and Working papers

Audit Documentation

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faculty: Rakesh Vijayvergiya, SAO

 OUTLINE
• WHY DOCUMENTATION?
• WHAT IS AUDIT DOCUMENTATION?

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• WHO REVIEWS AUDIT DOCUMENTATION?

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• AUDIT DOCUMENTATION REQUIREMENT

faculty: Rakesh Vijayvergiya, SAO

• DOCUMENTATION OF SPECIFIC MATTERS
• RETENTION OF AND SUBSEQUENT CHANGES TO AUDIT
DOCUMENTATION
• SUMMARY OF KEY POINTS

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 WHY DOCUMENTATION?
• Self- Defense in a Court of Law: In a Court proceeding lies on the auditor to
prove that he was not professionally negligent in the performance of his
duties.

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• Effective Audit: Documentation is the only way an auditor can prove to
outsiders that an effective audit was planned and performed.

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• To assist as proof of audit evidence during the Peer Review Process.

faculty: Rakesh Vijayvergiya, SAO

• Records of the work performed and conclusions reached regarding significant
matters.
• Evidence that the audit was planned and performed in accordance with
Auditing Standards and applicable legal and regulatory requirements.

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 WHAT IS AUDIT DOCUMENTATION?

• Audit documentation is the written record of the

basis for the auditor‘s conclusions that provides the

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support for the auditor’s representations, whether

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those representations are contained in the auditor’s

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report or otherwise.

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 WHAT IS AUDIT DOCUMENTATION?
Audit documentation also may be referred to as work papers or working papers.
It is maintained at 3 stages of audit work:
• Audit Planning

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• Audit Implementation
• Audit Reporting

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•It includes records of the:

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planning and performance of the work,
the Audit procedures performed,
Relevant audit evidence obtained
conclusions reached

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 NATURE AND PURPOSE

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faculty: Rakesh Vijayvergiya, SAO

Audit documentation :
•Facilitates
the planning, performance, and supervision of

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the engagement.

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•provides the reviewer with written documentation of the
evidence supporting the auditor’s significant conclusions.

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•is reviewed by members of the engagement team
performing the work and might be reviewed by others.

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 WHO REVIEWS AUDIT DOCUMENTATION?
Reviewers might include, for example:
•Auditors who are new to an engagement and review the prior year‘s documentation to understand
the work performed as an aid in planning and performing the current engagement.

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•A successor auditor who reviews a predecessor auditor’s audit documentation.
The auditor should prepare audit documentation in such a manner that it enables an experienced

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auditor having no previous connection with the engagement to review and testify as to the audit
work performed and the related audit findings.

faculty: Rakesh Vijayvergiya, SAO

•Supervisory personnel who review documentation prepared by assistants on the engagement.
•Internal and external inspection teams that review documentation to assess audit quality and
compliance with auditing and related professional practice standards; applicable laws, rules, and
regulations.

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 AUDIT DOCUMENTATION REQUIREMENT
One significant feature of audit documentation (work paper):
•Audit documentation must contain sufficient information to enable an
experienced auditor, having no previous connection with the

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engagement:

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a)To understand the nature, timing, extent, and results of the procedures
performed, evidence obtained, and conclusions reached, and

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b)To determine
 who performed the work and the date such work was completed
 the person who reviewed the work and the date of such review.

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 AUDIT DOCUMENTATION REQUIREMENT
• The auditor must prepare audit documentation in connection with each
engagement conducted pursuant to the Auditing standards
• Examples of audit documentation include
 memoranda,

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 confirmations,

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 correspondence,

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 schedules,
 audit programs,
 letters of representation.

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 AUDIT DOCUMENTATION REQUIREMENT
• Audit documentation may be in the form of paper, electronic files,
or other media.

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How it helps?

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• It
supports the basis for the auditor’s conclusions concerning every

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relevant financial statement assertion, and
• Audit documentation demonstrates that the work was in fact
performed.

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 AUDIT DOCUMENTATION REQUIREMENT
What else it should include?
Audit documentation must include information the auditor
has identified relating to significant findings or issues that

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is inconsistent with or contradicts the auditor’s final

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conclusions.

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But don’t forget to retain records and how you resolve the
issues through consultation and professional judgment
among engagement team members.

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 AUDIT DOCUMENTATION REQUIREMENT
The auditor must determine that
•sufficient procedures were performed
•sufficient evidences were obtained, and

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•appropriate conclusions were reached with respect to the relevant

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financial statement assertions

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To accomplish this, the auditor must have persuasive other
evidence. Oral explanation alone does not constitute persuasive
other evidence, but it may be used to clarify other written evidence.

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 AUDIT DOCUMENTATION REQUIREMENT
(1)If the auditor determines and demonstrates that sufficient
procedures were performed, sufficient evidence was
obtained, and appropriate conclusions were reached, but

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that documentation thereof is not adequate, then the auditor
should consider what additional documentation is needed.

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Q. Can we add additional documentation after the audit is

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done?

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 AUDIT DOCUMENTATION REQUIREMENT

A. Circumstances may require additions to audit

documentation after the report release date. Audit
documentation must not be deleted or discarded after the

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documentation completion date, however, information may
be added.

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Any documentation added must indicate the date the

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information was added, the name of the person who
prepared the additional documentation, and the reason for
adding it.

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 Documentation of Specific Matter
• Results of auditing procedures that indicate a need for
significant modification of planned auditing
procedures, the existence of material misstatements,

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omissions in the financial statements, the existence of

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significant deficiencies, or material weaknesses in
internal control over financial reporting.

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 Documentation of Specific Matter
• Audit adjustments. an audit adjustment is a correction of a
misstatement of the financial statements that was or should
have been proposed by the auditor, whether or not

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recorded by management, that could, either individually or
when aggregated with other misstatements, have a material

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effect on the company’s financial statements.

faculty: Rakesh Vijayvergiya, SAO

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 Documentation of Specific Matter
• Disagreements among members of the engagement team or
with others consulted on the engagement about final
conclusions reached on significant accounting or auditing

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matters.

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• Circumstances that cause significant difficulty in applying
auditing procedures.

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• Significantchanges in the assessed level of audit risk for
particular audit areas and the auditor’s response to those
changes.

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 Documentation of Specific Matter
• Any matters that could result in modification of the auditor’s report.
Engagement Completion Document
The auditor must identify all significant findings or issues in an engagement

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completion document. This document may include either all information

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necessary to understand the significant findings, issues or cross-references, as
appropriate, to other available supporting audit documentation. This

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document, along with any documents cross-referenced, should collectively be
as specific as necessary in the circumstances for a reviewer to gain a thorough
understanding of the significant findings or issues.

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 Retention of and Subsequent Changes to Audit
Documentation
• The auditor must retain audit documentation for atleast five years or if any
specified time or a longer period of time is required by law.
• Prior to the report release date, the auditor must have completed all necessary

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auditing procedures and obtained sufficient evidence to support the
representations in auditor’s report. A complete and final set of audit

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documentation should be assembled for retention after the report release date.
• Audit documentation must not be deleted or discarded after the documentation

faculty: Rakesh Vijayvergiya, SAO

completion date, however, information may be added.
• The office/authority issuing the auditor’s report is responsible for ensuring that all
audit documentation sufficient to meet the requirements of this standard is
prepared and retained.

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Multi-Location Audits and Using the Work of
Other Auditors
•  The office issuing the auditor’s report must obtain, and review and
retain, prior to the report release date, the following documentation
related to the work performed by other auditors (including auditors

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associated with other offices of the firm, affiliated firms, or non-
affiliated firms):

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•A list of significant fraud risk factors, the auditor’s response, and the

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result of the auditor’s related procedures.
• Any findings affecting the consolidating or combining of
Audit/accounts in the consolidated report/financial statements.

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 Using the Work of Other Auditors..
• A scheduleof audit adjustments, including a description of the nature
and cause of each misstatement.
• All significant deficiencies and material weaknesses in internal

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control over financial reporting, including a clear distinction between
those two categories.

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• ThePrincipal auditor is required to review the documentation of the

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other auditor to the same extent and in the same manner that the audit
work of all those who participated in the engagement is reviewed.

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 Points to be Considered
• Audit Documentation may be recorded on paper or on electronic or other
media.
• The auditor may include abstract or copies of the client’s records (for

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example, specific contracts and agreements) as part of documentation.

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• The auditor need not include in documentation incomplete records, previous
copies of documents corrected for errors and duplicates of documents.

faculty: Rakesh Vijayvergiya, SAO

• Oral explanations by the auditor do not represent adequate support for the
work auditor performed but it may be used to clarify information contained in
the audit documentation.

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 Working papers
• All relevant documents and information collected and generated during a audit
constitute the working papers. Ideally the working papers should consist of three
sections – each linked to the other:
planning;

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• audit objectives, determination of criteria including the process of their determination

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execution

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• field audit and evidence gathering procedures, evidence analysis, the nature, timing and the extent
of audit procedures performed

reporting.
• process of arriving at the results of the audit tests audit findings and conclusions

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 Characteristics of Working papers
• Completeness and accuracy:
• Clarity and conciseness: should be able to understand the entire audit process
without need for any supplementary examination.
• Ease of preparation: While the audit teams will be called upon to collect large

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volumes of working papers, to the extent they can use the entity prepared
documents and reports, pre-printed standard audit stationery and automatically

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generated standard working paper formats, the time and effort may be optimised.

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• Legibility and neatness: Applies particularly to photocopies.
• Relevance: Working papers should be restricted to matters, which are important,
pertinent and useful for the purpose.

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 Characteristics of Working papers
• Ease of review: should contain cross-references to the audit memoranda,
discussion papers, audit observation, field audit report and performance audit
report, as the case may be, to enable AG/PAG and the supervisory authority to
link the working papers to audit conclusions and recommendations.
• Organisation and ease of reference: may contain an omnibus, easy to follow,

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index with proper narration for all volumes in an audit summary file and an index

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for each of the working paper files.
• Complete audit trail of analysis: should be so organized so that even an

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uninitiated person can follow the trail of how the subject was selected, how
evidence was gathered, what was the evidence collected and how audit
conclusions were formulated. This should include evidence for the positive
findings as well.

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 Summary of Key Points
• Auditdocumentation also may be referred to as work papers or
working papers

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• Theauditor must prepare audit documentation in connection with
each engagement conducted pursuant to the Auditing standards

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• Audit documentation demonstrates that the work was in fact

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performed
• Theauditor must retain audit documentation atleast for five years,
unless a longer period of time is required by law.

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 Things to be kept in mind
• Filing of working papers
• Proper numbering/sequencing of working papers
• Writing of Queries in detail

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• Disposing of Queries – at staff/senior/partner level

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• Discussing with seniors on matters of importance

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• Working papers to be signed, dated and approved by relevant level of audit
staff
• Importance of depicting the client’s name, file number, accounting period,
area to be checked, audit staff involved

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