Audit Documentation

Question 1

Audit documents

Answer 1

Audit documentation, also known as working papers, is a crucial part of the audit process. It includes records of audit procedures performed, audit evidence obtained, and conclusions reached. The audit file, which can be in physical or electronic form, contains all the documentation for the entire engagement.

The main objectives of audit documentation are to:

1. Provide a Record:
   
   • Ensure there is a sufficient and appropriate record of the basis for the auditor’s report.
   • Example: Documenting the rationale for key audit decisions and conclusions.
2. Evidence of Compliance:
   
   • Provide evidence that the audit was planned and performed in accordance with International Standards on Auditing (ISAs) and applicable legal and regulatory requirements.
   • Example: Including checklists and work programs that demonstrate compliance with auditing standards.

ISA 230 requires auditors to prepare documentation that:

1. Timeliness:
   
   • Documentation should be prepared on a timely basis to ensure accuracy and completeness.
2. Understandability:
   
   • Documentation should be sufficient to enable an experienced auditor, with no previous connection to the audit, to understand:
     
     • The nature, timing, and extent of the audit procedures performed.
     • The results of the audit procedures and the audit evidence obtained.
     • Significant matters arising during the audit and the conclusions reached.
3. Significant Matters:
   
   • Document discussions of all significant matters.
   • Record how any inconsistencies with the final conclusion on significant matters were resolved.
   • Justify any departure from a basic principle or relevant procedure specified by an ISA.

Scenario: An auditor is auditing a company’s financial statements and needs to document the audit process.

Steps:
1. Audit Procedures:
- Document the specific audit procedures performed, such as inventory counts and confirmation of receivables.

2. Audit Evidence:
   
   • Record the evidence obtained, such as bank confirmations and inspection of invoices.
3. Conclusions:
   
   • Document the conclusions reached, including any significant findings and how they were addressed.
4. Significant Matters:
   
   • Note any significant discussions with management and how any issues were resolved.
5. Compliance:
   
   • Ensure all documentation demonstrates compliance with ISAs and relevant regulations.

By following these guidelines, auditors can ensure their documentation is thorough, accurate, and compliant with professional standards. If you have any further questions or need more detailed examples, feel free to ask!