SA – 230 : AUDIT DOCUMENTATION

Scope: This Standard deals with auditors responsibilities in preparation of audit documentation while auditing financial statements. Specific documentation requirements of other Standards on auditing do not limit its scope.

Nature and Purpose: Audit Documentation provides evidence as to whether the overall objective of the auditor was achieved as well as whether it was planned and performed in accordance with Standards of Auditing as also applicable legal and regulatory requirements.

It assists in planning, performing, fixation of accountability and responsibility, supervision and review of audits (SA 220). Retaining the records for future audits, as also conduct of quality controls (SQC 1).

Definitions: Audit Documentation: The record of audit procedures performed, relevant audit evidence obtained and conclusions the auditor reached (working papers, work papers).

Audit File: One or more folders or other storage media in physical or electronic form, containing the records that comprise of the 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, SAs and applicable legal and regulatory requirements, the business environment in which the entity operates and auditing and financial reporting issues relevant to the entity’s industry.

Form, Content and Extent in addition to the Nature and Purpose

An auditor should prepare audit documentation sufficient to enable an experienced auditor having no previous connection with the audit to understand.

1. Nature, timing and extent of audit procedures:
   • Identifying characteristics of specific items and matters tested.
   • Who performed the audit and the date of completion.
   • Who reviewed the report, the date and extent of review.
2. Results of the audit procedures performed and evidence obtained:
   • Document discussions of significant matters.
   • Nature of the significant matters – when and with whom discussed.
3. Significant matters arising during the audit:
   • Document how the inconsistencies have been addressed.
   • In case of departure from the standard, the relevant requirements and the reason for departure, the alternative audit procedures performed to achieve the aim of that requirement.

Matters arising after the date of the Auditor’s Report

If, in the exceptional circumstances, auditor performs new or additional audit procedures or draws new conclusions after the date of the auditor’s report, the auditor shall document:

• Circumstances encountered
• Newer additional procedures performed, evidence obtained, conclusions reached and its effect on auditor’s report.
• When and by whom the resulting changes to audit documentation were made and reviewed.

Additional Points

• Assembling of the final Audit file should be completed on a timely basis after the date of the auditor’s report.
• After assembling the same, the auditor shall not delete or discard documentation of any nature before the end of its retention period.
• In case the auditor finds it necessary to modify existing or add new documentation post assembly, he should specify the reasons for them and when and by whom it was made and reviewed.

Application and Other Explanatory Material

• Timely preparation enhances quality, review, evaluation of the audit evidence and conclusions reached before finalisation of the auditor’s report. Documentation prepared after audit work is less accurate than that prepared during audit.
• Form, content and extent depends on size and complexity of the entity, nature of procedures performed, risks, exceptions, audit methodology, tools used and professional judgment.
• Audit documentation may be recorded on paper or on electronic or other media. Examples: Audit programmes, checklists, analysis, correspondence.
• Audit documentation should not include superseded drafts of working papers and financial statements, notes reflecting incomplete and preliminary thinking.
• Oral explanations can clarify or explain information contained in audit documentation.
• It is not necessary nor practicable for the auditor to document every matter considered or professional judgment made.
• Judging the significance of a matter requires an objective analysis of the facts and circumstances.
• Summary describing significant matters identified during the audit and how they were addressed, or that includes cross-references to other relevant supporting audit documentation that provides such information.
• The identifying characteristics should be recorded which helps serve a number of purposes.
• Documentation also includes records prepared by the entity’s personnel .
• Retention period of audit engagements is no shorter than seven years from the date of the auditor’s report.
• Unless otherwise stated audit documentation is the property of the auditor. He may make disclosures but these should not affect his independence nor invalidate his work.