OBJECTIVE 7-8

Prepare organized audit documentation.

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 AUDIT DOCUMENTATION
Audit documentation is the record of the audit procedures
performed, relevant audit evidence, and conclusions the auditor
reached.
Purposes of Audit Documentation:
• Basis for planning the audit
• Record of the evidence accumulated and the results of the tests
• Data for determining the proper type of audit report
• Basis for review by supervisors and partners

Ownership of the Audit Files: All audit files are the property of the
auditor.

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 AUDIT DOCUMENTATION (CONT.)

Confidentiality of Audit Files:

The AICPA Code of Professional Conduct states that a member in public
practice shall not disclose any confidential client information without the
specific consent of the client.
Requirements for Retention of Audit Documentation:
• Auditing standards require records of private companies be retained
for a minimum of five years.
• Sarbanes-Oxley Act requires auditors of public companies to maintain
audit files for a minimum of seven years.

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 AUDIT DOCUMENTATION (CONT.)

The contents and organization of a typical set of audit files is illustrated in

Figure 7-3. The type of audit documentation and the way it is arranged in the
files is logical although firms may vary in their approaches.
Permanent Files: Contain data of a historical or continuing nature. These
provide a convenient source of information that is used from year to year:
• Copies of company documents such as articles of incorporation, bylaws, bond
indentures, and long-term contracts
• Analyses of accounts from previous years that have continuing importance
• Information related to understanding internal controls and assessing control
risk
• Results of analytical procedures from prior years’ audits for comparison

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 AUDIT DOCUMENTATION (CONT.)

Current Files: Includes all documentation for the current year audit including:
• Audit Program
• Working Trial Balance—Each line in the trial balance is supported by a lead
schedule. A typical lead schedule for Cash is included in Figure 7-4.
• Adjusting Entries—Auditors propose adjusting entries for material
misstatements. An adjusting entry to Cash is illustrated in Figure 7-4.
• Supporting Schedules—Major types:
• Analysis
• Trial balance or list
• Reconciliation of amounts
• Substantive analytical procedures
• Summary of procedures
• Examination of supporting documentation
• Informational
• Outside documentation
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 AUDIT DOCUMENTATION (CONT.)

Preparation of Audit Documentation—Audit documentation should be in

sufficient detail to provide a clear understanding of the work performed,
evidence obtained, and conclusions reached.
Documentation should have these characteristics:
• Identified with the client’s name, period covered, description of the
contents, initials of the preparer, date of preparation, and an index
code.
• Files should be indexed and cross-referenced to aid in organization.
• Documentation should clearly indicate the audit work performed
through memos, initialing the procedures in the audit program, or tick
marks on the schedules.
• Include sufficient information to fulfill the audit objectives.
• Conclusions reached about the segment of the audit should be clearly
stated.

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