Requirements Of Audit Documentation

Question 1

Method
Assemble
Modifications
Confidentiality

Answer 1

Audit documentation, also known as working papers, can be recorded on paper, electronically, or on other media. The documentation for a specific engagement is assembled in an audit file. The contents of the audit file vary depending on the nature and size of the client and the complexity of the audit processes required. Here are the key components and details that should be included:

1. Audit Programs:
   
   • Detailed plans outlining the audit procedures to be performed.
2. Analyses:
   
   • Detailed examinations of financial data and other relevant information.
3. Summaries of Significant Matters:
   
   • Summarized notes on important issues identified during the audit.
4. Letters of Confirmation and Representation:
   
   • Written confirmations from third parties and representations from management.
5. Checklists:
   
   • Lists used to ensure all necessary audit procedures are completed.
6. Correspondence:
   
   • Communication related to significant audit issues, including emails and letters.

Each audit working paper should clearly show the following information, where relevant:

1. Client Name:
   
   • The name of the client being audited.
2. Accounting Date:
   
   • The date of the financial statements being audited.
3. File Reference:
   
   • A unique reference number for the working paper.
4. Preparer’s Name:
   
   • The name of the person who prepared the working paper.
5. Preparation Date:
   
   • The date the working paper was prepared.
6. Reviewer’s Name and Review Extent:
   
   • The name of any person reviewing the work and the extent of their review.
7. Review Date:
   
   • The date the review was completed.
8. Audit Ticks or Symbols Key:
   
   • A key explaining any audit ticks or symbols used in the working papers.
9. Errors or Omissions Listing:
   
   • A list of any errors or omissions identified during the audit.
10. Conclusion:
    
    • A conclusion on the area being audited, summarizing the findings and any necessary actions.

Scenario: An auditor is documenting the audit of a company’s year-end financial statements.

Steps:
1. Audit Programs: Include detailed plans for auditing revenue, expenses, assets, and liabilities.
2. Analyses: Perform and document analyses of significant accounts, such as receivables and payables.
3. Summaries: Summarize significant findings, such as discrepancies in inventory counts.
4. Confirmations: Include letters confirming bank balances and receivables from customers.
5. Checklists: Use checklists to ensure all audit steps are completed.
6. Correspondence: Document any significant communications with management or third parties.

By ensuring that all these elements are included and properly documented, auditors can maintain a comprehensive and organized audit file that supports their conclusions and complies with professional standards. If you have any further questions or need more detailed examples, feel free to ask!

Source: Conversation with Copilot, 12/26/2024
(1) 1111 Nature, purpose, and extent of audit documentation - OAG-BVG. https://www.oag-bvg.gc.ca/internet/methodology/performance-audit/manual/1111.shtm.
(2) SA 230 Audit Documentation | Form, extent of documentation. https://masllp.com/sa-230-audit-documentation/.
(3) Guide to Standard on Auditing (SA) 230, Audit Documentation - Tax Guru. https://taxguru.in/chartered-accountant/implementation-guide-standard-on-auditing-sa-230-audit-documentation.html.

The auditor is required to assemble the final audit file on a timely basis after the date of the auditor’s report, typically within 60 days. This process excludes drafts of working papers, financial statements, or notes that reflect incomplete or preliminary thinking. Once the final audit file is assembled, the auditor must retain all documentation until the end of its retention period.

If it becomes necessary to modify existing documentation or add new documentation after the final audit file has been assembled, the auditor must document:

1. When and By Whom:
   
   • The date and the person who made the modifications.
   • Example: “Modification made on January 15, 2025, by John Doe.”
2. Reasons for Modifications:
   
   • The reasons for making the modifications.
   • Example: “Modification made to correct an error identified in the inventory valuation.”

If exceptional circumstances arise after the date of the audit report, requiring the auditor to perform new or additional procedures or reach new conclusions, the auditor must document:

1. Circumstances:
   
   • The specific circumstances that necessitated the additional work.
   • Example: “New information received regarding a significant transaction.”
2. New or Additional Procedures:
   
   • The new or additional procedures performed, the audit evidence obtained, and the conclusions reached.
   • Example: “Performed additional procedures to verify the accuracy of the new information, obtained supporting documents, and concluded that the financial statements need to be adjusted.”
3. Documentation Changes:
   
   • When and by whom the resulting changes to the audit documentation were made and who reviewed them.
   • Example: “Changes made on February 10, 2025, by Jane Smith, reviewed by Michael Brown.”

By following these guidelines, auditors ensure that their documentation is complete, accurate, and compliant with professional standards, even when modifications are necessary. If you have any further questions or need more detailed examples, feel free to ask!

• Audit Documentation: The ownership of audit documentation, including working papers, rests with the auditor. These documents do not form part of the client’s accounting records and do not belong to the client.

• Retention Period: According to ISA 230, auditors are required to retain audit documentation for a minimum period of five years from the date of the audit report.
• Safety: Auditors must ensure that working papers are kept safe and secure to prevent unauthorized access or loss.

• Confidentiality Requirements: Auditors must maintain the confidentiality of the contents of the working papers. Information should only be disclosed to third parties in accordance with ethical guidelines.
• Ethical Guidelines: These guidelines typically include provisions for confidentiality and specify circumstances under which information may be shared, such as legal requirements or with the client’s consent.

Scenario: An auditor has completed the audit of a company’s financial statements and needs to manage the audit documentation.

Steps:
1. Ownership: The auditor retains ownership of all working papers and ensures they are not included in the client’s accounting records.
2. Custody: The auditor securely stores the audit documentation and plans to retain it for at least five years.
3. Confidentiality: The auditor ensures that all information in the working papers is kept confidential and only shared in accordance with ethical guidelines.

By adhering to these principles, auditors can ensure that their documentation is properly managed, secure, and compliant with professional standards. If you have any further questions or need more detailed examples, feel free to ask!