Chapter 21 Flashcards
Define Audit Documentation.
Audit Documentation is the written record of audit procedures performed, evidence obtained and conclusions reached.
Primary purpose of Audit Documentation.
Audit Documentation provide evidence that:
- Auditor has appropriate basis for opinion in audit report and achievement of overall objectives.
- audit is planned and performed in accordance with ISA’s and regulatory requirements.
Additional purposes of Audit Documentation.
Audit Documentation helps to:
1. Assist engagement team in planning and performance of audit.
2. Assist the senior in direction, supervision and review of audit team.
3. Enable quality control reviews.
4. Enable accountability of engagement team for its work.
5. Retain record of matters of continuing significance to future audit.
Documents that are prepared timely are more accurate than prepared later.
Ownership, Confidentiality and Retention of Audit Documentation
- Audit Documentation is not a part of accounting records. It is the property of auditor. However, auditor is also required to keep them in safe custody and ensure confidentiality.
- Each firm should establish its own policies and procedures for retention of documentation. However, minimum period for retention is at least 5 years from the date of auditor’s report or group audit repot which ever is later..
Define Audit Files
Audit Files are folders in physical or electronic form containing audit documentation for whole engagement.
Content of Audit Files.
- Documentation of Internal Controls.
- Audit plan for each area.
- Significant issues identified.
- Cumulative error schedule.
- Audit communication with different parties.
Experienced Audit Principle.
Audit Documentation should be self-explanatory. i.e: audit documentation shall be sufficient to enable an experienced auditor (having no previous connection with outgoing auditor) to understand:
- Nature, timing, extent of audit procedures performed.
- Evidence obtained and conclusions reached.
- Significant matters arising during audit.
Factors affecting Form, Content, and Extent of Audit Documentation.
- Risk of Material Misstatement.
- Size and complexity of entity.
- Audit methodology and tools used.
- Nature and significance of audit procedures performed.
- Nature and significance of evidence obtained.
- Nature and significance of exceptions identified.
Information that should be included in each working paper.
- Name of Audit Client.
- Period under audit.
- Page number.
- Who prepared the working paper and when.
- Who reviewed the working paper and when.
- Area and assertion for which working paper is prepared.
- Explanation of audit ticks and other symbols used.
- Items selected and basis for selection.
- Procedures performed, evidence obtained and conclusion reached.
What is the time period for Assembly File Period.
ISA’s require firms to establish their own policies and procedures for timely completion of assembly of audit files. However, an appropriate period is within 60 days from date of auditors report.
What type of changes can be made during File Assembly Period.
Changes of only administrative nature can be made during file assembly period.
For Example:
1. Deleting or discarding suspended documentation
2. Cross referencing or sorting working papers.
3. Signing off on completion checklists relating to file assembly period.
4. Documenting audit evidence that auditor has obtained before date of audit report.
What is required to be done when it become necessary to make changes in documentation after file assembly period.
Auditor can still make changes but following shall be documented in this regard:
- The specific reason for change
- Who made the change and when
- Who reviewed the change and when.
What changes are required to be done in Audit Documentation when exceptional circumstances arises after audit report.
Example of Exceptional circumstances:
- Subsequent events are identified.
- Misstatement is identified.
Auditor may perform new audit procedures and may add new documents.
- Specific reason for making change.
- Who made the change and when.
- Who reviewed the change and when.
- The new or additional audit procedures performed relating to event, audit evidence obtained and conclusions reached, and their effect on audit report.
