Substantive Testing and

Documentation
Chapter 10
 Introduction
• PSA 500 states:
– The auditor shall design and perform audit
procedures that are appropriate in the
circumstances for the purpose of obtaining
sufficient appropriate audit evidence.
– When designing and performing audit procedures,
the auditor shall consider the relevance and
reliability of the information to be used as audit
evidence.
 Introduction

• Audit Evidence
– All the information used by the auditor in arriving
at the conclusions on which the audit opinion is
based, and includes the information contained in
the accounting records underlying the financial
statements and other information.
Audit Procedures According to Purpose
Category Description/Purpose
Risk Used for obtaining an understanding of the
Assessment client entity and its environment, including
Procedures internal control. Risk assessment procedures
are performed during the audit planning and
internal control phases of the audit
Test of Used to test the operating effectiveness of
Controls controls n preventing, or detecting and
correcting, material misstatements
Substantive Used to detect material misstatement in
Tests account balances, classes of transactions and
disclosures
 Nature of Audit Evidence
• Audit evidence
– Cumulative
– Obtained from audit procedures
– May include from other sources such as previous
audits
– Entity’s accounting records are an important
source of audit evidence.
 Accounting Records & Other
Information
Accounting Records
The records of initial entries
Supporting records
Checks and records of electronic fund
transfers
Invoices
Contracts
General & subsidiary ledgers
Journal entries
Other adjustments to the financial
statements that are not reflected in
formal journal entries
Records such as work sheets
Spreadsheets supporting costs
allocations, computations,
reconciliations and disclosures
Other Information
Minutes of meetings
Confirmations from 3rd parties
Analysts reports
Comparable data about
competitors
Controls manuals
Information obtained by the auditor
from such audit procedures as
inquiry, observation and inspection
Other information developed by or
available to, the auditor that
permits the auditor to reach
conclusions through valid
reasoning
 Nature of Audit Evidence
• Other information
– Audit evidence not classified as accounting
records
• Corroborating evidence
– Refers to evidence which complements or
supports an assertion which is already supported
by another type or evidence.
Examples of Corroborating Evidence

1. Authoritative documents
2. Internal Controls
3. Calculations by auditor
4. Physical existence
5. Analytical review procedures
6. Confirmation replies
7. Representation letters
8. Subsequent events
 Relationship of Audit Evidence to
Management Assertions
Assertions about classes of Assertions about
transactions and events Assertions about account presentation and
for the period under audit balances at the period end disclosure

Occurrence Existence Occurrence & rights &

obligations
Completeness Rights & Obligations Completeness
Accuracy Completeness Classification &
understandability
Cutoff Valuation & allocation Accuracy & valuation

Classification

Assertions in the Financial Statements

 Sufficiency & Appropriateness of
Evidential Matter
• Sufficiency
– Measure of the quantity of audit evidence.
• Appropriateness
– Measure of the quality of audit evidence; i.e., its
relevance and its reliability in providing audit
support for, or detecting misstatements in, the
classes of transactions, account balances, and
disclosures and related assertions
 Factors which determine sufficient
appropriate evidential matter

1. The degree of risk of misstatement

2. Materiality of the item in relation to the
financial statements
3. Experience gained during previous audits
4. Results of auditing procedures, including
fraud or error which may have been found
5. Type of information available
 Cost Benefit Considerations
• Auditor’s opinion, to be economically useful,
must be formed within a reasonable length of
time and at reasonable cost.
• There should be a rational relationship
between the cost of obtaining evidence and
the usefulness of the information obtained
Appropriateness of Evidential Matter

• Evidence must both be valid and relevant.

• Validity of evidential matter is so dependent
on the circumstances under which it is
obtained that generalizations about the
reliability to various types of evidence are
subject to important exceptions
 Relevance
• Evidence must affect the auditor’s ability to
accept or reject a specific financial statement
assertion.
• Each piece of evidence obtained is evaluated in
terms of its usefulness either in corroborating
or contradicting an assertion by management
or in the auditor’s evaluation of evidence
obtained at other stages of the audit period.
 Reliability
• This is the quality of information that assures
that information is reasonably free from error
and bias and faithfully represents what it
purports to represent.
• Reliability of audit evidence is influenced by
its source and by its nature and is dependent
on the individual circumstances under which it
is obtained.
 Generalizations About the Reliability of
Evidence
Independence Evidential matter obtained by the auditor from independent
of the source sources outside the client is usually more reliable than that from
within the client.

Qualifications It must be obtained from people who are competent and have the
of the source qualifications to make the information free from error.

Internal Audit evidence that is generated internally is more reliable when

control the related controls imposed by the entity are effective. Auditor
does not accept management’s description without corroboration.

Nature of Audit evidence obtained directly by the auditor is more reliable

evidence than audit evidence obtained indirectly or by inference . Evidence
varies in the extent to which it is fact-based versus opinion-based.

Form of Audit evidence is more reliable when it exists in documentary

evidence form, whether paper, electronic, or other medium.
Information Produced by the Entity
• When the evidence has been prepared using a
management’s expert, auditor shall:
– Evaluate the competence, capabilities and
objectivity of that expert;
– Obtain an understanding of the work of that
expert; and
– Evaluate the appropriateness of that expert’s work
as audit evidence for the relevant assertion
Information Produced by the Entity
• The auditor shall evaluate whether the
information produced by an entity is
sufficiently reliable for the auditor’s purposes.
Including:
– Obtaining audit evidence about the completeness
and accuracy of the information; and
– Evaluating whether the information is sufficiently
precise and detailed for auditor’s purposed.
 Considerations when evaluating the
appropriateness of the management’s expert
as audit evidence:
• The relevance and reasonableness of that expert’s
findings or conclusions, their consistency with other
audit evidence, and whether they have been
appropriately reflected in the financial statements
• If that expert’s work involves use of significant
assumptions and methods, the relevance and
reasonableness of those assumptions and methods; and
• If that expert’s work involves significant use of source
data , the relevance, completeness and accuracy of that
source data.
 Other Considerations
• The auditor’s 2-fold goal in performing an audit in
accordance with GAAS is:
– To achieve the necessary assurance to support the audit
opinion
– To perform the audit as efficiently as possible
• Auditor also considers the evidence’s availability,
timeliness and cost.
• Auditors usually have available more than one source
or method of obtaining evidence to corroborate a
particular financial statement assertion.
 Evaluating Audit Evidence
• The auditor ordinarily obtains more assurance
from consistent audit evidence obtained from
different sources or of a different nature than
from items of audit evidence considered
individually.
• Obtaining audit evidence from different
sources or of a different nature may indicate
that an individual item of audit evidence is not
reliable.
 Relationships Among Assertions,
Objectives and Procedures
• In obtaining evidential matter in support of
financial statement assertions, the auditor
develops specific audit objectives in the light of
those assertions.
• In developing the audit objectives of a particular
engagement, the auditor should consider the
specific circumstances of the entity, including
the nature of its economic activity and the
accounting practices unique to its industry.
 Examples of Assertions and Audit
Objectives (Inventories)
Assertion Audit Objective
Completeness Inventory quantities include all
products, materials and supplies on
hand
Existence or Inventories included in the balance
occurrence sheet physically exists

Rights and Inventories exclude items billed to

obligations customers or owned by others
 Nature, Timing and Extent of
Procedures
• The nature and timing of the audit procedures
to be used may be affected by the fact that
some of the accounting data and other
information may be available only in electronic
form or only at certain points or periods in
time.
• An entity’s data retention policies may require
the auditor to request retention of some
information for the auditor’s review or to
perform audit procedures at a time when the
information is available.
Audit Procedures According to Purpose
1. Obtain
Do not an understanding
provide sufficient of the entity and its
environment,
appropriate auditincluding
evidence onits internal control, to assess
the riskstoof
which material
base the auditmisstatement at the financial
statement and assertion levels (risk assessment
opinion.
procedures)
2 circumstances when tests of controls
2. When necessary orare when the
necessary:
auditor has
determined to do so, test the operating effectiveness
1. When controls are expected to be
of controls in preventing, or detecting and correcting
effective; and
material misstatements at the assertion level (tests
of controls); and 2. When substantive procedures do
not provide sufficient appropriate
3. Detect material misstatements at required
Always
audit evidence.
the assertion level
to obtain
(substantive procedures) sufficient appropriate audit
evidence
 Audit Procedures According to Nature

• Inspection of records or documents

• Inspection of tangible assets
• Observation
• Inquiry
• Recalculation
• Reperformance
• Confirmation
• Analytical procedures
 Inspection of Record or Documents

• Examining records or documents, whether

internal or external, in paper form, electronic
form, or other media.
 Inspection of Tangible Assets

• Physical examination of the assets.

• May provide reliable audit evidence about
existence but not necessarily about the
entity’s rights and obligations or the valuation
of the assets.
 Direction of the Test
• Important in establishing the assertion being
tested by a certain procedure
• Vouching
– Involves examination of supporting documents of
transactions. Tests the assertions of existence and
occurrence
• Tracing
– Tracing to accounting records. Establishes
completeness.
 Observation
• Looking at a process or procedure being
performed by others.
• Limited to the point in time at which the
observation takes place and by the fact that
the act of being observed may affect how the
process or procedure is performed.
 Inquiry
• Seeking information of knowledgeable persons, both
financial and non-financial, throughout the entity or
outside the entity.
• Often is complementary to performing other audit
procedures.
• May range from formal written inquiries to informal oral
inquiries.
• Responses to inquiries provide a basis for the auditor to
modify or perform additional audit procedures.
• The auditor obtains written representations from
management to confirm responses to oral inquiries.
 Recalculation
• Checking the mathematical accuracy of
documents or records.
• Can be performed using information
technology (e.g., CAATs)
 Reperformance
• Independent execution of procedures or
controls that were originally performed as
part of the entity’s internal control, either
manually or through the use of CAATs.
 Confirmation
• Obtaining a representation of information or
of an existing condition directly from a third
party.
• Frequently used in relation to account
balances and their components, but need not
be restricted to these items.
• Also used to obtain audit evidence about the
absence of certain conditions.
 Analytical Procedures
• Evaluations of financial information made by a
study of plausible relationships among both
financial and non-financial data.
• Also encompass the investigation of identified
fluctuations and relationships that are
inconsistent with other relevant information
or deviate significantly from predicted
amounts.
 Other Terms for Audit Procedures
Term Application
Agree Schedule balances to general ledger
Analyze Account transactions
Compare Beginning balances with last year’s audited figures
Count Cash, inventory
Examine Authoritative documents
Foot Totals
Prove Totals
Read Minutes of director’s meetings
Reconcile Cash balance
Review Disclosure, legal documents
Scan For unusual items
 External Confirmations
• Process of obtaining and evaluating audit
evidence through a representation of
information or an existing condition directly
from a third party in response to a request for
information about a particular item affecting
assertions in the financial statements or
related disclosures.
 Situations Where External Confirmations
May Be Used
1. Bank balances and other information from bankers
2. Account receivable balances
3. Stocks held by third parties at bonded warehouses for
processing or on consignment
4. Property title deeds held by lawyers or financiers for
safe custody or as security
5. Investments purchased from stockbrokers but not
delivered at the balance sheet date
6. Loans from lenders
7. Accounts payable balances
Assertions Addressed by Confirmations

• Existence at a certain date.

• Operation of cutoff procedures
• Valuation – not established
Forms of Confirmation Requests
• Positive
– Asks the respondent to reply to the auditor in all
cases either by indicating the respondent’s
agreement with the given information, or by
asking the respondent to fill in information.
• Negative
– Asks the respondent to reply only in the event of
disagreement with the information provided in
the request.
 Uses of Negative Confirmations
• The assessed risk of material misstatement is
lower
• A large number of small balances is involved
• A substantial number of errors is not expected
• The auditor has no reason to believe that
respondents will disregard these requests.
 Management Requests Not to Confirm
Information
• There should be valid grounds and the auditor must obtain
audit evidence to support the validity of management’s
request.
• Alternative procedures must be applied to obtain
sufficient appropriate audit evidence regarding that
matter.
• If the auditor does not accept the validity of
management’s request and is prevented from carrying out
the confirmation, there has been a limitation on the scope
of the auditor’s work and the auditor should consider the
possible impact on the auditor’s report.
 Analytical Review Procedures
• Consist of evaluation of financial information made by a
study of plausible relationships among financial and
non-financial data.
• Typical approach:
– Develop an expectation for the account balance
– Determine the amount of difference from the expectation
that can be accepted without investigation
– Compare the company’s account balance (or ratio) with the
expected account balance
– Investigate significant differences from the expected account
balance.
Summary of Procedures Classified
as to Type and as to Nature
Procedure RAP TOC ST
Inquiry X X X
Inspection X X X
Observation X X X
Reperformance X
Confirmation X
Recalculation X X
Analytical Procedures X X
 Substantive Tests
• 2 General Types:
– Test of details of transaction, balances and
disclosures
• Used to examine the actual details making up the
various account balances
– Analytical review procedures
 Timing of Test of Details
• Desirable to perform the tests before year-end.
– The auditor must assess the difficulty of controlling the
incremental audit risk.
• It is usually efficient to perform substantive tests
on related accounts as of a common date.
• If tests are done early, the auditor should obtain
satisfaction that the risk of material misstatements
is low during the intervening period between the
early testing date and the year-end.
 Interim Testing: Procedures to Link the
Balances
• Review key performance indicators and management information for
unexpected variations in account balances at the balance sheet date,
and investigate any material fluctuations in account balances and any
unusual activity since the time of the early substantive tests.
• Scan entries in the relevant general ledger accounts or review
summaries of recorded transactions to determine whether any
expected entries have been omitted and whether the entries appear to
be reasonable in relation to the normal level of activity.
• Review any special procedures the client has carried out on the year-
end figures
• Review reconciliations of individual ledger balances to control accounts,
and investigate any unusual items in the reconciliations
• Ensure that any relevant matters brought forward from the early
substantive testing date have been satisfactorily resolved.
• Reassess any valuation accounts in light of latest available information.
 Fraud and Error
• Error – unintentional misstatements in the financial
statements
• Fraud – intentional act by one or more individuals among
management, those charged with governance, employees or
third parties involving the use of deception to obtain an
unjust or illegal advantage.
– Management fraud
– Employee fraud
• Auditor considers the ff. types of fraud:
– Misstatements resulting from fraudulent financial reporting
– Misstatements resulting from misappropriation of assets
• Those charged with governance and management have the
primary responsibility to prevent and detect fraud and errors.
 Responsibilities for Fraud & Error

• The primary responsibility for the prevention

and detection of fraud and error rests with
both those charged with governance and the
management of an entity.
• The auditor is not and cannot be held
responsible for the prevention of fraud and
error.
Inherent Limitations of an Audit
• Risk of not detecting a material misstatement
resulting from fraud is higher than the risk if
not detecting a material misstatement
resulting from error because fraud may
involve sophisticated and carefully organized
schemes to conceal it, such as forgery,
deliberate failure to record transactions or
intentional misrepresentation made to the
auditor.
 Subsequent discovery
misstatement due to fraud or
error does not indicate:
• A failure to obtain reasonable assurance
• Inadequate planning, performance or
judgment
• The absence of professional competence and
due care, or
• A failure to comply with PSAs
Professional skepticism needed to identify
and evaluate:
• Matters that increase the risk of material
misstatement.
• Circumstances that make the auditor suspect
that the FS are materially misstated.
• Evidence obtained that brings into question the
reliability of management representations.
Note: unless there is evidence to the contrary,
auditor is entitled to accept records and
documents as genuine.
 Effect on Risk Assessment
• Fraud risk factors
– Events or conditions that provide an opportunity,
a motive or a means to commit fraud, or indicate
that the fraud may already have occurred.
When assessing inherent and control risk, the
auditor should consider how the financial
statements might be materially misstated as a
result of fraud or error.
 Examples of Circumstances that might
indicate Fraud
• Discrepancies in accounting records
• Transactions that are note recorded in a complete or
timely manner or are improperly recorded
• Unsupported or unauthorized balances or transactions
• Last minute adjustments
• Evidence of employees’ access to systems and records
inconsistent with that necessary to perform their
authorized duties.
• Tips or complaints to the auditor about alleged fraud
• Conflicting or missing evidence
• Altered documents
 Examples of Circumstances that might
indicate Fraud
• Unavailability of original documents
• Significant unexplained reconciling items
• Unusual balance sheet changes or changes in trends or
important ratios or relationships
• Inconsistent, vague or implausible responses for inquiries
• Unusual discrepancies between records and confirmation replies
• Large numbers of credit entries and other adjustments to AR
records
• Unexplained difference between AR subsidiary records and
general ledger account or between customer statements and
the AR subsidiary ledger
• Missing or non-existent cancelled checks
 Examples of Circumstances that might
indicate Fraud
• Missing inventory or physical assets of significant
magnitude
• Unavailable or missing electronic evidence,
inconsistent with the retention practices or policies
• Fewer responses to confirmations than anticipated or a
greater number of responses than anticipated
• Inability to produce evidence of key systems
development and program change testing and
implementation activities for current year system
changes and deployments
 Examples of problematic or unusual
relationships between auditor and
management
• Denial of access to records, facilities, employees, customers, vendors
or others from whom audit evidence might be sought
• Undue time pressure
• Complaints about conduct of audit or intimidation of audit team
members
• Unusual delays
• Unwillingness to facilitate access to key electronic files for testing
through CAATs
• Denial of access to key IT operations staff and facilities
• Unwillingness to add or revise disclosures in the financial statements
• Unwillingness to address identified weaknesses in internal control on
a timely basis.
 Other fraud risk factors
• Unwillingness by management to permit the
auditor to meet privately with those charged with
governance
• Accounting policies that appear to be at variance
with industry norms
• Frequent changes in accounting estimates that do
not appear to result from changes in
circumstances
• Tolerance of violations of entity’s code of conduct
Actions related to Fraud or Error
• Identify if there are circumstances that indicate a possible
misstatement in the financial statements
• Determine whether the financial statements are materially misstated
• If misstatements are identified, the auditor should consider whether
such a misstatement may be indicative of fraud. If indicative of
fraud, the auditor should consider the implications on the audit
• In evaluating and disposing of misstatements, consider materiality.
The effect on the auditor’s report depends on the evaluation and
disposition of these misstatements
• The auditor should document:
– Fraud risk factors identified as being present during risk assessment process,
and during the performance of the audit
– The auditor’s responses to the fraud risk factors
 Matters to be Communicated regarding
Fraud
• Questions regarding management competence and
integrity
• Fraud involving management
• Other fraud that results in a material misstatement of
the financial statements
• Material misstatements resulting from error
• Misstatements that indicate material weaknesses in
internal control, including the design or operation of the
entity’s financial reporting process
• Misstatements that may cause future financial
statements to be materially misstated.
 Communication of Misstatements from
Error
• Auditor should communicate to management,
or the board is necessary, any identified
material misstatements resulting from error
including uncorrected misstatements
aggregated by the auditor that were deemed
by management as immaterial to the financial
statements.
 Communication of Misstatements from
Fraud
• Whether the misstatement due to fraud is
material or not, exists or may exist, the
auditor should report the same to the
appropriate level of management and those
charged with governance.
 Communication to Regulatory and
Enforcement authorities
• Duty of confidentiality of client information
may be overridden by statute, the law or
courts of law in reporting fraud or error to a
party outside of the client entity.
 Inability to Complete Engagement

• Auditor should consider professional and legal

responsibilities and consider the possibility of
withdrawing from the engagement resulting
from fraud or suspected fraud
• Auditor should discuss with appropriate level
of management or those charged with
governance the withdrawal and reasons for it.
 Auditing Accounting Estimates
• Accounting estimate
– Approximation of the amount of an item in the absence of a
precise means of measurement.
• Examples:
– Allowance s to reduce inventory and accounts receivable to
their net realizable values and amortized cost
– Provisions to allocate the cost of fixed assets over their
estimated useful lives
– Accrued revenue
– Deferred tax
– Provision for a loss from a lawsuit
– Losses on construction contracts in progress
– Provision to meet warranty claims
Procedures in Testing accounting estimates

• Test the process used by management to develop the

estimate:
– Identify controls relating to the estimate (e.g., use of
standard journal entry every month)
– Evaluate the sources of data used
– Determine if assumptions are reasonable and consistent
– Test the calculations management uses to translate the
assumptions into the accounting estimate
• Develop an independent expectation
• Review subsequent events or transactions
Preparing Substantive Test Audit Program

• Approaches in auditing an account:

– Direct test of ending balances (high turnover
accounts)
• Cash, accounts receivable, accounts payable, etc.
– Tests of inputs and outputs during the year (tests
of details of transactions)
• Fixed assets, long-term debt, etc.
• See exhibit 10-3 on page 357
 Audit Documentation
• Records kept by the auditor of the procedures
applied, the tests performed, the information
obtained and the pertinent conclusions reached in
the engagement.
• Preparing sufficient and appropriate audit
documentation on a timely basis helps to enhance
the quality of the audit and facilitates the effective
review and evaluation of the audit evidence
obtained and conclusions reached before the
auditor’s report is finalized
 Functions of Audit Documentation
• Serve as sufficient and appropriate record of the basis
for the auditor’s report
• Provide evidence that the audit was performed in
accordance with PSAs and applicable legal and
regulatory requirements
• Assist the audit team to plan and perform the audit
• Assist members of the audit team responsible for
supervision to direct and supervise the audit work,
and to discharge their review responsibilities in
accordance with PSA 220
 Functions of Audit Documentation
• Enable the audit team to be accountable for its work
• Retain a record of matters of continuing significance
to future audits
• Enable an experienced auditor to conduct quality
control reviews and inspections in accordance with
PSQC 1 and
• Enable an experienced auditor to conduct external
inspections in accordance with applicable legal,
regulatory or other requirements
 Form and Content of Audit
Documentation
• Audit documentation should enable an
experienced auditor to understand:
– The nature, timing and extent of the audit
procedures performed to comply with PSAs and
applicable legal and regulatory requirements
– The results of the audit procedures and the audit
evidence obtained, and
– Significant matters arising during the audit and the
conclusions reached thereon
 Factors affecting Form, Content
and Extent of Audit Documentation
• Nature of the audit procedures to be performed
• Identified risks of material misstatement
• Extent of judgment required in performing the work and
evaluating the results
• Significance of the audit evidence obtained
• Nature and extent of exceptions identified
• Need to document a conclusion of the basis for a conclusion
not readily determinable from the the documentation of the
work performed or audit evidence obtained; and
• Audit methodology and tools used
Classification of Audit Documentation

• Permanent file
– Contain historical or continuing nature pertinent to
the current audit. Includes:
• Extracts or copies of articles of incorporation, bylaws,
bond indentures and contracts
• Analyses, from previous years, of accounts that have
continuing importance to the auditor such as long-term
debt, stockholders’ equity accounts, goodwill and fixed
assets
• Information related to the understanding of the internal
control structure and assessment of control risk such as
organization charts, flowcharts, questionnaires, etc.
Classification of Audit Documentation

• Current file
– Contain evidence gathered, descriptions of audit
procedures performed, and conclusions reached
relevant to the audit of a particular year. Includes:
• Working (top) trial balance
• Proposed adjusting and reclassifying entries
• Lead schedule
• Supporting schedules
 Working Paper Elements
• Heading:
– Name of client
– Title of working paper
– Date or period of time
• Dates and initials of staff and reviewers
• Indexing numbers and appropriate cross-
referencing to other working papers
• Tick marks and legend
 Identifying Characteristics of Specific
Items Being Tested
• Auditor should record the identifying
characteristics of the specific items or matters
being tested.
• It enables the audit team to be accountable
for its work and facilitates the investigation of
exceptions or inconsistencies.
• Examples on page 361
 Significant Matters
• Matters that give rise to significant risks
• Results of audit procedures indicating that the financial
information could be materially misstated, or a need to
revise the auditor’s previous assessment of the risks of
material misstatement and the auditor’s responses to
those risks
• Circumstances that cause the auditor significant
difficulty in applying necessary audit procedures
• Findings that could result in a modification to the
auditor’s report
Documentation of Inconsistencies
• Auditor should document how the
contradiction or inconsistency in forming the
final conclusion was addressed.
• This does not imply that the auditor needs to
retain documentation that is incorrect or
superseded
 Working Papers vs. Audit Programs

• WPs – cover the whole audit engagement

• Audit programs – pertain only to procedures
performed
Ownership, Custody and Confidentiality
• Audit documentation are the property of the auditor subject to
ethical limitations relating to the confidential relationships with
clients
• They should not be regarded as part of, or a substitute for the
client’s accounting records.
• Auditor should adopt reasonable procedures for the safe custody
of his working papers and should retain them for a period
sufficient to meet the needs of his practice and to satisfy any
pertinent legal requirements of records retention
• Auditor should complete assembly of final audit file after the
date of the auditor’s report. 60 days is an appropriate time limit.
Changes made on Audit Documentation

• Deleting or discarding superseded documentation

• Sorting, collating and cross referencing working
papers
• Signing off on completion checklists relating to the
file assembly process
• Documenting audit evidence that the auditor has
obtained, discussed and agreed with the relevant
members of the audit team before the date of the
auditor’s report.
• PSQC 1 requires firms to establish policies and
procedures for the retention of engagement
documentation.
• As PSQC 1 indicates, the retention period for
audit engagements ordinarily is no shorter
than 5 years from the date of the auditor’s
report, or, if later, the date of the group
auditor’s report