Audit Documentation
• Audit documentation comprises the record of conducted audit
procedures, pertinent evidence, and the auditor's conclusions.
• Purpose of Audit Documentation:
1.Planing for audit planning
2. Record of evidence and test outcomes
3. Data for determining the appropriate type of audit report
4. Material for review by supervisors and partners
Planning for audit (1 of 4)
• To ensure proper audit planning, essential
reference data must reside within the audit files.
• These files encompass a wide range of planning
information, including:
internal control descriptions,
individual audit area time budgets,
the audit program, and
outcomes from the previous year's audit.
Record of Evidence and Test outcomes (2 of 4)
• Audit documentation is the essential record that
verifies audit compliance with standards,
capable of demonstrating effective planning,
evidence appropriateness, and
accurate reporting to authorities.
• Key aspects of audit documentation include
itemizing tested elements,
significant findings,
resolution actions, and
basis for conclusions.
Data for Determining the Appropriate Type of
Audit Report (3 of 4)
• Audit documentation aids auditors in determining if
they've gathered enough suitable evidence to support the
audit report under specific conditions.
• This data is also valuable for assessing the fairness of
financial statements and disclosures based on audit
evidence.
• Furthermore, the documentation should back the
disclosure of crucial audit matters in the audit report.
Confidentiality of the Audit Files
• The Code of Professional Conduct emphasizes the
importance of maintaining client confidentiality.
• Auditors gather confidential data during audits,
such as salary details, pricing strategies, and cost
data.
• Sharing this information could harm the auditor-
client relationship and risk data manipulation.
Thus, protecting audit files is vital to prevent
unauthorized access and maintain trust.
Material for Review by Supervisors and
Partners (4 of 4)
• Audit files serve as the main reference for
supervisors reviewing assistants' work, ensuring
proper supervision and validating the audit
process.
• Documentation should detail:
performer,
date,
reviewer, and
review date.
• The files assist in training, planning, and
coordinating future audits.
Documentation Retention
• Auditing standards require private
company audit records to be
retained for five years.
• For public companies, the demands
seven-year retention of audit files,
backed by penalties for intentional
destruction.
• All audit files are the property of
the auditor.
Permanent Files
• Permanent Files store historical or ongoing data, offering a reliable reservoir
of information utilized across years. They encompass:
1. Copies of corporate documents like articles of incorporation, bylaws, bond
indentures, and long-term contracts, pension plans, leases.
2. Analyses of accounts from prior years with ongoing significance.
• Fixed assets, LT debt, goodwill
3. Data pertinent to comprehending internal controls and evaluating control
risk.
• Control deficiencies
4. Previous years' audit analytical procedure results for reference and
comparison.
Current Files
• Current Files: Includes all documentation for the current year audit including:
• Audit Program
• Working Trial Balance—Each line in the trial balance is supported by a lead schedule.
• Adjusting Entries—Auditors propose adjusting entries for material misstatements.
• Supporting Schedules—Major types:
• Analysis: Difference in balances
• Trial balance or list
• Reconciliation of amounts: Bank reconciliation, A/P and A/R reconciliation
• Substantive analytical procedures
• Summary of procedures
• Examination of supporting documentation
• Informational: Tax return, BSE filing,
• Outside documentation
MCQ from Farhat Lectures
• Which of the following statements regarding the audit working
papers is correct?
A- They should be delivered to the client once the audit report is
issued.
B- They should indicate who performed the audit work, the date
the work was performed, who reviewed the work, and the date of
that review.
C- They must be in paper form.
D- They provide additional support for the client’s recorded
amounts.
