AUDIT PROCEDURES AND

DOCUMENTATION

PRESENTED BY TATENDA
AUDIT PROCEDURES AND
DOCUMENTATION
Training Overview:
1. Nature and Purposes of Audit Documentation
2. Sufficiency of Audit Documentation
3. Types of Working Papers
4. Characteristics of Good Audit Documentation
5. Organization of working papers
6. Format of Audit Documentation
7. Audit Documentation Review
8. Other Issues Related to Audit Documentation
9. Engagement Completion Document
10. Documentation Retention
Key objectives of the session

The objective is to document the audit so that, when it is

complete, the audit file tells the story of how the audit team
arrived at its conclusions.

“IF IT’S NOT DOCUMENTED, IT’S NOT DONE.” WHY?

How well do you know audit documentation
requirements?

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Do you know what the documentation

standard requires? Take this quiz to find
out.
Key Definitions:

• Audit documentation - The record of audit procedures performed, relevant audit

evidence obtained, and conclusions the auditor reached (terms such as "working
papers" or "workpapers" are also sometimes used).
• Experienced auditor - An individual (whether internal or external to the firm) who
has practical audit experience, and a reasonable understanding of:
• Audit processes;
• ISAs, GAAP and applicable legal and regulatory requirements;
• The business environment in which the entity operates; and
• Auditing and financial reporting issues relevant to the entity’s industry.
OBJECTIVES OF AUDIT DOCUMENTATION 7

Sufficient appropriate evidence involves the

quantity and quality of evidence.

Audit documentation facilitates the planning, performance, and

supervision of the engagement, and is the basis for the review
of the quality of the work because it provides the reviewer with
written documentation of the evidence supporting the auditor's
significant conclusions.
 Experienced auditor principle 8

Auditors shall prepare audit documentation that is sufficient 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 IFRS and applicable legal and regulatory requirements;
(b) The results of the audit procedures performed, and the audit evidence
obtained; and
(c) Significant matters arising during the audit, the conclusions reached
thereon, and significant professional judgments made in reaching those
conclusions.
Nature and Purposes of Audit Documentation
9

Give examples of additional purposes that audit documentation

serves.

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Nature and Purposes of Audit Documentation 10

Audit documentation serves a number of additional purposes,

including the following:
• Assisting the engagement team to plan and perform the audit.
• Assisting members of the engagement team responsible for supervision to
direct and supervise the audit work, and to discharge their review
responsibilities in accordance with ISA (UK) 220 (Revised November 2019).2
• Enabling the engagement team to be accountable for its work.
• Retaining a record of matters of continuing significance to future audits.
• Enabling the conduct of quality control reviews and inspections in accordance
with ISQC (UK) 1 (Revised November 2019)3 or national requirements that are at
least as demanding.
• Enabling the conduct of external inspections in accordance with applicable
legal, regulatory or other requirements
 DOCUMENTATION OF THE AUDIT PROCEDURES PERFORMED 11

AND AUDIT EVIDENCE OBTAINED

Form, Content and Extent of Audit Documentation

The auditor shall prepare audit documentation that is sufficient 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
the ISAs (UK) and applicable legal and regulatory requirements;
b) The results of the audit procedures performed, and the audit evidence obtained;
c) Significant matters arising during the audit, the conclusions reached thereon, and
significant professional judgments made in reaching those conclusions .
 Documentation of the Audit Procedures 12

Performed and Audit Evidence Obtained

The form, content and extent of audit documentation depend on factors such as:

• The size and complexity of the entity

• The nature of the audit procedures to be performed.
• The identified risks of material misstatement
• 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
DOCUMENTATION OF THE AUDIT PROCEDURES 13

PERFORMED AND AUDIT EVIDENCE OBTAINED

Audit documentation may be recorded on paper or on electronic

or other media. Examples of audit documentation include:

• The auditor may include abstracts or copies of

the entity's records (for example,
significant and specific contracts and
agreements) as part of audit documentation.
Audit documentation, however, is not a
substitute for the entity's accounting records.
DOCUMENTATION OF THE AUDIT PROCEDURES 14

PERFORMED AND AUDIT EVIDENCE OBTAINED

Judging the significance of a matter requires an objective analysis of the facts and
circumstances. Examples of significant matters include:

• Matters that give rise to significant risks (as defined in ISA 315 (Revised
July 2020)
• Results of audit procedures indicating (a) that the financial statements 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 audit opinion or the inclusion
of an Emphasis of Matter paragraph in the auditor's report.
• Concerns about the entity's ability to continue as a going concern.
 SUFFICIENCY OF AUDIT DOCUMENTATION 15

 Sufficientto enable an experienced auditor to understand

the work performed and the significant conclusions
reached.
 Identify who performed and reviewed the work.
 Show that the accounting agree or reconcile to the
financial statements.
 Include all significant audit findings and the actions taken
to address them.
 SUFFICIENCY OF AUDIT DOCUMENTATION 16

The following is a checklist of best practices for every audit step:

 Audit objective — auditors write the audit steps with sufficient detail to
understand the objective and/or purpose of the audit procedures.
 Source—auditors indicate the source of documents, e.g., prepared by entity
(PBE) or prepared by the OAG or a third party (name of third party).
 Conclusion/result—auditors document conclusions and/or results from the
evidence for every audit step.
 Extent—the extent of documentation is sufficient for an experienced auditor
having no previous connection with the audit to understand the nature, timing,
extent, results of procedures performed, evidence obtained, and conclusions
reached.
 SUFFICIENCY OF AUDIT DOCUMENTATION 17

The following is a checklist of best practices for every

audit step:
 Nature—documentation of audit steps, which involve the review
of documents or confirmation, tests of operating effectiveness of
controls, and tests of details, includes identification of items
reviewed (sources from which items were selected and the
specific selection criteria). Documentation of audit steps related to
the review of significant contracts or agreements with financial
impact includes abstracts or copies of the documents.
 Timing—auditors obtain and review all evidence to support the
audit report before finalizing the audit report.
CHARACTERISTICS OF GOOD AUDIT DOCUMENTATION 18

WHAT ARESlido.com
THE CHARACTERISTICS OF A GOOD AUDIT WORKING PAPER?

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CHARACTERISTICS OF GOOD AUDIT DOCUMENTATION/ 19

WORKINGPAPER

The following is a checklist of best practices for every

working paper:
 Heading which includes the clients name, explanatory title, and
balance sheet date.
 Initials
of the auditor who prepared the documentation and date
completed
 Initials of the reviewer and date review completed.
 Description of the tests performed and the findings.
CHARACTERISTICS OF GOOD AUDIT 20

DOCUMENTATION/WORKINGPAPER

 Assessment of tests which indicate material misstatement in an

account.
 Tick marks and legend indicating work performed by the auditor.
 Index to identify the location of papers.
 Cross-reference to related documentation.

Working papers should be organized in such a way that any

member of the audit team (and others) can find the audit
evidence that supports each financial statement account .
 21
EXAMPLES OF POOR WORK PAPER DOCUMENTATION

So, what does insufficient audit documentation look like?

In In other words, what are some of the signs that we are not complying ISA 230.

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EXAMPLES OF POOR WORK PAPER DOCUMENTATION 22

Here are examples of poor audit work paper documentation:.

 Signing off on audit steps with no supporting work papers (and no explanation on the audit
program).
 Placing a document in a file without explaining why (what is its purpose?).
 Not signing off on audit steps.
 Failing to reference audit steps to supporting work papers.
 Listing a series of numbers on an Excel spreadsheet without explaining their source (where did
they come from? who provided them?).
 Not signing off on work papers as a preparer.
 Not documenting the selection of a sample (why and how and the sample size).
EXAMPLES OF POOR WORK PAPER DOCUMENTATION 23

Here are examples of poor audit work paper documentation:.

 Key bank accounts and debt are not confirmed

 Not documenting the reason for not sending receivable confirmations
 A failure to document risk assessments
 A lack of linkage from the risk assessment to the audit plan.

This list is not comprehensive, but it provides examples to consider. This list is based on my
past experiences. Probably the worst offense (at least in my mind) is signing off on an
audit program with no support.
 Three common misconceptions are driving 24

nonconformity. They are:

Misconception No. 1: Auditors can meet their overall

audit objectives without documenting their work - Audit
opinion.

For example, on one of the single-audit engagements subject

to enhanced oversight, the engagement team had no
documentation related to their tests of controls over
compliance.
 Three common misconceptions are driving 25

nonconformity. They are:

Misconception No. 2: A signoff on an audit

program is sufficient documentation of a detail
test.

Signing off on an audit program is rarely sufficient to

meet the requirements of the Audit Documentation
standard.
 Three common misconceptions are driving 26

nonconformity. They are:

Misconception No. 3: Oral explanation can

substitute for written documentation to meet
the requirements of ISA 230.
 27

FORTY WORK PAPER MISTAKES

Examples of risks of penalties for some audit

firms:
https://cpahalltalk.com/workpaper-mistakes/
ENGAGEMENT COMPLETION DOCUMENT 28

Documentation should be complete (documentation

completion date) no more than 60 days after
report release date (signing date).
SUMMARY 29

In summary, audit documentation continues to be a

significant peer review problem. We can enhance the quality of
our work papers by remembering we are not just auditing. We
are communicating. It is our responsibility to provide a clear
message. We need to do so to comply with ISA 230, Audit
Documentation.
Questions, comments and contributions
 TOGETHER WE
MAKE IT HAPPEN
THE END!!!

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