## Completion Memorandum and Significant Professional Judgements

### Completion Memorandum

The auditor should prepare and retain (as part of AD) a completion memorandum — a summary that describes:

(a) Significant matters identified during the audit, and

(b) How those matters were addressed.

#### Why is it useful?

Facilitates effective and efficient review and inspection of AD.
Particularly valuable for large and complex audits.
Assists the auditor in considering whether any individual SA objective that cannot be achieved prevents achievement of the overall objective of the auditor.

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### Documentation of Significant Matters and Professional Judgements

Judging the significance of a matter requires an objective analysis of facts and circumstances.

#### Examples of Significant Matters Requiring Documentation

#	Significant Matter
(a)	Results of audit procedures indicating FS could be materially misstated, OR need to revise auditor's previous ROMM and responses to those risks
(b)	Circumstances that created difficulty in applying necessary audit procedures
(c)	Findings resulting in modification of audit opinion or inclusion of EOM (Emphasis of Matter) in the audit report

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### When to Document Professional Judgement — Three Specific Circumstances

(i) Rationale for auditor's conclusion when SA says 'shall consider'

When an SA requirement uses the phrase "auditor shall consider" — the auditor must document the rationale for the conclusion reached after that consideration.

(ii) Basis for conclusion on reasonableness of subjective judgements

When evaluating significant accounting estimates — document the basis for concluding the estimate is reasonable (or not).

(iii) Basis for conclusion on authenticity of documents

When further investigation is undertaken because, during the audit, conditions arose causing the auditor to believe a document may not be authentic — document the reasoning behind the conclusion about authenticity.

> These three represent situations where the judgement is non-obvious and must be traceable through the documentation.

Worked example

### Example 1

Q: During the audit of a manufacturing company, the auditor finds that a particular plant's depreciation estimate differs significantly from industry norms. What should the completion memorandum address?

A: (a) Identify this as a significant matter — the depreciation estimate involves subjective professional judgement. (b) Document how it was addressed — steps taken to evaluate management's estimate, audit evidence obtained, and the basis for concluding whether the estimate is reasonable or requires adjustment.

### Example 2

Q: While auditing, the auditor receives an invoice that appears to have been backdated. The auditor investigates further. What must be documented?

A: This triggers Circumstance (iii) — the auditor must document the basis for the conclusion about the document's authenticity: what conditions led to suspicion, what further investigation was undertaken, and the conclusion reached.

### Example 3

Q: SA 540 requires the auditor to 'consider' whether management's assumptions are reasonable. How does this affect documentation?

A: Whenever an SA uses 'shall consider,' the auditor must document the rationale for the conclusion reached after considering the matter — not just note that the consideration was done. The reasoning must be traceable.

### Example 4

Q: An auditor issues a qualified opinion on a company's financial statements. Is this a 'significant matter' requiring specific documentation?

A: Yes — a finding that results in modification of the audit opinion is explicitly listed as a significant matter. The auditor must document the facts, the judgement applied, and the reasoning that led to the qualification.

⚠️ Common exam mistakes

Treating the completion memorandum as optional — it is part of AD and should be prepared and retained, especially for large/complex audits.
Listing only one or two examples of significant matters instead of all three categories: (a) material misstatement risk / revised ROMM, (b) difficulty in applying procedures, (c) modified opinion / EOM.
Forgetting that documentation of professional judgement is required when an SA says 'shall consider' — students often think documenting the consideration itself is sufficient; the RATIONALE for the conclusion is what must be documented.
Confusing EOM (Emphasis of Matter paragraph) with a modified opinion — EOM is included in an unmodified report to draw attention to a matter; a modified opinion (qualified/adverse/disclaimer) is a separate concept, but both trigger significant matter documentation.

Reference:

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Completion Memorandum and Documentation of Significant Matters

Worked example

⚠️ Common exam mistakes