit documentation available to clients, provided such disclosure does not undermine the validity of the work performed, or, in the case of assurance engagements, the independence of the auditor or of his personnel.

Question 10

Documentation of Significant matters and its examples

Answer 10

Judging the significance of a matter requires an objective analysis of the facts and circumstances.

Examples of significant matters include:
1. Matters that give rise to significant risks.

2. Results of audit procedures indicating
   a) that the financial statements could be materially misstated, or
   b) a need to revise the auditor’s previous assessment of the risks of material misstatement and the auditor’s responses to those risks.
3. Circumstances that cause the auditor significant difficulty in applying necessary audit procedures.
4. Findings that could result in a modification to the audit opinion or the inclusion of an Emphasis of Matter Paragraph in the auditor’s report.

Question 11

Completion memorandum or Audit Documentation summary.

Answer 11

The auditor may consider it helpful to prepare and retain as part of the audit documentation a summary (sometimes known as a completion memorandum) that describes
i) the significant matters identified during the audit and
ii) how they were addressed.

Such a summary may facilitate effective and efficient review and inspection of the audit documentation, particularly for large and complex audits.