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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.
Objective
The objective is to organise documentation that provides:
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:
Form, content, and extent of documentation
The form, content, and extent of documentation depend upon factors such as:
Examples of documentation
Examples of audit documentation include:
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:
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:
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.
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