Chapter 6: Audit documentation
Table of Contents
Table of Contents ................................................................................................................. 1
1 SA 230 Audit Documentation. .................................................................................... 2
1.1 Examples of Audit Documentation. ..................................................................... 2
1.2 Responsibility of the Auditor. .............................................................................. 2
1.3 Objectives of the Auditor. ................................................................................... 2
1.4 Nature of Audit Documentation. ......................................................................... 2
1.5 Purpose of Audit Documentation ......................................................................... 3
1.6 Form, Content and Extent of Audit Documentation. ...................................... 3
1.7 Timely Preparation of Audit Documentation. ................................................... 4
1.8 Audit File ................................................................................................................... 5
1.9 Assembly of the Final Audit File. ........................................................................ 5
1.10 Documentation of Significant Matters and Related Significant
Professional Judgements. .................................................................................. 6
1.11 Completion Memorandum or Audit Documentation Summary ................... 7
1.12 Ownership of Audit Documentation. ............................................................... 7
1 SA 230 Audit Documentation.
“Audit Documentation”, “working papers” or “work papers” refers to:
Record of audit Relevant audit evidence Conclusions the auditor
procedures performed, obtained, reached.
1.1 Examples of Audit Documentation.
Audit programmes. Summaries of significant matters.
Analyses. Letters of confirmation and
representation.
Issues memoranda. Checklists.
Correspondence (including e-mail) concerning significant matters.
1.2 Responsibility of the Auditor.
✓ To prepare audit documentation for an audit of financial statements.
✓ It should be adapted as needed when applied to audits of other historical
financial information.
✓ The specific documentation requirements of other SAs do not limit the
application of this SA.
✓ Laws or regulations may establish additional documentation requirements.
1.3 Objectives of the Auditor.
The objective of the auditor is to prepare documentation that provides:
✓ A sufficient and appropriate record of the basis for the auditor’s report;
and
✓ Evidence that the audit was planned and performed in accordance with SAs
and applicable legal and regulatory requirements.
1.4 Nature of Audit Documentation.
Audit documentation provides:
✓ Evidence of the auditor’s basis for a conclusion about the achievement of
the overall objectives of the auditor; and
✓ Evidence that the audit was planned and performed in accordance with SAs
1.5 Purpose of Audit Documentation
The following are the purpose of Audit documentation:
✓ Assisting the engagement team to plan and perform the audit.
✓ Assisting members of the engagement team to direct and supervise the
audit work, and to discharge their review responsibilities.
✓ Enabling the engagement team to be accountable for its work.
✓ Retaining a record of matters of continuing significance to future audits.
✓ Enabling the conduct of quality control reviews and inspections.
✓ Enabling the conduct of external inspections.
1.6 Form, Content and Extent of Audit Documentation.
The auditor shall prepare audit documentation that is sufficient to enable an
experienced auditor, having no previous connection with the audit, to understand:
a. The nature, timing and extent of the audit procedures performed.
b. The results of the audit procedures performed, and the audit evidence
obtained.
c. Significant matters arising during the audit and the conclusions reached
thereon and significant professional judgements made in reaching those
conclusions.
❖ Further in documenting the nature, timing and extent of audit
procedures performed, the auditor shall record:
✓ The identifying characteristics of the specific items or matters
tested.
✓ Who performed the audit work and the date of completion of such
work; and
✓ Who reviewed the audit work performed and the date and extent
of such review.
❖ The auditor shall document discussions of significant matters:
Management Those charges with Others
Governance
Including:
nature of the significant matters When with whom the discussions
discussed took place.
✓ If the auditor identified information that is inconsistent with the
auditor’s conclusion regarding a significant matter, the auditor shall
document how the auditor addressed the inconsistency
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 audit methodology and tools used.
7. 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.
Quick revision
Form, Content and Extent of Audit documentation
NTE of APs Result of APs & AE obtained Significant matters
identified
Factors to be considered
size and complexity nature of the audit Identified RoMM
procedures
significance of the Nature and Extent of Methodology and tools
AE exceptions used
Conclusions not readily determinable from documentation
1.7 Timely Preparation of Audit Documentation.
The auditor shall prepare audit documentation on a timely basis:
✓ To enhance the quality of the audit
✓ Facilitates the effective review.
✓ Evaluation of the audit evidence obtained and conclusions reached
before the auditor’s report is finalised.
Documentation prepared after the audit work has been performed is likely to be
less accurate than documentation prepared at the time such work is performed.
1.8 Audit File
Audit file may be defined as:
One or more folders or other storage media,
In physical or electronic form, containing the record that comprise,
the audit documentation for a specific engagement.
1.9 Assembly of the Final Audit File.
The auditor shall assemble the audit documentation in an audit file and complete
the administrative process of assembling the final audit file on a timely basis
after the date of the auditor’s report.
✓ SQC 1 “Quality Control for Firms that perform Audits and Review of
Historical Financial Information, and other Assurance and related
services”, requires firms to establish policies and procedures for the timely
completion of the assembly of audit files.
✓ 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.
✓ 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.
✓ Changes may, however, be made to the audit documentation during the final
assembly process, if they are administrative in nature.
Deleting or discarding superseded documentation.
Sorting, collating and cross-referencing working papers.
Signing off on completion checklists relating to the file assembly process.
Documenting audit evidence that the auditor has obtained, discussed and
agreed with the relevant members of the engagement team before the
date of the auditor’s report.
✓ 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 its retention period 1 no shorter than seven years (>7 years) from
the date of audit report.
1.10 Documentation of Significant Matters and Related
Significant Professional Judgements.
Examples of significant matters include: Matters that give rise to significant
risks.
✓ Results of audit procedures indicating:
a. That the financial statements could be materially misstated,
b. Need to revise the auditor’s previous assessment of the risks of
material misstatement and the auditor’s responses to those risks.
✓ Circumstances that cause the auditor significant difficulty in applying
necessary audit procedures.
✓ 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.
(Modification of auditor’s report)
❖ Judging the significance of a matter requires an objective analysis of the
facts and circumstances.
❖ Significant matter is the extent of professional judgement exercised in
performing the work and evaluating the results.
❖ Documentation of the professional judgements made, where significant, to
explains the auditor’s conclusions and to reinforce the quality of the
judgement.
❖ Such matters are of particular interest to those responsible for reviewing
audit documentation, including those carrying out subsequent audits, when
reviewing matters of continuing significance
Some examples of circumstances in which it is appropriate to prepare audit
documentation relating to the use of professional judgement include, where
the matters and judgements are significant:
✓ The rationale for the auditor’s conclusion when a requirement provides
that the auditor ‘shall consider’ certain information or factors, and that
consideration is significant in the context of the engagement.
✓ The basis for the auditor’s conclusion on the reasonableness of areas of
subjective judgements.
✓ The basis for the auditor’s conclusions about the authenticity of a
document when further investigation is undertaken in response to
conditions identified during the audit that caused the auditor to believe
that the document may not be authentic.
1.11 Completion Memorandum or Audit Documentation
Summary
❖ The auditor may consider it helpful to prepare and retain as part of the
audit documentation a summary that describes-
✓ the significant matters identified during the audit and
✓ how they were addressed.
❖ It facilitates effective and efficient review and inspection of the audit
documentation, particularly for large and complex audits.
❖ Preparation of such a summary may assist auditor’s consideration of the
significant matters.
❖ It may also help the auditor to consider whether there is any individual
relevant SA objective that the auditor cannot achieve that would prevent
the auditor from achieving the overall objectives of the auditor.
1.12 Ownership of Audit Documentation.
❖ SQC 1 provides that, unless otherwise specified by law or regulation, audit
documentation is the property of the auditor.
❖ 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.