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SA 230 Audit Documentation

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Standard on Auditing (SA) 230, “Audit Documentation”, is an essential and crucial standard that lays down the crucial principles of audit documentation. These principles got to be kept in mind by auditors while complying with requirements of this standard and other Standards on Auditing.

This SA defines audit documentation as “The record of audit procedures (AP) performed, relevant audit evidence (AE) obtained, and conclusions the auditor reached (terms like “working papers” or “work papers” also are sometimes used”. It’s getting to be noted that the ‘documents provided by entity’ used by the auditor to audit should be a part of audit documentation, and auditors should attach checking notes on such documents.


The objective is to organise documentation that provides:

  • A sufficient and appropriate basis for the auditor’s report; and
  • Evidence that the audit was arranged and performed under SA’s and applicable rules and regulatory requirements.

Why Documentation?

Documentation is contemplated as the backbone of an audit. The work performs by the auditor, the explanations and remarks given to the auditor, the conclusions that come up are all evidenced by documentation. Poor and irrelevant documentation may outline poor performance in an audit. The auditor may have accomplished appropriate audit procedures; however, if there’s no documentation to prove, it will put the question on the work done, just in case any material misstatement is reported. Improper and incomplete audit documentation may put the auditor in embarrassing and uncomfortable situations.

Documentation is important because:

  • It reinforces the auditor’s basis for a conclusion about achieving the auditor’s objectives.
  • Provides evidence that the audit was organised and performed as per SA and rules and regulations.
  • It assists supervision and review.
  • It results in better conceptual clarity, clarity of thought, and expression.
  • It eases better understanding and helps avoid misconceptions.

Form, content, and extent of documentation

The form, content, and extent of documentation depend upon factors such as:

  • The size and complexity of the entity;
  • The nature of the audit procedures (AP) to be performed (that is, a test of controls or substantive procedure);
  • The identified risks of material misstatement (ROMM);
  • The significance of the audit evidence obtained;
  • The nature and extent of exceptions and deviation specified; and
  • The audit methodology, technique, and tools used.

Examples of documentation

Examples of audit documentation include:

  • Engagement letter
  • Audit program including planning memorandum
  • Issues memorandum
  • Summaries of significant matters
  • Letters of confirmation and representation
  • Checklists
  • Correspondence (including e-mail) concerning substantial issues.

Function of documentation

Audit documentation enables the auditor to understand the nature, timing, and extent (NTE) of the audit procedure performed, the outcome of audit procedures performed, and conclusions on significant matters and significant professional judgments made in reaching those conclusions.

Documentation of significant professional judgments and related matters

Judging the importance of a matter requires an objective and unbiased analysis of the facts and circumstances. Examples of significant matters include:

  • Matters that produce substantial risks (as defined in SA 315);
  • Results of audit procedures  indicating:
    • That the FS could be materially misstated, or
    • ­A requirement to revise the auditor’s previous assessment of the risks of material misstatement and therefore the auditor’s responses to those risks; and
    • The findings that would result in a modification to the audit opinion or the formation of an Emphasis of Matter paragraph (EOM) in the auditor’s report as per SA 706.

While determining and recording what significant matters are, it’s also essential to document the method of determining, i.e. judging what important issues are. It is because it may enable the reviewer to assess the quality of the audit also as providing those that perform subsequent audits with a critical perspective. The documentation isn’t limited to records prepared by the auditor but may include other appropriate forms like minutes of meetings organised by the entity’s management and agreed by the auditor.

The auditor may discuss significant matters with others, including other personnel within the entity, and external parties, like persons providing professional advice to the entity. However, it is recommended that documentation be an ongoing practice and will not be left to the end, i.e. completion of the audit, since that might diminish documentation quality.

Documentation of how Inconsistencies are addressed

If the auditor identified conflicting information with the auditor’s conclusion regarding a significant matter, the deviation should be documented with the reasoning and, therefore, the subsequent action.

No need to document

The documentation formally applies only to requirements that are applicable within the circumstances. So, for example, a need isn’t suitable if a specific SA isn’t pertinent or if the SA is applicable conditionally, and therefore, the conditions do not exist.

Timely preparation and assembly of the audit file

Preparation of documentation on a timely basis helps increase the quality of documentation since it’s likely to be more accurate than documentation completed after completion of the audit.

The auditor shall get together the audit documentation in an audit file and complete the administrative/executive process of assembling the ultimate audit file on a timely basis which isn’t more than 60 days after the signed auditor’s report.

The completion of the final audit file’s assembly means no further processing after the completion of the final audit file. However, changes may be made to the audit documentation during the final assembly process if they’re administrative/ executive. Examples of such changes include:

  • Deleting or discarding superseded documentation.
  • Sorting, collating, and cross-referencing working papers.
  • Signing off on completion checklists concerning the file assembly process.

Considerations specified to smaller entities

In the case of an audit where the engagement partner performs all the audit work, the audit documentation won’t include matters which may require to be documented solely to inform members of an engagement team or to provide confirmation of review by other members of the team (for example, there’ll be no matters to document relating to team discussions or supervision).

The auditor of a smaller entity also can find it helpful and efficient to record several aspects of the audit together during one document, with cross-references to supporting audit evidence as appropriate. The matters that will be documented of a smaller entity together within the audit include the understanding of the entity and its internal control, the general audit strategy and plan, assessed risks, observations noted during the audit, and conclusions reached. The documentation process has made the auditors more skilled and responsible towards audit; however, the technologies have simplified the process to a great extent.

At AJSH, we assist our clients in dealing with internal audits, government audits, various corporate matters (Company incorporations, statutory audits, ROC compliances, company winding-up) in India by providing them adequate support and guidance from our end. If you have any questions or which to know more about audit documentation, kindly contact us.


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