isa 230: audit documentation

OVERVIEW

ISA 230 set the guidelines for the auditor regarding the audit documentation and guides the auditor that when and how to obtain sufficient appropriate audit documentation while ensuring to maintain the best quality.

Key Takeaway Points

=> ISA 230 deals with the audit documentation and it guides the auditor that when and how to prepare the audit documentation.

=> The audit documentation  (also called audit working papers) is the record of the audit evidence obtained about the account balances of the financial statements and the audit procedures performed to verify the balances of the financial statements.

=> The auditor shall ensure the quality of the audit documentation and such audit documentation shall be self-explanatory and should not be ambiguous. It means that any third party from the same profession can easily understand the evidence obtained and conclude that the audit evidence obtained during the audit is sufficiently appropriate.

=> The audit documentation is not limited to specific things but it depends upon the professional judgment of the auditor that what to include in the audit documentation as per the relevant circumstances.

=> The auditor shall complete the assembly of the audit file in a timely manner. The best ideal time to complete the assembly of the final audit file is within 60 days of the issuance of the audit report. ISA 230 deals with the audit documentation and it guides the auditor that when and how to prepare the audit documentation.

=> The audit documentation is the record of the audit evidence obtained about the account balances of the financial statements and the audit procedures performed to verify the balances of the financial statements.

=> The auditor shall ensure the quality of the audit documentation and such audit documentation shall be self-explanatory and should not be ambiguous. It means that any third party from the same profession can easily understand the evidence obtained and conclude that the audit evidence obtained during the audit is sufficiently appropriate.

=> The audit documentation is not limited to specific things but it depends upon the professional judgment of the auditor that what to include in the audit documentation as per the relevant circumstances.

=> The auditor shall complete the assembly of the audit file in a timely manner. The best ideal time to complete the assembly of the final audit file is within 60 days of the issuance of the audit report.

AUDIT DOCUMENTATION

Audit documentation is the record of the audit procedures performed and the audit evidence obtained while performing an audit. The audit documentation is also referred to as the “audit working papers”.

PURPOSES OF THE AUDIT DOCUMENTATION

Audit documentation serves a number of purposes. Some of the purposes of the audit documentation are the following:

=> Helps in the efficient planning and performing an audit.

=> Assisting supervisors and audit managers to review the work of the audit team.

=> It ensures accountability of the audit team, which means each individual audit team member shall be accountable for his or her own work.

=> It helps in the quality control review of the audit and inspection of the audit which is conducted by third parties.

=> It helps in maintaining a record of the significant matters related to an audit client.

The auditor shall make sure that the audit documentation is prepared on a timely basis. It means that such documentation is prepared as and when the audit procedures are performed and the relevant audit evidence has been obtained.

QUALITY OF THE AUDIT DOCUMENTATION

The auditor shall ensure to maintain the quality of the audit documentation.  Quality of the audit documentation means that everyone from the same audit profession can easily understand the nature of the audit evidence obtained and the audit procedures performed for the verification of the account heads in the financial statements. Sometimes the firm’s quality control department reviews the audit documentation to check the quality work of the audit team and the person reviewing the work of the audit team is referred to as an “experienced auditor”. The experienced auditor is the person who has no previous connection with the current audit but by reviewing the audit documentation he can easily understand what has been obtained and done in relevant circumstances.

So the audit documentation should be self-explanatory itself so that it helps the experienced auditor to understand the whole scenario of the audit without the guidance from the audit team and if he gets understanding from the audit documentation about the audit procedures performed then it means that such documentation is of the quality nature

THINGS TO INCLUDE IN THE AUDIT DOCUMENTATION

The audit documentation includes the audit evidence obtained and the procedures performed to verify the account balances in the financial statements. However, it depends upon professional judgment and the audit documentation can comprise of many things as deemed fit by the auditor in the relevant circumstances. Generally, the audit documentation includes the following things:

=> The audit procedures are performed to verify account balances in the financial statements.

=> The minutes of the entrance and exit meetings.

=> Confirmation sent to the receivables, payables, banks, lawyers, donors, and to other third parties.

=> The minutes of the meeting with the management and those charged with the governance.

=> The details about the inconsistencies between the oral response and documentary evidence and how such inconsistencies are resolved.

AUDIT REPORT AND THE AUDIT DOCUMENTATION

The auditor shall prepare the audit documentation and obtain all the audit evidence prior to the issuance of the audit report. He should not continue to obtain the audit evidence and prepare the audit documentation after the issuance of the audit report. However, if there arise circumstances that led to obtaining further audit documentation then the auditor shall document the following issues:

=> The circumstances that led to change or obtaining the audit documentation.

=> The details about the additional audit procedures performed in the required circumstances.

=> Who reviewed the additional audit documentation and when it is reviewed.

ASSEMBLING THE FINAL AUDIT FILE

The audit file is the folder of the audit documentation either in the hard physical form or in the electronic form.

The auditor shall complete the assembling of the audit file in a timely manner soon after the audit report is issued. Normally, the auditor shall complete the assembling of the final audit file within 60 days of the issuance of the audit report.

The auditor shall not change or delete any audit documentation once the audit file is assembled completely. However, an auditor can make changes of an administrative nature to the audit documentation and such changes could be:

=> Straight and cross-referencing the audit documentation to its relevant evidence and other documentation.

=> Deleting or discarding any superseded documentation from the audit file.

=> Signing off different completion checklists relevant to an audit.