Scope:

• It deals with the auditor’s responsibility to prepare audit documentation
• Specific documentation requirements of other ISAs do not limit the scope of ISA 230

Principal Purposes / Objective of Audit Documentation: 

is to provide evidence;

• Of the auditor’s basis for conclusion, and
• That the audit was planned and performed(in accordance with ISAs and applicable legal and regulatory requirements)

Additional Purposes / Advantages / Importance of Audit Documentation:

Definitions:

Audit Documentation / Working Papers / Work papers :
The record of';

• Audit procedures performed,
• Relevant audit procedures obtained, and
• Conclusions the auditor reached.

Audit File:

• These are folders or other storage media,
• In Physical or electronic form,
• Containing the records that comprise audit documentation, for a specific engagement.

Experienced Auditor:
An individual, whether internal or external to the firm, who has :

• Practical audit experience, and
• A reasonable understanding of :

> Audit processes,

> ISAs and applicable legal and regulatory requirements,

> The business environment, where the entity operates, and

> Auditing and financial reporting issues, relevant to the entity’s industry.

Requirements:

Timely preparation of Audit Documentation helps to:

• Enhance the quality of the audit, and
• Facilitate the effective review & evaluation (of audit evidence obtained)

Documentation of the audit procedures performed & audit evidence obtained:

Form, Content & Extent of audit Documentation :
Documentation should be self-explanatory and sufficient to make understand:

• Nature, timing and extent of the audit procedures performed.
• Results of the audit procedures performed and audit evidence obtained, and
• Significant matters arising during audit; conclusions reached; n significant professional judgments made in reaching those conclusions.

Examples of significant matters include matters that give rise to:

> Significant risks

> Disagreement i.e. the financial statements may be materially misstated

> Scope limitation for the auditor, to apply necessary audit procedures

> Inclusion of emphasis of matter paragraph or modification to the auditor’s report

Documentation:

1. Audit documentation may be recorded on paper or on electronic or other media.
2. Most documents are prepared by the auditor himself but some may be gathered from the client or third parties as well (e.g. replies from client’s bank)

Documentation should include the following:

• In documenting nature, timing, and extent of the audit procedures performed, the auditor shall record:

> Identifying characteristics : These are the Basis for selection of items, so that sample is the true representative of the population

> Who performed the audit work, and date of completion, and

> Who reviewed the audit work, and date of extent of such review

• Document discussion of significant matters with management, those charged with governance and others including :

> The nature of significant matters discussed, and

> When and with whom the discussions took place

• Document how the auditor addresses inconsistencies, (i.e. inconsistencies in information regarding significant matter with the auditor’s final conclusion).

Sample working paper:

• If in exceptional circumstances, the auditor judges to depart from any requirement of the ISAs, the auditor shall document :

> Alternate audit procedures performed, and

> The reasons for such departure.

• If in exceptional circumstances, after the reporting date the auditor performs;

> New or additional audit procedures; or

> Draws new conclusions

The auditor shall document:

• The circumstances,
• Such audit procedures performed, audit evidence obtained, conclusions reached, and =their effects on the auditor’s report, and
• When and by whom the resulting changes were made and reviewed.

Factors on which form, content & extent of audit documentation depends are as follows:

• The size and complexity of the entity.
• The nature of the audit procedures to be performed.
• The identified risks of material misstatement.
• The significance of the audit evidence obtained.
• The nature and extent of exceptions identified.
• The need to document a conclusion or basis of conclusion.
• The audit methodology and tools used.

Examples of Audit Documentation are:

• Audit Programs/Audit Plans: Documents of planning or risk assessment phase.
• Analyses: Documents making comparisons of any kind.
• Issues Memoranda: Document showing summary of all identified issues(material, immaterial, significant or insignificant).
• Summaries of significant matters.
• Letters of confirmation and representation: For e.g. replies from banks or debtors of the client.
• Checklists.
• Correspondence (including email) concerning significant matters.
• The auditor may include abstracts or copies of the entity’s records as part of the audit documentation.

Assembly of the final audit file:
Assembly of the final audit file is an administrative process, examples of such administrative processes include:

• Deleting or discarding superseded documents.
• Sorting, compiling, cross-referencing working papers.
• Signing off on completion checklists.
• Documenting audit evidence, which has already been obtained, discussed and agreed with the relevant engagement team members, before the date of the auditor’s report.

Timely requirement of assembling the audit documentation:

• The auditor shall assemble the audit documentation within 60 days after the date of the auditor’s report.
• After the said 60 days, the auditor shall not delete or discard audit documentation until the retention period ends.
• However, the auditor may find it necessary to modify the existing document, or add new document (after the final audit file has been completed). Such a need may occur when it is required by the internal or external inspection performing parties.

In such a case, the auditor shall document :

1. The specific reasons for making them, and
2. When and by whom they were made and reviewed.