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Microsoft Word - A011 2010 IAASB Handbook ISA 230
Microsoft Word - A011 2010 IAASB Handbook ISA 230
AUDITING
• Enabling the conduct of quality control reviews and inspections in
Assembly of the Final Audit File ................................................................ A21−A24
accordance with ISQC 13 or national requirements that are at least as
Appendix: Specific Audit Documentation Requirements in Other ISAs demanding.4
• Enabling the conduct of external inspections in accordance with
International Standard on Auditing (ISA) 230, “Audit Documentation” should be read applicable legal, regulatory or other requirements.
in conjunction with ISA 200, “Overall Objectives of the Independent Auditor and the
Conduct of an Audit in Accordance with International Standards on Auditing.”
1
ISA 200, “Overall Objectives of the Independent Auditor and the Conduct of an Audit in Accordance
with International Standards on Auditing,” paragraph 11.
2
ISA 220, “Quality Control for an Audit of Financial Statements,” paragraphs 15–17.
3
ISQC 1, “Quality Control for Firms that Perform Audits and Reviews of Financial Statements, and Other
Assurance and Related Services Engagements,” paragraphs 32–33, 35–38, and 48.
4
ISA 220, paragraph 2.
Effective Date (a) The nature, timing and extent of the audit procedures performed to
comply with the ISAs and applicable legal and regulatory requirements;
4. This ISA is effective for audits of financial statements for periods beginning on
(Ref: Para. A6–A7)
or after December 15, 2009.
(b) The results of the audit procedures performed, and the audit evidence
Objective obtained; and
5. The objective of the auditor is to prepare documentation that provides: (c) Significant matters arising during the audit, the conclusions reached
(a) A sufficient and appropriate record of the basis for the auditor’s report; and thereon, and significant professional judgments made in reaching those
conclusions. (Ref: Para. A8–A11)
(b) Evidence that the audit was planned and performed in accordance with
ISAs and applicable legal and regulatory requirements. 9. In documenting the nature, timing and extent of audit procedures performed,
the auditor shall record:
Definitions (a) The identifying characteristics of the specific items or matters tested;
6. For purposes of the ISAs, the following terms have the meanings attributed below: (Ref: Para. A12)
(a) Audit documentation – The record of audit procedures performed, relevant (b) Who performed the audit work and the date such work was completed; and
audit evidence obtained, and conclusions the auditor reached (terms such as
(c) Who reviewed the audit work performed and the date and extent of such
“working papers” or “workpapers” are also sometimes used).
review. (Ref: Para. A13)
(b) Audit file – One or more folders or other storage media, in physical or
10. The auditor shall document discussions of significant matters with
electronic form, containing the records that comprise the audit
management, those charged with governance, and others, including the nature
documentation for a specific engagement.
of the significant matters discussed and when and with whom the discussions
(c) Experienced auditor – An individual (whether internal or external to the took place. (Ref: Para. A14)
firm) who has practical audit experience, and a reasonable understanding
11. If the auditor identified information that is inconsistent with the auditor’s final
of:
conclusion regarding a significant matter, the auditor shall document how the
(i) Audit processes; auditor addressed the inconsistency. (Ref: Para. A15)
(ii) ISAs and applicable legal and regulatory requirements; Departure from a Relevant Requirement
(iii) The business environment in which the entity operates; and 12. If, in exceptional circumstances, the auditor judges it necessary to depart from
AUDITING
(iv) Auditing and financial reporting issues relevant to the entity’s a relevant requirement in an ISA, the auditor shall document how the
industry. alternative audit procedures performed achieve the aim of that requirement, and
the reasons for the departure. (Ref: Para. A18–A19)
Requirements
Matters Arising after the Date of the Auditor’s Report
Timely Preparation of Audit Documentation
13. If, in exceptional circumstances, the auditor performs new or additional audit
7. The auditor shall prepare audit documentation on a timely basis. (Ref: Para. A1) procedures or draws new conclusions after the date of the auditor’s report, the
auditor shall document: (Ref: Para. A20)
Documentation of the Audit Procedures Performed and Audit Evidence
Obtained (a) The circumstances encountered;
Form, Content and Extent of Audit Documentation (b) The new or additional audit procedures performed, audit evidence obtained,
and conclusions reached, and their effect on the auditor’s report; and
8. The auditor shall prepare audit documentation that is sufficient to enable an
experienced auditor, having no previous connection with the audit, to (c) When and by whom the resulting changes to audit documentation were
understand: (Ref: Para. A2–A5, A16–A17) made and reviewed.
Assembly of the Final Audit File • The need to document a conclusion or the basis for a conclusion not
readily determinable from the documentation of the work performed or
14. The auditor shall assemble the audit documentation in an audit file and
audit evidence obtained.
complete the administrative process of assembling the final audit file on a
timely basis after the date of the auditor’s report. (Ref: Para. A21–A22) • The audit methodology and tools used.
15. After the assembly of the final audit file has been completed, the auditor shall A3. Audit documentation may be recorded on paper or on electronic or other
not delete or discard audit documentation of any nature before the end of its media. Examples of audit documentation include:
retention period. (Ref: Para. A23)
• Audit programs.
16. In circumstances other than those envisaged in paragraph 13 where the auditor
• Analyses.
finds it necessary to modify existing audit documentation or add new audit
documentation after the assembly of the final audit file has been completed, the • Issues memoranda.
auditor shall, regardless of the nature of the modifications or additions,
• Summaries of significant matters.
document: (Ref: Para. A24)
• Letters of confirmation and representation.
(a) The specific reasons for making them; and
• Checklists.
(b) When and by whom they were made and reviewed.
• Correspondence (including e-mail) concerning significant matters.
*** The auditor may include abstracts or copies of the entity’s records (for
example, significant and specific contracts and agreements) as part of audit
Application and Other Explanatory Material documentation. Audit documentation, however, is not a substitute for the
entity’s accounting records.
Timely Preparation of Audit Documentation (Ref: Para. 7)
A4. The auditor need not include in audit documentation superseded drafts of
A1. Preparing sufficient and appropriate audit documentation on a timely basis
working papers and financial statements, notes that reflect incomplete or
helps to enhance the quality of the audit and facilitates the effective review and
preliminary thinking, previous copies of documents corrected for typographical
evaluation of the audit evidence obtained and conclusions reached before the
or other errors, and duplicates of documents.
auditor’s report is finalized. Documentation prepared after the audit work has
been performed is likely to be less accurate than documentation prepared at the A5. Oral explanations by the auditor, on their own, do not represent adequate support
time such work is performed. for the work the auditor performed or conclusions the auditor reached, but may be
AUDITING
used to explain or clarify information contained in the audit documentation.
Documentation of the Audit Procedures Performed and Audit Evidence
Obtained Documentation of Compliance with ISAs (Ref: Para. 8(a))
Form, Content and Extent of Audit Documentation (Ref: Para. 8) A6. In principle, compliance with the requirements of this ISA will result in the
audit documentation being sufficient and appropriate in the circumstances.
A2. The form, content and extent of audit documentation depend on factors such as:
Other ISAs contain specific documentation requirements that are intended to
• The size and complexity of the entity. clarify the application of this ISA in the particular circumstances of those other
ISAs. The specific documentation requirements of other ISAs do not limit the
• The nature of the audit procedures to be performed.
application of this ISA. Furthermore, the absence of a documentation
• The identified risks of material misstatement. requirement in any particular ISA is not intended to suggest that there is no
documentation that will be prepared as a result of complying with that ISA.
• The significance of the audit evidence obtained.
A7. Audit documentation provides evidence that the audit complies with the ISAs.
• The nature and extent of exceptions identified.
However, it is neither necessary nor practicable for the auditor to document
every matter considered, or professional judgment made, in an audit. Further, it
is unnecessary for the auditor to document separately (as in a checklist, for • Results of audit procedures indicating (a) that the financial statements
example) compliance with matters for which compliance is demonstrated by could be materially misstated, or (b) a need to revise the auditor’s
documents included within the audit file. For example: previous assessment of the risks of material misstatement and the
auditor’s responses to those risks.
• The existence of an adequately documented audit plan demonstrates
that the auditor has planned the audit. • Circumstances that cause the auditor significant difficulty in applying
necessary audit procedures.
• The existence of a signed engagement letter in the audit file demonstrates
that the auditor has agreed the terms of the audit engagement with • Findings that could result in a modification to the audit opinion or the
management or, where appropriate, those charged with governance. inclusion of an Emphasis of Matter paragraph in the auditor’s report.
• An auditor’s report containing an appropriately qualified opinion on the A9. An important factor in determining the form, content and extent of audit
financial statements demonstrates that the auditor has complied with the documentation of significant matters is the extent of professional judgment
requirement to express a qualified opinion under the circumstances exercised in performing the work and evaluating the results. Documentation of
specified in the ISAs. the professional judgments made, where significant, serves to explain the
auditor’s conclusions and to reinforce the quality of the judgment. Such matters
• In relation to requirements that apply generally throughout the audit,
are of particular interest to those responsible for reviewing audit
there may be a number of ways in which compliance with them may be
documentation, including those carrying out subsequent audits when reviewing
demonstrated within the audit file:
matters of continuing significance (for example, when performing a
○ For example, there may be no single way in which the auditor’s retrospective review of accounting estimates).
professional skepticism is documented. But the audit documentation
A10. Some examples of circumstances in which, in accordance with paragraph 8, it
may nevertheless provide evidence of the auditor’s exercise of
is appropriate to prepare audit documentation relating to the use of professional
professional skepticism in accordance with the ISAs. Such evidence
judgment include, where the matters and judgments are significant:
may include specific procedures performed to corroborate
management’s responses to the auditor’s inquiries. • The rationale for the auditor’s conclusion when a requirement provides
that the auditor “shall consider” certain information or factors, and that
○ Similarly, that the engagement partner has taken responsibility
consideration is significant in the context of the particular engagement.
for the direction, supervision and performance of the audit in
compliance with the ISAs may be evidenced in a number of • The basis for the auditor’s conclusion on the reasonableness of areas of
ways within the audit documentation. This may include subjective judgments (for example, the reasonableness of significant
documentation of the engagement partner’s timely involvement accounting estimates).
AUDITING
the audit procedures performed and conclusions reached, there is any Documentation of Discussions of Significant Matters with Management, Those
individual relevant ISA objective that the auditor cannot achieve that would Charged with Governance, and Others (Ref: Para. 10)
prevent the auditor from achieving the overall objectives of the auditor.
A14. The documentation is not limited to records prepared by the auditor but may
Identification of Specific Items or Matters Tested, and of the Preparer and Reviewer include other appropriate records such as minutes of meetings prepared by the
(Ref: Para. 9) entity’s personnel and agreed by the auditor. Others with whom the auditor may
discuss significant matters may include other personnel within the entity, and
A12. Recording the identifying characteristics serves a number of purposes. For external parties, such as persons providing professional advice to the entity.
example, it enables the engagement team to be accountable for its work and
facilitates the investigation of exceptions or inconsistencies. Identifying Documentation of How Inconsistencies Have Been Addressed (Ref: Para. 11)
characteristics will vary with the nature of the audit procedure and the item or
A15. The requirement to document how the auditor addressed inconsistencies in
matter tested. For example:
information does not imply that the auditor needs to retain documentation that
• For a detailed test of entity-generated purchase orders, the auditor may is incorrect or superseded.
identify the documents selected for testing by their dates and unique
purchase order numbers. Considerations Specific to Smaller Entities (Ref. Para. 8)
• For a procedure requiring selection or review of all items over a specific A16. The audit documentation for the audit of a smaller entity is generally less
amount from a given population, the auditor may record the scope of extensive than that for the audit of a larger entity. Further, in the case of an
the procedure and identify the population (for example, all journal audit where the engagement partner performs all the audit work, the
entries over a specified amount from the journal register). documentation will not include matters that might have to be documented
solely to inform or instruct members of an engagement team, or to provide
• For a procedure requiring systematic sampling from a population of evidence of review by other members of the team (for example, there will be
documents, the auditor may identify the documents selected by no matters to document relating to team discussions or supervision).
recording their source, the starting point and the sampling interval (for Nevertheless, the engagement partner complies with the overriding requirement
example, a systematic sample of shipping reports selected from the in paragraph 8 to prepare audit documentation that can be understood by an
shipping log for the period from April 1 to September 30, starting with experienced auditor, as the audit documentation may be subject to review by
report number 12345 and selecting every 125th report). external parties for regulatory or other purposes.
• For a procedure requiring inquiries of specific entity personnel, the A17. When preparing audit documentation, the auditor of a smaller entity may also
auditor may record the dates of the inquiries and the names and job find it helpful and efficient to record various aspects of the audit together in a
designations of the entity personnel.
AUDITING
single document, with cross-references to supporting working papers as
• For an observation procedure, the auditor may record the process or appropriate. Examples of matters that may be documented together in the audit
matter being observed, the relevant individuals, their respective of a smaller entity include the understanding of the entity and its internal
responsibilities, and where and when the observation was carried out. control, the overall audit strategy and audit plan, materiality determined in
accordance with ISA 320,8 assessed risks, significant matters noted during the
A13. ISA 220 requires the auditor to review the audit work performed through audit, and conclusions reached.
review of the audit documentation.7 The requirement to document who
reviewed the audit work performed does not imply a need for each specific Departure from a Relevant Requirement (Ref: Para. 12)
working paper to include evidence of review. The requirement, however,
A18. The requirements of the ISAs are designed to enable the auditor to achieve the
means documenting what audit work was reviewed, who reviewed such work,
objectives specified in the ISAs, and thereby the overall objectives of the auditor.
and when it was reviewed.
Accordingly, other than in exceptional circumstances, the ISAs call for compliance
with each requirement that is relevant in the circumstances of the audit.
7 8
ISA 220, paragraph 17. ISA 320, “Materiality in Planning and Performing an Audit.”
A19. The documentation requirement applies only to requirements that are relevant • Documenting audit evidence that the auditor has obtained, discussed
in the circumstances. A requirement is not relevant9 only in the cases where: and agreed with the relevant members of the engagement team before
the date of the auditor’s report.
(a) The entire ISA is not relevant (for example, if an entity does not have
an internal audit function, nothing in ISA 61010 is relevant); or A23. ISQC 1 (or national requirements that are at least as demanding) requires firms
to establish policies and procedures for the retention of engagement
(b) The requirement is conditional and the condition does not exist (for
documentation.15 The retention period for audit engagements ordinarily is no
example, the requirement to modify the auditor’s opinion where there is an
shorter than five years from the date of the auditor’s report, or, if later, the date
inability to obtain sufficient appropriate audit evidence, and there is no such
of the group auditor’s report.16
inability).
A24. An example of a circumstance in which the auditor may find it necessary to
Matters Arising after the Date of the Auditor’s Report (Ref: Para. 13) modify existing audit documentation or add new audit documentation after file
A20. Examples of exceptional circumstances include facts which become known to assembly has been completed is the need to clarify existing audit
the auditor after the date of the auditor’s report but which existed at that date documentation arising from comments received during monitoring inspections
and which, if known at that date, might have caused the financial statements to performed by internal or external parties.
be amended or the auditor to modify the opinion in the auditor’s report.11 The
resulting changes to the audit documentation are reviewed in accordance with
the review responsibilities set out in ISA 220,12 with the engagement partner
taking final responsibility for the changes.
made to the audit documentation during the final assembly process if they are
administrative in nature. Examples of such changes include:
• Deleting or discarding superseded documentation.
• Sorting, collating and cross-referencing working papers.
• Signing off on completion checklists relating to the file assembly process.
9
ISA 200, paragraph 22.
10
ISA 610, “Using the Work of Internal Auditors.”
11
ISA 560, “Subsequent Events,” paragraph 14.
12
ISA 220, paragraph 16.
13 15
ISQC 1, paragraph 45. ISQC 1, paragraph 47.
14 16
ISQC 1, paragraph A54. ISQC 1, paragraph A61.
Appendix
(Ref: Para. 1)