SA 230 Audit Documentation

SA 230 Audit Documentation is the mainstay of an audit. The work that the auditor performs, the explanations given to the auditor, the conclusions arrived at, are all evidenced by documentation. Poor documentation may delineate poor performance in an audit. Even though the auditor has executed appropriate audit procedures, if there is no documentation to prove, it may question the work done, in case any material misstatement is reported. Improper and incomplete documentation, at times, may put the auditor in embarrassing situations.

SA 230 defines Audit documentation as the record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached . This standard deals with the auditor’s responsibility to prepare audit documentation for an audit of financial statements. It is effective for audit of financial statements for periods beginning on or after 1st April, 2009.

Purpose of Audit Documentation

SA 230 Audit Documentation serves the following purposes-

  • Evidence of the auditor’s basis for a conclusion about the achievement of the overall objectives of the auditor
  • Evidence that the audit was planned and performed in accordance with SAs and applicable legal and regulatory requirements.
  • Assisting the engagement team to plan and perform the audit. Assisting members of the engagement team responsible for supervision to direct and supervise the audit work, and to discharge their review responsibilities in accordance with SA 220
  • Enabling the engagement team to be accountable for its work. Retaining a record of matters of continuing significance to future audits.
  • Enabling the conduct of quality control reviews and inspections
  • Enabling the conduct of external inspections in accordance with applicable legal, regulatory or other requirements.

Objectives of Audit Documentation

The objective of the auditor is to prepare audit documentation that provide-

  • A sufficient and appropriate record of the basis for the auditor’s report
  • It also acts as an evidence that the audit was planned and performed in accordance with SAs and applicable legal and regulatory requirements

Documentation of Audit Procedures performed and Audit Evidence Obtained

  • Form, Content and Extent of Audit Documentation-
    The auditor shall prepare audit documentation that is sufficient to enable an experienced auditor, having no previous connection with the audit, to
    1. The nature, timing, and extent of the audit procedures performed to comply with the SAs and applicable legal and regulatory requirements
    2. The results of the audit procedures performed, and the audit evidence obtained and
    3. Significant matters arising during the audit, the conclusions reached thereon, and significant professional judgments made in reaching those conclusions.

      Nature, Timing and Extent of Audit Procedures-

      In documenting the nature, timing and extent of audit procedures performed, the auditor shall record
    1. The identifying characteristics of the specific items or matters tested
    2. Who performed the audit work and the date such work was completed and
    3. Who reviewed the audit work performed and the date and extent of such review.
  • Documentation of Discussions with the Management and Those Charged with Governance-
    The auditor shall document discussions of significant matters with management, those charged with governance, and others, including the nature of the significant matters discussed and when and with whom the discussions took place.
  • Documentation of Any Inconsistency Identified-
    If the auditor identified information that is inconsistent with the auditor’s final conclusion regarding a significant matter, the auditor shall document how the auditor addressed the inconsistency.
  • Departure from a Relevant Requirement-
    If, in exceptional circumstances, the auditor judges it necessary to depart from a relevant requirement in a SA, the auditor shall document how the alternative audit procedures performed achieve the aim of that requirement, and the reasons for the departure.
  • Matters Arising after the Date of the Auditor’s Report-
    If, in exceptional circumstances, the auditor performs new or additional audit procedures or draws new conclusions after the date of the auditor’s report, the auditor shall document
    1. The circumstances encountered
    2. The new or additional audit procedures performed, audit evidence obtained, and conclusions reached, and their effect on the auditor’s report and
    3. When and by whom the resulting changes to audit documentation were made and reviewed.

Assembly of Final Audit File

The auditor shall assemble the audit documentation in the audit file and complete the administrative process of assembling the audit file. Such assembling of documentation in an appropriate audit file must be ordinarily done within 60 days of the auditor’s report.

The auditor shall not discard audit documentation of any nature before the end of his retention period, which is not shorter than seven years from the date of audit report. However, if the auditor finds it is necessary to modify the audit file or add new documentation to the existing audit file after the completion of assembly, he shall do so after documenting the following-

  • The specific reasons for such modification or addition
  • When and by whom were they made and reviewed

Ownership of Audit Documentation

Standard on Quality Control (SQC) 1, “Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements”, issued by the Institute, provides that, unless otherwise specified by law or regulation, audit documentation is the property of the auditor. He may at his discretion, make portions of, or extracts from, audit documentation available to clients, provided such disclosure does not undermine the validity of the work performed, or, in the case of assurance engagements, the independence of the auditor or of his personnel.

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