Chapter 10 - Documentation Flashcards
What is the purpose of audit documentation (working papers)? (2)
Audit documentation serves as a record of procedures performed, evidence obtained, and conclusions reached during the audit. It provides:
Evidence for the auditor’s conclusion.
Proof that the audit was planned and performed per ISAs and legal requirements.
Name additional reasons for maintaining audit documentation. (6)
Audit documentation is maintained to:
Assist in planning and performing audits.
Supervise and direct work.
Prove adherence to ISAs.
Enable accountability for audit work.
Retain records for future audits.
Facilitate external inspections and quality reviews.
What should audit documentation show? (4)
Audit documentation should include:
Name of the client and reporting date.
File reference and name of the preparer.
Date of preparation and subject of the working paper.
Results of audit procedures, conclusions, and key points highlighted.
What is the purpose of showing how samples were selected in audit documentation?
This helps explain the rationale behind audit sampling, ensuring that conclusions are evidence-based and methodologically sound.
What are automated working papers, and why are they used?
Automated working papers use software to document and cross-reference audit work. They reduce errors, save time, and are easier to review and adjust.
List advantages of automated working papers. (4)
Advantages include:
Reduced risk of errors.
Neater and easier-to-review documents.
Quick adjustments and cross-referencing.
Electronic sharing and storage capabilities
How are working papers categorised for filing? (2)
Working papers are divided into:
Permanent audit files: Contain documents of continuing importance (e.g., engagement letters, articles of association).
Current audit files: Contain information specific to the current year’s audit (e.g., financial statements, risk assessments).
What is the ICAEW’s requirement for retaining working papers?
The ICAEW requires working papers to be retained for at least six years from the end of the accounting period they relate to.
What is the purpose of retaining audit working papers for a minimum of six years?
Retaining working papers for six years ensures compliance with auditing standards and facilitates future audits, reviews, or legal inquiries.
Who owns the working papers?
Working papers are the property of the assurance providers, while the audit report becomes the client’s property upon issuance.
Are auditors required to share working papers with the client?
No, auditors are not required to share working papers with the client unless the auditors choose to do so at their discretion.
Under what circumstances might working papers be shared with third parties?
Working papers might be shared with third parties when a new firm takes over an audit, with the client’s permission.
What measures must firms take for the security of audit documentation?
Firms must ensure documents are stored in locked premises, with electronic documents protected by controls.
Why is confidentiality important in working papers?
Confidentiality protects sensitive client information and ensures compliance with ethical guidelines, avoiding unauthorised disclosure to third parties.
Permanent audit files contain information of continuing importance to the audit
Engagement letters
New client questionnaire
The memorandum and articles of association
Other legal documents such as prospectuses,
leases, sales agreements
Details of the history of the client’s business
Board minutes of continuing relevance
Previous years’ signed accounts and analytical
procedures
Accounting systems notes, previous years’ control questionnaires
Current audit files contain any information of
continuing importance to the audit
Financial statements
Accounts checklists
A summary of unadjusted errors
Report to partner including details of
significant events and errors
Audit planning memorandum, time budgets
and summaries, risk assessments
Written representations from management
Notes of board minutes
Communications with third parties such as
experts or other auditors
A lead schedule including details of the figures
to be included in the accounts
Details of tests of detail and tests of control and conclusions drawn
Why is it important for firms to have good security procedures for retained working papers?
Good security procedures ensure that working papers are protected from unauthorized access or loss, maintaining the confidentiality and integrity of audit documentation.
What measures should firms take for securing paper documents?
Paper documents should be kept securely in locked premises to prevent unauthorised access.
How should firms protect electronic documents?
Electronic documents should be secured using electronic controls, such as encryption and secure access protocols.
The auditor will prepare documentation in relation to the fieldwork carried out on an assurance engagement.
Indicate whether the following are, or are not, valid reasons for preparing such documentation. VALID OR NOT VALID
(i) To comply with the law.
(ii) To provide a record of matters of continuing significance to future audits.
(iii) To facilitate review by senior staff.
(iv) To prove adherence to ISAs in a litigious situation.
- NOT VALID - It is not a legal requirement for the auditor to prepare working papers
- VALID
- VALID
- VALID
Which three of the following are reasons why assurance providers record their work?
A To confirm the terms of the engagement
B To help the assurance team to plan and perform the engagement
C To retain a record of matters of continuing significance to the engagement
D To enable an experienced assurance provider to carry out quality reviews
B To help the assurance team to plan and perform the engagement
C To retain a record of matters of continuing significance to the engagement
D To enable an experienced assurance provider to carry out quality reviews
Confirming the terms of the engagement is done in the engagement letter and does not constitute a reason for assurance providers to record their work. SAMPLE EXAM
Which three of the following should working papers show?
A The name of the client
B The date the work was planned
C The date the work was carried out
D The date the work was reviewed
E The initials of the person supervising the work
A The name of the client
C The date the work was carried out D The date the work was reviewed
The second option is not correct because the details relating to the planning of the work will be included in the planning memorandum. The answer is not the fifth option as the initials of the person supervising the work are not necessary, but the reviewer would initial the working paper. The supervisor and the reviewer might be the same person, but not necessarily.
Which two of the following are likely to be kept on a permanent audit file?
A Engagement letter
B Planning memorandum
C Review notes
D Previous year’s signed financial statements
E Current year’s draft financial statements
A Engagement letter
D Previous year’s signed financial statements
The second, third and fifth options will be kept on the current year audit file.
4 Many auditors use two types of audit file: a current audit file and a permanent audit file.
LO 3a
LO 3a
LO 3a
For each of the following documents, select whether it is most likely to be included in the current audit file, permanent audit file or in both.
Engagement letter
A Current audit file
B Permanent audit file
C Both
Audit plan
D Current audit file
E Permanent audit file
F Both
Manager review notes
G Current audit file
H Permanent audit file
I Both
4 Correct answer(s):
B Permanent audit file
Correct answer(s):
D Current audit file
Correct answer(s):
G Current audit file
SAMPLE EXAM
The engagement letter will be held on the permanent audit file. The audit plan and manager review notes will be on the current file only.
5 Which three of the following documents would be held on a current audit file?
A Details of the history of the client’s business
B Communications with experts
C Audit file review notes
D Copies of management accounts
E Lease agreements
B Communications with experts
C Audit file review notes
D Copies of management accounts
Details of the history of the client’s business and lease agreements would be held on the permanent audit file.
For each of the following statements, select whether they are true or false. Working papers should be stored in locked premises.
A True
B False
An auditor can destroy the audit plan relating to Jacobs Ltd for the year ended 30 June 20X3 in 20Y0.
C True
D False
Working papers belong to the client and may be stored at their premises.
E True
F False
Correct answer(s): A True
Correct answer(s): C True
Correct answer(s): F False
Working papers belong to the auditor and should be stored securely by the auditor in locked premises. Although ISA 230 requires documentation to be kept for a minimum of five years from the date of the auditor’s report, ICAEW requires registered auditors to keep all audit working papers required by auditing standards for a period of at least six years from the end of the accounting period to which they relate.
For each of the following, select whether or not they are valid reasons for preparing audit working papers.
To help the audit team to plan and perform the audit
A Valid
B Not valid
To enable the auditor to charge a higher fee
C Valid
D Not valid
To prove adherence to ISAs
E Valid
F Not valid
Correct answer(s): A Valid
Correct answer(s): D Not valid
Correct answer(s): E Valid
SAMPLE EXAM
The second statement is not valid as there is no direct correlation between the number of working
papers produced and the audit fee charged. The other two statements are valid.
The assurance provider will prepare documentation in relation to the fieldwork carried out on an assurance engagement.
For each of the following, select whether or not they are valid reasons for the preparation of such documentation.
To help in establishing this year’s overall audit strategy
A Valid
B Not valid
To help in this year’s review process
C Valid
D Not valid
To provide a record of evidence gathered to support the conclusions reached
E Valid
F Not valid
B Not valid
Fieldwork documentation does not help in establishing the audit strategy. Correct answer(s):
C Valid
Fieldwork documentation helps in an effective review process.
Correct answer(s):
E Valid
The fieldwork documentation provides a record of evidence gathered.
10 Which one of the following statements is correct in respect of the minimum period, as required by ICAEW, for which audit working papers must be retained by the auditor?
A Five years from the date of completion of the audit work
B Six years from the date of the auditor’s report
C Six years from the end of the accounting period to which they relate
D Five years from the date of approval of the financial statements by the shareholders
C Six years from the end of the accounting period to which they relate
Six years from the end of the accounting period to which they relate is the ICAEW requirement. SAMPLE EXAM
11 Which one of the following statements is correct in respect of the safe custody of audit documentation?
A While audit documentation is held on the client’s premises it is the responsibility of the client to ensure its safe custody.
B The auditor need only ensure the safe custody of audit documentation for the duration of the audit.
C The auditor must ensure the safe custody of audit documentation for at least six years from the end of the accounting period to which it relates.
D All audit documentation must be destroyed within five years of the end of the accounting period to which it relates.
C The auditor must ensure the safe custody of audit documentation for at least six years from the end of the accounting period to which it relates.
The auditor may choose to include a number of items within their working papers. For each of the following statements, select whether they are true or false.
Auditors may include a summary of all significant matters arising during the audit and how they were addressed.
A True
B False
In cases where significant judgement is required, the auditor can choose to delay the preparation of working papers in order to allow for suitable reflection.
C True
D False
Audit working papers will record matters of continuing significance to future audits.
E True
F False
A True
Matters of significance should be documented for both current and future audits.
However, documentation must be prepared on a timely basis, as any delay could lead to inaccurate working papers. The need for reflection is unlikely to benefit the auditor’s judgement in such cases! Working papers can also be updated as and when subsequent information/evidence is obtained.
D False
E True
