SA 230: Audit Documentation

DEFINATION OF AUDIT DOCUMENTATION

Audit documentation means records of audit procedure performed by an auditor during an audit procedure. sometimes it is also commonly known as ‘working papers of an auditor’. 

So question comes what is purpose of audit documentation in audit ??

There are several purpose of audit documentation such as :

1. It assists the engagement team to plan & perform the audit

2. It also makes audit team accountable for the work carried by them

3. It enables the audit team to direct the and supervise their work in more s

4. Further it enables the conduct of quality control reviews & inspections .

So to understand it more deeply have some example of audit documentation  :

• Audit programs.
• Analyses.
• Checklist
• Letter of confirmations from management.
• Issue memoranda.

Auditor may include copies of entity records like significant and specific contract agreement as a part of audit documentation, but audit documentation is not a substitute of entity accounting records.

Now there is another topic and that is sqc1

SQC 1 “ quality control for firms that performs audit and review of HISTORICAL FINANCIAL INFORMATION and other assurance related services” for timely completion of assembly of audit files.

The completion and assembly of final audit file is done after auditors report and it is an administrative procedure that does not involve drawing of any new conclusion from it . but yes changes can however be done during the final assembly process, if administrative in nature

Examples of such changes are :

• Deleting or discarding superseding documents.
• Sorting, collating or cross referencing working papers
• Sinning off completion checklist.

SQC 1 establish policy and procedure of retention period of documents of seven years from the date of audit report or later the date of audit report as mentioned

AUDITOR IS ALSO NEEDED TO DOCUMENT SOME SINGNIFICANT MATTERS

What are significant matters

1. Matters t hat give rise to significant risk.

2. Results of audit procedure performed as: (a) that financial statement could be material misstated. (b) need to revise auditor previous assessment of risk of material misstatement.

3. Or circumstances that causes auditor significant difficulty in applying accounting procedure.

The most important thing is auditor professional judgement i.e. an auditor shall take

Its decision wisely and carefully by applying its skills & experience in a way that are in accordance with professional standard / laws to develop an opinion that can be best served to its clients.

Now the question comes who review the audit documentation???

(a) The answer to this question is auditors who are responsible to the new engagement& review the prior period documentation to understand the work performed as an aid in the current audit period.

(b) the successor auditor who review the predecessor audit work.

THINGS TO BE KEPT IN MIND

I. Filling of working papers

II. Proper numbering of working papers

III. Writing of queries in depth so that it can be discussed by management

IV. Disposing of queries with staff / partners/ or senior level management

V. Discussing important matters with senior level management

VI. Working papers need to be signed by top level management and shall be relevantly dated by audit staffs.

DOCUMENTATION ON SIGNIFICANT MATTERS

Auditors shall also report on significant matters such as:

1. Disagreement among members of engagement team or consult with engagement team about final conclusion of audited matters

2. Such other circumstances which create significant difficulty in applying the audit procedure

3. Or subsequent changes in assured audit risk and auditors response to those risk.

Thus audit documentation demonstrates that the work was in fact performed whereas, audit documentation/working papers makes the audit work easy to review , makes audit in an organized manner and an easy reference & serves as an evidence for the auditor that work has been performed in an organized manner and relevant documents have been obtained from the client .

An auditors shall also maintain professional skepticism, as an auditor shall be questioning mind and shall be always be in a position to ask question from client on whatever point he fells necessary to ask from the client.

Written by Sangam Kumar Chaudhary (CA Finalist)