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documentation

Terms in this set (22)

what does the auditor's documentation support
AUDITOR'S AUDIT DOCUMENTATION SUPPORTS AUDITOR'S WORK AND AUDITOR'S OPINION NOT CLIENT'S FINANCIAL STATEMENTS
audit documenation
- also referred to as working papers or work papers
- the principal record of audit procedures performed, evidence obtained and conclusions reached
- work papers belong to the auditor
when may an auditor disclose work papers without the client's permission
- general rule: the auditor cannot disclose work papers without the client's permission
- exceptions:
subpoenaed by a court
for investigation by state board of accountancy
requested by audit firm's attorney if audit firm was sued by client
audit documentation should provide
- evidence of the basis of the auditor's report and the conclusion about the achievement of the overall objectives of the auditor
- evidence that the audit was conducted in accordance with GAAS and applicable legal and regulatory requirements
audit documentation requirements
audit documentation should:
1. assist the engagement team in planning, conducting, supervising the audit
2. show that the accounting records reconcile with the FS
3. enable the engagement team to show its accountability, emphasizing that the team is responsible for its work
4. provide a record of accumulated evidence, showing the procedures performed, evidence examined and conclusions reached
5. be a record of matters of continuing significance to future audits of the same entity
6. enable the conduct of quality control reviews and inspections
7. assist an auditor who reviews a predecessor auditor's documentation
8. be prepared in enough detail so that an experienced auditor who has no previous connection with the audit can understand the NET of the audit
report release date
- the date on which the auditor grants the client permission to use the report
- often this is the date on which the report is delivered to the client
- auditor should document the report release date
document retention SAS rules (non issuers/private companies)
audit documentation should be retained for at least 5 years from the report release date
document retention PCAOB rules (issuers/public companies)
audit documentation should be retained for at least 7 years from the report release date

7 years because of criminal statutes- they don't want any evidence being destroyed until the criminal statute has passed
documentation completion date
- this deals with the idea that once you finish the work, if a problem arises 2 years later the auditor cannot go back and clean up with work papers- the work papers should remain the way they were when they released the report
- the auditor is granted a certain window of time following the report release date in which to assemble the final audit documentation file
- the end of this window is referred to as the documentation completion date
- after this date existing documentation must not be deleted and additions to audit documentation must be documented as such
documentation completion date SAS rules (non issuers/private companies)
the final audit documentation file should be assembled within 60 days following the report release date

60 day grace period where the auditor can still be manipulating/adjusting the work papers
documentation completion date PCAOB rules (issuers/public companies)
- the final audit documentation file should be assembled within 45 days following the report release date
- 45 day grace period where the auditor can still be manipulating/adjusting the work papers
- PCAOB requires preparation of an engagement completion document identifying all significant findings/issues
- under PCAOB standards, if work is performed by another auditor, the office issuing the report must obtain, review and retain certain audit documentation from the other auditor
safekeeping of audit documenation
- reasonable precautions should be established for the safekeeping of audit documentation, as it is the proof that a professional audit was performed
- SOX 2002 imposes tough penalties for failure to retain audit documentation and for the destruction of records
- the auditor should establish appropriate controls for audit documentation to protect its integrity and prevent unauthorized changes
nature and extent of audit documenation
- audit documentation may be in paper form, electronic form or other media
- oral explanations alone are insufficient but may be used for clarification of information included in audit documentation
- the specific quantity, type and content of audit documentation is based on the auditor's judgement
what should the auditor consider when determining the nature and extent of audit documentation
- size and complexity of the entity
- nature of the specific auditing procedure
- the risk of material misstatement
- significance of evidence obtained
- nature and extent of expectations identified
- need to document conclusions that may not be obvious
- audit methodology and tools used
- extent to which judgement was required in performing work and evaluating results
specific contents of work papers
- form and content of audit documentation can vary but they should be designed to meet circumstances of particular engagement
- generally, audit documentation consists of a permanent/continuous file and a current file
permanent/continuous file
- carry forward from year to year
- the permanent file includes audit documentation that has a continuing interest from year to year
examples of audit documentation in the permanent/continuous file
contracts
pension plans
leases
stock options
bylaws
articles of incorporation
minutes of meetings
bond indentures
internal information
flowchart of internal control
current file
- this years stuff
- the current file contains all audit documentation applicable to the year under audit
examples of audit documentation in the current file
- audit plan/program
- financial statements and auditor's report
- working trial balance, adjusting JEs, reclassification entries
- letters of confirmation and representation (letters from attorneys, management representation letter, confirmation responses)
- analyses, worksheets, issue memos (to make requests of employees) and schedules or commentaries prepared or obtained by the auditor
- abstracts or copies of entity documents such as contracts or agreements examined to evaluate accounting for significant transactions
- summaries of signifiant audit findings or issues, actions taken and conclusions reached
- records of tests of controls and substantive tests
significant audit findings
audit documentation should include significant audit findings, actions taken and conclusions reached

significant audit findings include matters that:
- are related to the selection and application of accounting principles especially those involving complex or unusual transactions or estimates and uncertainties
- are related to matters that give rise to significant risks
- are related to possible material misstatements in FS
- suggest a need to revise the auditor's previous risk assessment
- cause significant difficulty in applying necessary audit procedures or indicate the need for significant revision of planned audit procedures
- may result in modification of the auditor's opinion of the inclusion of an emphasis-of-matter/other-matter paragraph in the auditor's report
tick marks
- auditors often use tick marks or symbols, indicating the work that has been performed
- audit documentation should include explanations of any tick marks used
- tick marks tell you that this is what we did to be comfortable with this number
audit documentation serves mainly to provide
1. principal support for the auditor's report
2. assistance in planning, conduct and supervision of the audit
3. accountability
4. useful information
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