Audit Method: Best practices in Audit Documentation

ISA 230, deal with the auditor’s responsibility to prepare the audit documentation. Audit Documentation is defined in ISA 230 as “The record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached (terms such as “working papers” or “workpapers” are also sometimes used).” The auditor shall prepare audit documentation that is sufficient to enable an experienced auditor, having no previous connection with the audit, to understand

• ·         The nature, timing and extent of the audit procedures performed
• ·         The results of the audit procedures performed
• ·         Significant matters arising during the audit and the conclusions reached thereon

In documenting the nature, timing and extent of audit procedures performed, the auditor shall record:

• ·         The identifying characteristics of the specific items or matters tested;
• ·         Who performed the audit work and the date such work was completed; and
• ·         Who reviewed the audit work performed and the date and extent of such review.

The auditor shall assemble the audit documentation in an audit file and complete the administrative process of assembling the final audit file on a timely basis. After the assembly of the final audit file has been completed, the auditor shall not delete or discard audit documentation of any nature before the end of its retention period.

Audit documentation may be recorded on paper or on electronic or other media. Examples of audit documentation include:

• ·         Audit programs.
• ·         Analyses.
• ·         Issues memoranda.
• ·         Summaries of significant matters.
• ·         Letters of confirmation and representation.
• ·         Checklists.
• ·         Correspondence (including e-mail) concerning significant matters.

However it should be kept in mind that neither auditing standards nor any audit firm policy prohibits the audit team members from including documentation in the file that they believe necessary to support their work.

Practice

Documentation prepared after the audit work has been performed is likely to be less accurate than documentation prepared at the time such work is performed. ISQC 1, requires firms to establish policies and procedures for the timely completion of the assembly of audit files. An appropriate time limit within which to complete the assembly of the final audit file is ordinarily not more than 60 days after the date of the auditor’s report.