A6 Audit Documentation PT 4

Question 1

How long must audit documentation be retained for issuers and nonissuers?

Answer 1

1. PCAOB rules require that auditors retain audit documentation of public companies (issuers) for seven years from the report release date.
2. SAS rules require that auditors keep audit documentation for nonissuers for at least five years from the report release date.
3. The report released date is the date on which the auditor gives the client permission to use the report (often the date the report is delivered to client)

Question 2

Define permanent (continuous) file and provide examples of audit documentation that may be included within.

Answer 2

1. Contracts
2. Pension plan
3. Leases
4. Stock options
5. Bylaws
6. Articles of

Question 3

What are the advantages and disadvantages of auditing with a computer?

Answer 3

Advantages:

1. Fewer math errors
2. Automatic cross-referencing of amounts by linking each lead schedule to the working trial balance and financial statements
3. Automatic preparation of financial statement, tax return sch and consolidating schedules
4. Reduction in required supervisory review time.
5. Automatic performance of certain analytical review procedures.
6. Reduction in required supervisory review time.
7. Automatic performance of certain analytical review procedures.
8. Enhanced client service
9. Improved moral and productivity for audit team

Disadvantages:
1. Audit docs may not contain readily observable details of calculation

Question 4

Describe “auditing around the computer” and identify when it is appropriate and not appropriate.

Answer 4

When auditing around the computer, the auditor does not directly test the application program but instead tests the input data, processes the data independently, and then compares the independent results to the program results.

This method is appropriate for simple batch systems that have a good audit trail. Auditing around the computer is not appropriate when there is insufficient paper-based evidence.