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.