chap 7 audit documentation Flashcards
auditing standards state that audit documentation is what?
the record of the audit procedures performed, relevant audit evidence, and conclusions the auditor reached.
audit documenation should include all the info the auditor considers necessary to do what?
adequately conduct the audit and to proide support for the audit report
the overall objective of audit documentation is to do what?
aid the auditor in providing reasonable assurance that an adquate audit was conducted in accordance with auditing standards
what are the 4 purposes of audit documentation?
1.Basis for planning the audit- to plan an audit, the necessary reference info must be availble in the files 2. Record of the evidence accumulated and the results of the tests- can demonstrate to regulatory agencies and courts if need be that the audit was well planned and aequately supervised, evidence appropriate and sufficient, and the audit report was proper given the results of the audit 3.Data for determining the proper type of audit report- 4.Basis for review by supervisors and partners
in addition to the purposed directly related to the audit report, the audit files often serve as the baisis for what?
preparing tax returns filings with the SEC other reports source of info for issuing communication to managment and those that govern the company
all audit files (documentation)are teh property of who?
the auditor
when is the only time anyone else incluiding the client has a legal right to examine the audit files?
when they are subpoenaed by a court as legal evidence or when they are examined by approved peer reviewers or regulatory inspectors
Auditing standards require records of private companies be retained for a minimum of ?
5 years
Sarbanes-Oxley Act requires auditors of public companies to maintain audit files for a minimum of ?
7 years
Permanent Files: Contain what kind of data
data of a historical or continuing nature. These provide a convenient source of information that is used from year to year
what are 4 examples of the kind of data in permanent files?
1.Copies of company documents such as articles of incorporation, bylaws, bond indentures, and long-term contracts 2.Analyses of accounts from previous years that have continuing importance 3.Information related to understanding internal controls and assessing control risk 4.Results of analytical procedures from prior years’ audits for comparison
what do the current files include?
: Includes all documentation for the current year audit 1. Audit Program 2.Working Trial Balance—Each line in the trial balance is supported by a lead schedule. . 3. Adjusting Entries—Auditors propose adjusting entries for material misstatements. 4/ Supporting Schedules
what is the working trial balance?
a listing of the general ledger accounts and their year end balances
what is a lead schedule?
it contains the detailed accounts from the general ledgermaking up the line item total.
when the auditor discover material misstatments in the accounting records, the FSs must be corrected. the adjusting entries are often prepared by the auditor but they must be approved by who?
the client since managment has the primary responsiblity for the fair presentation of the statements
only adjusting entries that do what to the FSs must be recorded?
significantly affect the fair presentation of financial statments and auditors decide shen misssatement should be adjusted based on materiality
Documentation—Audit documentation should be in sufficient detail to provide a clear understanding of what? (3)
- the work performed 2. the evidence obtained 3. the conclusions reached
Documentation should have these characteristics
- Identified with the client’s name, period covered, description of the contents, initials of the preparer, date of preparation, and an index code 2. Files should be indexed and cross-referenced to aid in organization 3. Documentation should clearly indicate the audit work performed through memos, initialing the procedures in the audit program, or tick marks on the schedules 4. Include sufficient information to fulfill the audit objectives 5/ Conclusions reached about the segment of the audit should be clearly stated
what are supporting schedules?
prepared by client or auditors in support of specific amounts on the FSs
what are the major types of supporting schedules? (8)
- Analysis 2 Trial balance or list 3 Reconciliation of amounts 4 Substantive analytical procedures 5 Summary of procedures 6 Examination of supporting documentation 7 Informational 8 Outside documentation
what is the supporting schedule of analysis?
designed to show the activity in the GL account during the entire period under audit, tying together the beinning and ending balances
what is the supporting schedule of trial balance or list?
consists of the details that make up a year end blance of a general ledger account . difference from analysis is includes only those items making up the end of the period balance
what is the supporting schedule of reconciliation of amounts?
suports a specific amount and is normally expected to tie the amount recorded in the clients records to another source of info ex. cash blance to bank statement
what is the supporting schedule of substantive analytical procedures?
include evidence documenting auditors expectation of the balance in an account as well as other comparisons used in analytical procedures
