Clarified Auditing Standard--Audit Documentation (Redrafted) (AU-C 230)

This Clarified Auditing Standard is a redraft of SAS No. 103 published in 2006.  It contains no significant change to practice.  The requirements in this standard underpin the specific documentation requirements in other Clarified Auditing Standards. As in the previous standard, the basic requirement for audit documentation preparation is that it must be sufficient to enable an experienced auditor having no previous connection with the audit to determine what the auditor did, what the auditor found and what the auditor did about what was found!  While this is a liberal paraphrase of the specifics in the standard, it is the guiding principle for the preparation of all audit documentation.

Basic Objective of the Auditor

The basic objective of the auditor is to prepare documentation that provides a good record of evidence that is the basis for the auditor’s report; as well evidence that the audit was planned and performed in accordance with generally accepted auditing standards and any applicable legal and regulatory requirements.

Definitions – This SAS contains the following terms:

·      Audit documentation. The record of audit procedures performed, audit evidence obtained, auditor actions and conclusions. Audit documentation is also referred to as working papers or workpapers.

·      Audit file. One or more folders in hardcopy or electronic form that contains the evidence that constitutes the engagement documentation.

·      Documentation completion date. A date no later than 60 days following the report release date at which a complete and final set of documentation is assembled in an audit file.

·      Experienced auditor. An internal or external individual who has practical audit experience, understands the audit process, understands generally accepted auditing standards and any applicable industry standards, is familiar with the entity’s business environment and any legal or regulatory requirements that apply.

·      Report release date. The date the auditor releases an audit report for distribution with the financial statements. (This date differs from the date statements are available for issue, which is the date management has finally approved the financial statements and the auditor has completed all applicable quality control review procedures. The date statements are issued may be the same as the report release date.)

Requirements

Documentation of the Audit Procedures Performed and Audit Evidence Obtained:

Audit documentation should provide an experienced auditor and understanding of:

·      The nature, extent and timing of audit procedures planned and performed including:

o       Identifying characteristics of items tested. This would include all client documents inspected, including those used in tests of controls or systems walk-through procedures.

o       Initials of the preparer and the date procedures were completed.

o       Initials of the reviewer, extent of the review and the date of the review.

·      Planning and/or completion documents may be useful summaries for use by internal and external reviewers.

·      The evidence obtained and the results of audit procedures including:

o       Obtaining copies or extracts of significant contracts or agreements.

o       Making a record of the discussion of significant matters with management or persons charged with governance, the persons with whom the matters were discussed and when the discussions occurred.

·      Significant issues discovered during the audit, along with the professional judgments made and conclusions reached.

·      Documentation required by other Clarified Auditing Standards (SASs) and applicable quality control standards (QC10).

·      Documentation of the professional judgment and professional skepticism applied in performing the work and evaluating the results, the foundation of which begins with the assessed risks at the financial statement and assertion levels.

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

When new or additional audit procedures are performed after the date of the auditor’s report, documentation should include a description of the circumstances, additional procedures and related evidence and conclusions and the effect on the auditor’s report.

Practical Note:

Audit documentation normally includes audit plans, analyses, memorandums, summaries of significant findings or issues, confirmation and representation letters, various practice aids and correspondence. Such documentation should demonstrate compliance with generally accepted auditing standards and Statement on Quality Control Standard No. 8 (QC 10). 

All documentation that contains substantive audit evidence must include the identifying characteristics of the documents inspected, inquiries of client personnel performing procedures and their responses and the details of any observation procedures. A spreadsheet documenting all unusual matters discovered during planning and performance of the engagement, along with inquiries made of management, their responses and the auditor’s actions and conclusions, is a practical way to document audit findings and conclusions.

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