## Audit Documentation (SA 230)
### What is Audit Documentation?
Audit documentation is the record of:
- Audit procedures performed
- Relevant audit evidence obtained
- Conclusions the auditor reached
It is sometimes called "working papers" and constitutes the auditor's file for a specific engagement.
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### Examples of Audit Documentation
| # | Example |
|---|---|
| 1 | Audit programme |
| 2 | Engagement letter |
| 3 | External confirmations |
| 4 | Copies of written representations from management & TCWG |
| 5 | Audit checklist |
| 6 | Significant matters communicated to the client |
| 7 | Copies of correspondence with experts & other auditors |
| 8 | Analysis of significant ratios & trends |
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### Objective of the Auditor (SA 230)
To prepare a sufficient and appropriate record that provides:
1. A basis for the auditor's report
2. Evidence that the audit was planned and performed in accordance with SAs and applicable legal/regulatory requirements
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### Nature of Audit Documentation
Audit documentation serves as:
- Evidence of the auditor's basis for a conclusion about achieving the overall objectives
- Evidence that the audit was planned and performed per SAs and legal requirements
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### Purpose of Audit Documentation — Mnemonic: FAD PIE
| Letter | Purpose |
|---|---|
| F | Retaining a record of matters of continuing significance to Future audits |
| A | Enabling the engagement team to be Accountable for its work |
| D | Direct & Supervise audit work |
| P | Plan & Perform the audit (assisting the engagement team) |
| I | Enabling the conduct of quality control reviews & Inspections |
| E | Enabling the conduct of External inspection in accordance with applicable legal requirements |
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### Form, Content & Extent of Audit Documentation — Mnemonic: I Need DRS
| Letter | Requirement |
|---|---|
| I | Document how the auditor addressed Inconsistencies to resolve doubts identified during the audit |
| N | Nature, timing and extent of audit procedures performed; including: (1) identifying characteristics of items tested, (2) who performed the work and when, (3) who reviewed the work, when and to what extent |
| D | Discussions of significant matters with management, TCWG, and others — nature of matters, when and with whom |
| R | Results of audit procedures performed and audit evidence obtained |
| S | Significant matters arising, conclusions reached, and significant professional judgements made |
> Significant Matters — Examples:
> - Matters giving rise to significant risks
> - Results indicating possible material misstatement or need to revise risk assessment
> - Circumstances causing significant difficulty in applying audit procedures
> - Findings that could result in a modified opinion or Emphasis of Matter paragraph
> - Matters where significant professional judgement was exercised (e.g., reasonableness of accounting estimates, authenticity of documents)
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### Factors Affecting Form, Content & Extent — Mnemonic: Neha & Neetu MISS
| Letter | Factor |
|---|---|
| N | Nature of audit procedures performed |
| N | Nature and extent of exceptions identified |
| M | Audit Methodology and tools |
| I | Identified risk of material misstatement |
| S | Size & complexity of the entity |
| S | Significance of audit evidence obtained |
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### Audit File
An audit file is one or more folders or other storage media (physical or electronic) containing the records that comprise the audit documentation for a specific engagement.
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### Working Paper Files: Permanent vs Current
| Permanent Audit File | Current Audit File |
|---|---|
| Contains matters that don't change very often | Contains matters relating to the audit of a single period |
| Mnemonic: SLAM | Mnemonic: LIEN |
| S — Significant audit observations of earlier years | L — Letter of representation/confirmation from client |
| L — Legal documents, agreements & minutes relevant to the audit | I — Important matters in Minutes of BM & GM |
| A — Analysis of significant ratios & trends | E — Evidence of the planning process & audit programme |
| M — MOA & AOA | N — Nature, timing & extent of auditing procedures |
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### Ownership & Retention of Audit Documentation
- Audit documentation is the property of the auditor (as per SQC-1)
- The auditor may, at his discretion, make portions available to clients — provided it does not undermine the validity of the work or the independence of the auditor
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### Assembly & Retention of the Final Audit File (SQC-1)
| Rule | Detail |
|---|---|
| Assembly deadline | Complete final audit file within 60 days after the date of the auditor's report |
| No deletion | After assembly, the auditor shall not delete or discard documentation before the end of its retention period |
| Retention period | At least 7 years from date of auditor's report, or if later, the date of group auditor's report |
| Administrative changes | Changes during assembly are permitted if administrative in nature only |
Administrative changes permitted during assembly:
- Deleting or discarding superseded documentation
- Sorting, collating and cross-referencing working papers
- Signing off on completion checklists
- Documenting audit evidence obtained, discussed and agreed before the date of the auditor's report
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### Completion Memorandum
- A summary document prepared and retained as part of audit documentation (optional but helpful)
- Describes: (1) significant matters identified during the audit, and (2) how they were addressed
- Benefits:
- Facilitates effective and efficient review and inspection, especially for large/complex audits
- Assists auditor in considering whether any individual SA objective cannot be achieved
- Helps auditor consider whether overall objectives are achievable