(a) an audit of a financial report for a financial year, or an audit of a financial report for a half-year, in accordance with Part 2M.3 of the Corporations Act 2001; and
(b) an audit of a financial report for any other purpose.
2 This Auditing Standard also applies, as appropriate, to an audit of other financial information.
Operative Date
3 This Auditing Standard is operative for financial reporting periods commencing on or after 1 July 2006.
Introduction
4 The purpose of this Auditing Standard is to establish mandatory requirements and to provide explanatory guidance on audit documentation. Certain other Auditing Standards contain specific mandatory documentation requirements. Laws or regulations may establish additional documentation requirements.
5 The auditor shall prepare, on a timely basis, audit documentation that provides:
(a) a sufficient and appropriate record of the basis for the auditor’s report; and
(b) evidence that the audit was performed in accordance with Auditing Standards and applicable legal and regulatory requirements.
6 Preparing sufficient and appropriate audit documentation on a timely basis helps to enhance the quality of the audit and facilitates the effective review and evaluation of the audit evidence obtained and conclusions reached before the auditor’s report is finalised. Documentation prepared at the time the work is performed is likely to be more accurate than documentation prepared subsequently.
7 In addition to these objectives, audit documentation serves a number of purposes, including:
Assisting the audit team to plan and perform the audit.
Assisting members of the audit team responsible for supervision to direct and supervise the audit work, and to discharge their review responsibilities in accordance with ASA 220 Quality Control for Audits of Historical Financial Information.
Enabling the audit team to be accountable for its work.
Retaining a record of matters of continuing significance to future audits.
Enabling an experienced auditor to conduct quality control reviews[1] and inspections in accordance with quality control requirements for firms issued by a professional accounting body.
Enabling an experienced auditor to conduct external inspections in accordance with applicable legal, regulatory or other requirements.
Definitions
8 In this Auditing Standard the following terms have the meanings attributed below:
(a) “Audit documentation” means the record of audit procedures performed,[2] relevant audit evidence obtained, and conclusions the auditor reached (terms such as “working papers” or “workpapers” are also sometimes used).
(b) “Experienced auditor” means an individual (whether internal or external to the firm) who has a reasonable understanding of:
(i) audit processes;
(ii) Auditing Standards and applicable legal and regulatory requirements;
(iii) the business environment in which the entity operates; and
(iv) auditing and financial reporting issues relevant to the entity’s industry.
Nature of Audit Documentation
9 Audit documentation may be recorded on paper or on electronic or other media. It includes, for example, audit programs, analyses, issues memoranda, summaries of significant matters, letters of confirmation and representation, checklists, and correspondence (including e-mail) concerning significant matters. Abstracts or copies of the entity’s records, for example, significant and specific contracts and agreements, may be included as part of audit documentation if considered appropriate. Audit documentation, however, is not a substitute for the entity’s accounting records. The audit documentation for a specific audit engagement is assembled in an audit file.
10 The auditor ordinarily excludes from audit documentation superseded drafts of working papers and financial reports, notes that reflect incomplete or preliminary thinking, previous copies of documents corrected for typographical or other errors, and duplicates of documents.
Form, Content and Extent of Audit Documentation
11 The auditor shall prepare the audit documentation so as to enable an experienced auditor, having no previous connection with the audit, to understand:
(a) the nature, timing, and extent of the audit procedures performed to comply with Auditing Standards and applicable legal and regulatory requirements;
(b) the results of the audit procedures and the audit evidence obtained; and
(c) significant matters arising during the audit and the conclusions reached thereon.
12 The form, content and extent of audit documentation depend on factors such as:
The nature of the audit procedures to be performed.
The identified risks of material misstatement.
The extent of judgement required in performing the work and evaluating the results.
The significance of the audit evidence obtained.
The nature and extent of exceptions identified.
The need to document a conclusion or the basis for a conclusion not readily determinable from the documentation of the work performed or audit evidence obtained.
The audit methodology and tools used.
It is, however, neither necessary nor practicable to document every matter the auditor considers during the audit.
13 Ordinarily, oral explanations by the auditor, on their own, do not represent adequate support for the work the auditor performed or conclusions the auditor reached, but may be used to explain or clarify information contained in the audit documentation.
Documentation of the Identifying Characteristics of Specific Items or Matters Being Tested
14 In documenting the nature, timing and extent of audit procedures performed, the auditor shall record the identifying characteristics of the specific items or matters being tested.
15 Recording the identifying characteristics serves a number of purposes. For example, it enables the audit team to be accountable for its work and facilitates the investigation of exceptions or inconsistencies. Identifying characteristics will vary with the nature of the audit procedure and the item or matter being tested. For example:
For a detailed test of entity-generated purchase orders, the auditor may identify the documents selected for testing by their dates and unique purchase order numbers.
For a procedure requiring selection or review of all items over a specific amount from a given population, the auditor may record the scope of the procedure and identify the population (for example, all journal entries over a specified amount from the journal register).
For a procedure requiring systematic sampling from a population of documents, the auditor may identify the documents selected by recording their source, the starting point and the sampling interval (for example, a systematic sample of shipping reports selected from the shipping log for the period from April 1 to September 30, starting with report number 12345 and selecting every 125th report).
For a procedure requiring enquiries of specific entity personnel, the auditor may record the dates of the enquiries and the names and job designations of the entity personnel.
For an observation procedure, the auditor may record the process or subject matter being observed, the relevant individuals, their respective responsibilities, and where and when the observation was carried out.
Significant Matters
16 Judging the significance of a matter requires an objective analysis of the facts and circumstances. Significant matters include, amongst others:
Matters that give rise to significant risks (as defined in ASA 315 Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement).
Results of audit procedures indicating:
(a) that the financial information could be materially misstated; or
(b) a need to revise the auditor’s previous assessment of the risks of material misstatement and the auditor’s responses to those risks.
Circumstances that cause the auditor significant difficulty in applying necessary audit procedures.
Findings that could result in a modification to the auditor’s report.
17 The auditor may consider it helpful to prepare and retain as part of the audit documentation a summary (sometimes known as a completion memorandum) that describes the significant matters identified during the audit and how they were addressed, or that includes cross-references to other relevant supporting audit documentation that provides such information. Such a summary may facilitate effective and efficient reviews and inspections of the audit documentation, particularly for large and complex audits. Further, the preparation of such a summary may assist the auditor’s consideration of the significant matters.
18 The auditor shall document discussions of significant matters with those charged with governance, management and others on a timely basis.
19 Under paragraph 18 of this Auditing Standard, the auditor needs to document the significant matters discussed, and when and with whom the discussions took place. It is not limited to records prepared by the auditor but may include other appropriate records such as agreed minutes of meetings prepared by the entity’s personnel. Others with whom the auditor may discuss significant matters include other personnel within the entity and external parties, such as persons providing professional advice to the entity.
20 If the auditor has identified information that contradicts or is inconsistent with the auditor’s final conclusion regarding a significant matter, the auditor shall document how the auditor addressed the contradiction or inconsistency in forming the final conclusion.
21 The documentation of how the auditor addressed the contradiction or inconsistency, however, does not imply that the auditor needs to retain documentation that is incorrect or superseded.
Documentation of Inability to Comply with Mandatory Requirements
22 The basic principles and essential procedures in the Auditing Standards are designed to assist the auditor in meeting the overall objective of the audit. In accordance with ASA 200 Objective and General Principles Governing an Audit of a Financial Report, the auditor is required to comply with all relevant Auditing Standards. ASA 200 contains a mandatory requirement regarding the situation, where, in rare and exceptional circumstances, factors outside the auditor’s control prevent the auditor from complying with an essential procedure contained within a relevant mandatory requirement.
23 Where, in rare and exceptional circumstances, factors outside the auditor’s control prevent the auditor from complying with an essential procedure contained within a relevant mandatory requirement, the auditor shall document:
(a) the circumstances surrounding the inability to comply;
(b) the reasons for the inability to comply; and
(c) justification of how alternative audit procedures achieve the objectives of the mandatory requirement.
24 Under paragraph 23(c) of this Auditing Standard, the auditor needs to document how the alternative audit procedures performed were sufficient and appropriate to replace that mandatory requirement.
25 Under ASA 100 Preamble to AUASB Standards, where a mandatory requirement is not relevant, the auditor does not need to document the circumstances.
Identification of Preparer and Reviewer
26 In documenting the nature, timing and extent of audit procedures performed, the auditor shall record:
(a) who performed the audit work and the date such work was completed; and
(b) who reviewed the audit work performed and the date and extent of such review.[3]
27 The requirement to document who reviewed the audit work performed does not imply a need for each specific working paper to include evidence of review. The audit documentation, however, evidences who reviewed specified elements of the audit work performed and when.
Assembly of the Final Audit File
28 The auditor shall complete the assembly of the final audit file on a timely basis after the date of the auditor’s report.
29 Under quality control requirements for firms issued by a professional accounting body, firms are obliged to establish policies and procedures for the timely completion of the assembly of audit files. Ordinarily, 60 days after the date of the auditor’s report is an appropriate time limit within which to complete the assembly of the final audit file.
30 The completion of the assembly of the final audit file after the date of the auditor’s report is ordinarily an administrative process that does not involve the performance of new audit procedures or the drawing of new conclusions. Changes may, however, be 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.
Documenting audit evidence that the auditor has obtained, discussed and agreed with the relevant members of the audit team before the date of the auditor’s report.
31 After the assembly of the final audit file has been completed, the auditor shall not delete or discard audit documentation before the end of its retention period.
32 Under section 307B of the Corporations Act 2001, the auditor or member of an audit firm is required to “retain all audit working papers prepared by or for, or considered or used by, the auditor in accordance with the requirements of the Auditing Standards until:
(a) the end of 7 years after the date of the audit report prepared in relation to the audit or review to which the audit working papers relate; or
(b) an earlier date determined by ASIC[4] for the audit working papers”.
33 For audits other than those conducted under the Corporations Act 2001, the auditor ordinarily retains all audit documentation for not less than 7 years from the date of the auditor’s report.
34 When the auditor 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 auditor shall, regardless of the nature of the modifications or additions, document:
(a) when and by whom they were made, and (where applicable) reviewed;
(b) the specific reasons for making them; and
(c) their effect, if any, on the auditor’s conclusions.
Changes to Audit Documentation in Exceptional Circumstances after the Date of the Auditor’s Report
35 When exceptional circumstances arise after the date of the auditor’s report that require the auditor to perform new or additional audit procedures or that lead the auditor to reach new conclusions, the auditor shall document:
(a) the circumstances encountered;
(b) the new or additional audit procedures performed, audit evidence obtained, and conclusions reached; and
(c) when and by whom the resulting changes to audit documentation were made, and (where applicable) reviewed.
36 Such exceptional circumstances include the discovery of facts regarding the audited financial information that existed at the date of the auditor’s report that might have affected the auditor’s report had the auditor then been aware of them.
Confidentiality, Safe Custody, Integrity, Accessibility and Retrievability of Audit Documentation
37 The auditor shall adopt appropriate procedures for maintaining the confidentiality, safe custody, integrity, accessibility and retrievability of the audit documentation.
38 Under quality control requirements for firms issued by a professional accounting body, firms are required to establish policies and procedures to maintain the confidentiality, safe custody, integrity, accessibility and retrievability of audit documentation. Engagement teams are ordinarily entitled to rely on the firm’s systems, unless information provided by the firm or other parties suggests otherwise (see ASA 220 for further guidance).
Conformity with International Standards on Auditing
39 Except as noted below, this Auditing Standard conforms with International Standard on Auditing ISA 230 Audit Documentation, issued by the International Auditing and Assurance Standards Board (IAASB) of the International Federation of Accountants. The main differences between this Auditing Standard and ISA 230 are:
This Auditing Standard makes reference to the quality control requirements for firms issued by a professional accounting body. ISA 230 refers to the International Standard on Quality Control (ISQC) 1 issued by the IAASB.
This Auditing Standard includes a mandatory requirement that the auditor shall document discussions of significant matters with those charged with governance (paragraph 18). ISA 230 includes this as explanatory guidance.
This Auditing Standard includes a mandatory requirement that, where the auditor is unable to comply with an essential procedure contained within a relevant mandatory requirement, the auditor shall document certain matters (paragraph 23). In ISA 230, the auditor is required to document certain matters where the auditor has judged it necessary to depart from a mandatory requirement.
This Auditing Standard requires the auditor to adopt appropriate procedures for maintaining the confidentiality, safe custody, integrity, accessibility and retrievability of the audit documentation (paragraph 37). ISA 230 does not contain any requirement for the auditor to maintain the confidentiality, safe custody, integrity, accessibility and retrievability of the audit documentation.
Compliance with this Auditing Standard enables compliance with ISA 230.