2017-11-30
2109
Audit documentation is the record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached (terms such as 'working papers' or 'work papers' are also sometimes used).It is important to document audit work performed in working papers to:
• Enable reporting partner to ensure all planned work has been completed adequately
• Provide details of work done for future reference
• Assist in planning and control of future audits
• Encourage a methodical approach
All audit work must be documented: the working papers are the tangible evidence of the work done insupport of the audit opinion. ISA 230 Audit documentation states that the auditor shall prepare auditdocumentation on a timely basis.
Audit documentation is necessary for the following reasons:
(a) It provides evidence of the auditor's basis for a conclusion about the achievement of the overallobjective.
(b) It provides evidence that the audit was planned and performed in accordance with ISAs and otherlegal and regulatory requirements.
(c) It assists the engagement team to plan and perform the audit.
(d) It assists team members responsible for supervision to direct, supervise and review audit work.
(e) It enables the team to be accountable for its work.
(f) It allows a record of matters of continuing significance to be retained.
(g) It enables the conduct of quality control reviews and inspections (both internal and external).
The ISA requires working papers to be sufficiently complete and detailed to provide an overallunderstanding of the audit. Auditors cannot record everything they consider. Therefore judgement must beused as to the extent of working papers, based on the following general rule.
Working papers are important because they:
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· are necessary for audit quality control purposes
· provide assurance that the work delegated by the audit partner has been properly completed
· provide evidence that an effective audit has been carried out
· increase the economy, efficiency, and effectiveness of the audit
· containsufficientlydetailed
· up-to-date facts which justify the reasonableness of the auditor’s conclusions
· retain a record of matters of continuing significance to future audits.
Describe the form and contents of working papers and supporting documentation.
Auditors should prepare and organize their working papers in a manner that helps the auditor carry out an appropriate audit service. The auditor should avoid preparing or accumulating unnecessary working papers, and should therefore avoid making extensive copies of the client’s accounting records. It is worth noting at this stage that it is neither necessary nor practicable for the auditor to document every matter considered during the audit.
IMPORTANCE OF WORKING PAPERS
Working papers are important because they:
· are necessary for audit quality control purposes
· provide assurance that the work delegated by the audit partner has been properly completed
· provide evidence that an effective audit has been carried out
· increase the economy, efficiency, and effectiveness of the audit
· contain sufficiently detailed and up-to-date facts which justify the reasonableness of the auditor’s conclusions
· retain a record of matters of continuing significance to future audits.
CONTENT
Each audit working paper must be headed with the following information:
· The name of the client, The period covered by the audit, The subject matter, The file reference
· The initials (signature) of the member of staff who prepared the working paper, and the date on which it was prepared
· In the case of audit papers prepared by client staff, the date the working papers were received, and the initials of the audit team member who carried out the audit work
· The initials of the member of staff who reviewed the working papers and the date on which the review was carried out
· Each audit paper should meet the characteristics of a good working paper, as detailed later in this article.
The form and content of working papers are affected by matters such as:
· 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
Examples of working papers. Information obtained in understanding the entity and its environment, including its internal control, such as the following:
(i) Information concerning the legal documents, agreements and minutes
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(ii) Extracts or copies of important legal documents, agreements and minutes
(iii) Information concerning the industry, economic environment and legislative environment within which the entity operates
(iv) Extracts from the entity's internal control manual
(b) Evidence of the planning process including audit programmes and any changes thereto
(c) Evidence of the auditor's consideration of the work of internal audit and conclusions reached
(d) Analyses of transactions and balances
(e) Analyses of significant ratios and trends
(f) Identified and assessed risks of material misstatements
(g) A record of the nature, timing, extent and results of audit procedures
(h) Evidence that the work performed was supervised and reviewed
(i) An indication as to who performed the audit procedures and when they were performed
(j) Details of audit procedures applied regarding components whose financial statements are audited by another auditor
(k) Copies of communications with other auditors, experts and other third parties
(l) Copies of letters or notes concerning audit matters communicated to or discussed with management or those charged with governance, including the terms of the engagement and significant deficiencies in internal control
(m) Written representations received from management of the entity
(n) Conclusions reached by the auditor concerning significant aspects of the audit, including how exceptions and unusual matters, if any, disclosed by the auditor's procedures were resolved or treated
(o) Copies of the financial statements and auditors' reports
(p) Notes of discussions about significant matters with management and others
(q) In exceptional circumstances, the reasons for departing from a basic principle or essential procedure of an ISA and how the alternative procedure performed achieved the audit objective
For recurring audits, working papers may be split between:
Permanent audit files (containing information of continuing importance to the audit). These contain:Engagement letters, New client questionnaire, The memorandum and articles, Other legal documents such as prospectuses, leases, sales agreement, Details of the history of the client's business, Board minutes of continuing relevance, Previous years' signed accounts, analytical review and reports to management, Accounting systems notes, previous years' control questionnaires
Current audit files (containing information of relevance to the current year's audit). These should becompiled on a timely basis after the completion of the audit and should contain:
Financial statements, Accounts checklists, Management accounts details, Reconciliations of management and financial accounts, Review notes, Audit planning memorandum, Written representations
