(A6, S2) Audit Documentation

Question 1

Audit documentation should clearly indicate the work performed and the evidence obtained, plus which parties performed and reviewed the work.
True or False?

Answer 1

True.

Question 2

Audit documentation should demonstrate compliance with quality control standards.
True or False?

Answer 2

False. Quality control standards relate to the conduct of a firm’s audit practice as a whole, and compliance with such standards would not be demonstrated by audit documentation for one specific audit engagement.

Question 3

What purpose does audit documentation serve?

Answer 3

1) the principal support for the auditor’s report
2) assistance in the planning, conduct, and supervision of the audit
3) accountability
4) useful information

Question 4

Where can you find audit objectives and assertions?

Answer 4

In the audit plan, generally kept separate from the working trial balance.

Question 5

What factors affect the nature and extent of audit documentation?

Answer 5

1. The risk of material misstatement
2. The extent to which judgment was required in performing the work and evaluating the results
3. That nature of the specific auditing procedure
4. The significance of the evidence obtained
5. The nature and extent of any problems identified
6. The need to document conclusions that may not be obvious

Question 6

An indication in the audit documentation that the accounting records agree or reconcile with the financial statements is required for an audit in accordance with GAAS.
True or False?

Answer 6

True.

Question 7

Audit documentation should be prepared in enough detail so that:

Answer 7

An experienced auditor who has NO previous connection with the audit can understand the procedures performed and the evidence obtained.

Question 8

What is the significance of the report release date?

Answer 8

• Report is delivered to client (typically)
• Auditor grants client permission to use report
• Beginning of retention period

Question 9

Documentation completion date significance?

Answer 9

The date after which existing documentation must not be deleted, and additions to the documentation file must be documented as well. With PCAOB standards, this is 45 days from report release date. With auditing standards, this is 60 days from report release date.

Question 10

What is the retention period under PCAOB & auditing standards?

Answer 10

Seven years and five years, respectively.

Question 11

Are accounting estimates considered sufficient and appropriate documentation?

Answer 11

No, they are considered a significant finding or issue that should be documented by the auditor.

Question 12

What are some examples of significant audit findings that should be included in audit documentation?

Answer 12

• Discovery of a material sale recorded in wrong year
• Substantial doubt over going concern
• Application of accounting principles to complex transactions
• NOT staffing changes

Question 13

Which documents show the procedures that are applied and the conclusions reached in an audit engagement?

Answer 13

Working papers.

Question 14

What is the maximum number of days in which a nonissuer’s auditor should complete the assembly of the final audit file following the report release date?

Answer 14

60 Days. (An issuer is 45 days.)

Question 15

The auditor’s understanding of internal control can be documented in a variety of different ways. Flowcharts and internal control questionnaires are two methods that might be used to assist the auditor in obtaining an understanding of internal control, but they generally do not provide information about the effectiveness of the entity’s internal controls.
True or False?

Answer 15

True.