ISAs – Summaries and Application Guide ISA 230

ISA 230
AUDIT DOCUMENTATION

APPLICATION
LO # LEARNING OBJECTIVE REQUIREMENTS PARAGRAPHS

INTRODUCTION (SCOPE, OBJECTIVE, AND

LO 1 1–6 N/A
DEFINITION)
TIMELY PREPARATION OF AUDIT
LO 2 7 A1
DOCUMENTATION
DOCUMENTATION OF THE AUDIT
LO 3 PROCEDURES PERFORMED AND AUDIT 8 – 13 A2 – A20
EVIDENCE OBTAINED
LO 4 ASSEMBLY OF THE FINAL AUDIT FILE 14 – 16 A21 – A24
SPECIFIC AUDIT DOCUMENTATION
APX 1 APPENDIX 1
REQUIREMENTS IN OTHER ISAs
PRACTICAL INSIGHT OF ISA AND REAL WORLD
APX 2 N/A
CASES

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ISAs – Summaries and Application Guide ISA 230

LO 1: INTRODUCTION (SCOPE, OBJECTIVE, AND DEFINITION):

Audit Documentation (or Working Papers):
Audit Documentation is the written record of audit procedures performed, evidence obtained and
conclusions reached by auditor.

Audit Files:
“Audit Files” are folders or (other storage media) in physical or electronic form containing audit
documentation for whole engagement.
There are two types of audit files i.e. Current File and Permanent File.

Experienced Auditor
An Experienced Auditor is an individual who has practical audit experience, and a reasonable
understanding of:
(i) Audit processes;
(ii) ISAs and applicable regulatory requirements;
(iii) The business environment in which the entity operates; and
(iv) Auditing and financial reporting issues relevant to the entity’s industry.

Purposes of Audit Documentation:

Primary Purposes:
Audit documentation provides evidence that:
 audit is planned and performed in accordance with ISAs and regulatory requirements, and
 auditor has appropriate basis for opinion in audit report and achievement of overall
objectives.

Additional Purposes:
Audit documentation also helps to:
a) assist engagement team in planning and performance of audit.
b) assist seniors in direction, supervision and review of audit team.
c) enable quality control reviews.
d) enable accountability of engagement team for its work.
e) retain a record of matters of continuing significance to future audits.

LO 2: TIMELY PREPARATION OF AUDIT DOCUMENTATION:

Audit documentation should be prepared on timely basis i.e. at the time when work is performed.
 Timely preparation enhances the quality of audit
 Timely preparation facilitates the effective review of procedures performed, conclusions
reached and evidence obtained
 Documentation prepared after work is performed, is likely to be less accurate

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ISAs – Summaries and Application Guide ISA 230

LO 3: DOCUMENTATION OF THE AUDIT PROCEDURES PERFORMED AND AUDIT

EVIDENCE OBTAINED:
Form, Content and Extent of Audit Documentation:
Experienced Auditor Principle:
Audit Documentation shall be sufficient to enable an Experienced Auditor*** (having no previous
connection with the audit) to understand:
 Nature, timing and extent of audit procedures performed (to comply ISAs and regulatory
requirements)
 Audit procedures performed, evidence obtained and conclusion reached.
 Significant matters arising during audit, significant judgments made in reaching
conclusions, and conclusions reached.

Factors affecting form, content and extent:

i. Size and Complexity of Entity
ii. Risk identified
iii. Nature of audit procedures to be performed
iv. Significance of evidence obtained

Documenting the identifying characteristics of items tested:

In documenting audit procedures performed, the auditor shall record:
a) The identifying characteristics of the specific items tested***;
b) Who performed the work and date of work; and
c) Who reviewed the work and date of review

*** Identifying characteristics of items tested means indicating source from which items were selected and selection
criteria e.g.
Audit Procedure Identifying characteristics
Selecting high value items from a population All journal entries over Rs. 50,000 from the purchase journal
Started with voucher#23 and selected every 125th voucher
Systematic selection from a population
from the sales journal
Inquiries of specific entity personnel Inquired from Mr. Ali (CFO) in a meeting dated January 7, 2012

Auditor shall document following in respect of Significant Matters:

 Nature of significant matters
 Discussion with management, TCWG or other external parties on significant matters
 When and with whom discussion took place

If there is inconsistency between auditor’s final conclusion on a significant matter and identified
information, auditor shall document how he addressed the inconsistency. However, auditor is not
required to retain incorrect or superseded documents.

Completion Memorandum is a document that describes:

– The significant matters identified during the audit and
– How they were addressed (or references to documentation that provides such information).

Documentation of professional judgment

Documentation of professional judgment:
 Explains auditor’s conclusion
 Is useful in quality control review and subsequent audits

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ISAs – Summaries and Application Guide ISA 230

In following circumstances, it is appropriate to document professional judgments made (when

significant):
1) Determination off reasonableness in areas of subjectivity (e.g. estimates)
2) Determination of Key Audit Matter
3) When authenticity of a document was in doubt

Considerations specific to smaller entities:

 Audit documentation of a smaller entity is generally less extensive than a larger entity.
 In case of smaller entity, where engagement partner performs all the audit work, the
documentation will not include matters related to direction, supervision or review.
 Auditor of a smaller entity may record various aspects of the audit together in a single
document with cross reference to working papers e.g. Audit Strategy, Audit Program,
Materiality, Risk assessment, Significant matters and Conclusions reached.

Departure from a Relevant Requirement:

If, in exceptional circumstances, auditor judges it necessary to depart from a relevant requirement
of an ISA, auditor shall document:
 Reason of departure
 How alternative audit procedures achieved aim of requirement (which was departed)

Matters Arising after the Date of the Auditor’s Report:

If exceptional circumstances occur after auditor’s report (e.g. subsequent event occurs, or misstatement is
identified), auditor may perform new audit procedures and may add new documents.
In this case, auditor shall document following:
 The specific reasons for making change.
 The new or additional audit procedures performed relating to event, audit evidence
obtained and conclusions reached, and their effect on the auditor’s report.
 Who made the changes, and when.
 Who reviewed the changes, and when.

LO 4: ASSEMBLY OF THE FINAL AUDIT FILE:

Completion and retention of audit documentation:
 An appropriate time for completion of assembly of audit file is 60 days after the date of
auditor’s report.
 An appropriate time for retention of audit documents should not be shorter than 5 years
from date of auditor’s report or from date of group auditor’s report, whichever is later.

Changes in documentation during file assembly period:

Assembly of audit file is an administrative process which includes following types of changes to
audit file:
 Adding/replacing documentation for evidence which has been obtained prior to auditor’s
report
 Deleting superseded/duplicate pages
 Sorting and cross- referencing working papers
 Sign-off completion checklist

Changes in documentation after file assembly period:

Auditor can modify existing documents, or add new documents after the file assembly period if it is
necessary e.g. there is need to clarify existing documentation from comments received during QCR.

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ISAs – Summaries and Application Guide ISA 230

APX 1: SPECIFIC AUDIT DOCUMENTATION REQUIREMENTS IN OTHER ISAs:

Standard Required matter to communicate to TCWG

ISA 210, Agreeing the Terms of  Agreed terms of the audit engagement shall be recorded in an audit
Audit Engagements engagement letter
 Conclusion regarding acceptance of audit client
ISA 220, Quality Control for an Audit
 Issues relating to compliance with ethical requirements.
of Financial Statements
 Information regarding performance of quality control review.
 Assessed risk of material misstatement (at financial statement level and
ISA 240, The Auditor’s
at assertion level)
Responsibilities Relating to Fraud in
 Response to assessed risk of material misstatement (overall, and specific
an Audit of Financial Statements
audit procedures)
ISA 250, Consideration of Laws and
Regulations in an Audit of Financial  identified or suspected non-compliance with laws and regulations
Statements
ISA 260 (Revised), Communication
with Those Charged with  Copy (or other Record) of matters communicated with TCWG
Governance
 Audit strategy
ISA 300, Planning an Audit of
 Audit Plan
Financial Statements
 Any significant change alongwith reason
 Discussion among engagement team
ISA 315 (Revised), Identifying and  Key elements of the understanding obtained regarding each aspects of
Assessing the Risks of Material the entity and its internal control.
Misstatement”  identified and assessed risks of material misstatement at the financial
statement level and at the assertion level
“ISA 320, Materiality in Planning  Materiality, performance materiality
and Performing an Audit”  Any revision
 Overall response to risk at financial statements level.
ISA 330, The Auditor’s Responses to  Nature, timing and extent of audit procedures and linking with risk at
Assessed Risks assertion level.
 The results of the audit procedures
 The amount below which misstatements would be regarded as clearly
trivial;
ISA 450, Evaluation of
 All misstatements accumulated during the audit and whether they have
Misstatements Identified during the
been corrected; and
Audit
 The auditor’s conclusion as to whether uncorrected misstatements are
material, individually or in aggregate,
 The basis for the auditor’s conclusions about the reasonableness of
ISA 540, Auditing Accounting accounting estimates and their disclosure that give rise to significant
Estimates” risks; and
 Indicators of possible management bias, if any.
 names of the identified related parties and the nature of the related party
ISA 550, Related Parties
relationships
 An analysis of components, indicating those that are significant, and the
type of work performed on the financial information of the components.
ISA 600, Special Considerations—
 The nature, timing and extent of the group engagement team’s
Audits of Group Financial
involvement in the work performed by the component auditors.
Statements
 Written communications between the group engagement team and the
component auditors about the group engagement team’s requirements
ISA 610 (Revised 2013), Using the  Documentation regarding work of internal auditor used by auditor
Work of Internal Auditors  Documentation regarding internal auditor if direct assistance is obtained.
ISA 720 (Revised), The Auditor’s
 final version of the other information on which the auditor has
Responsibilities Relating to Other
performed the work required under this ISA
Information