Study Circle

4 October 2009

SA 230 - Documentation

AgendaWelcome & Introduction

Form and Content

Importance of Documentation

Ownership and Custody

Elements of an Audit File

Referencing financial statements

Illustration

Assembling the audit file

Changes to documentation…after report date

Conclusion

Welcome & Introduction

SA 200 – Basic Principles Governing an Audit

International Standards on Auditing (ISA 23)

Standards on Auditing (SA) - India

What are working papers?• Prepared and retained as evidence gathered in

connection with an audit to support opinion• Aids planning and performance• Supervision & Review

Form and Content

Purpose: Financial Statement Assertions

Scope

Nature, timing and extent

Conclusions

Should be ‘contemporaneous’

Form and Content (cont’d)

Driven by:• Form of report

• Nature of engagement

• Complexity of client

• Reliance on controls

• Record maintenance

Form and Content (cont’d)

Types:• Permanent file(s)

• Current Audit file(s)

Importance

Re-performance Standards

Audit Evidence gathered

Should be completed before issuance of opinion

Assistance in reviews: - Peer Reviews- External Reviews- Internal risk & quality reviews

Ownership & Custody

Property of the Auditor

Should be addressed in the engagement letter

Archival of files

Period of retention of work papers

Elements of an audit file

Lead schedule

Audit work steps – see illustration

Coaching notes

Critical matters – judgements and estimates

Hard copy information and evidence

Referencing financial statements

Number all pages

Reference each line item on balance sheet and profit & loss to the appropriate lead schedule

Foot/ cast

Agree prior year information

Agree note disclosures to face statements

Check typos/ spelling mistakes

Read through for language and contextual errors

Check other information (e.g. statutory records)

Include tick-mark legend

IllustrationStep

Engagement Name

Period End:31 December 200x

Status: Pending or Final

Title: Confirm selected bank accounts and special arrangements

Audit Objectives: Completeness, Accuracy, Existence/Occurrence, Rights and Obligations

Paper File?

Details

Illustration (cont’d)Tailored Procedures:

When performing confirmation procedures, we should maintain control over the process of selecting those to whom a request will be sent, the preparation and sending of confirmation requests, and the responses to those requests. Second requests and, where warranted, third requests should be mailed when responses to confirmation requests have not been received within a reasonable time.

a) Select deposit bank accounts for confirmation in order to obtain the desired level of assurance. Bank confirmations should be sent to banking relationships to identify accounts not included in the general ledger.

Illustration (cont’d)For confirmations returned:

1. agree account information and account balance to comparative summary;

2. investigate all discrepancies reported or questions raised in review and determine whether any adjustments are necessary; and

3. assess impact of special arrangements or restrictions identified and determine whether disclosure is appropriate.

4. We should perform alternative audit procedures where no response is received to a confirmation request. The alternative audit procedures should be such as to provide audit evidence about the assertions that the confirmation request was intended to provide.

Illustration (cont’d)Results of work done:

a)

1) Find below the detail of the bank confirmation received:

Account number Account name Book Balance Statement Difference

8700000 Operating account 1 2,567,980 2,145,908 422,072

8700001 Payroll account 10,345 10,400 (55)

8700002 Loan account (345,098) (345,098) 0

8700004 Investment 4,000,000 4,000,000 0

2) Done.

3) No issues.

4) Not applicable – all confirmations were received.

Assembling the audit fileThe auditor should complete the assembly of the final auditfile on a timely basis after the date of the auditor’s report.

Administrative work that can be performed Deleting or discarding superseded documentation. Sorting, collating and cross-referencing working papers. Signing off on completion checklists relating to the file

assembly process.

Document: When and by whom they were made, and reviewed; The specific reasons for making them; and Their effect, if any, on the auditor’s conclusions.

Changes to documentation…..in rare circumstances, after the date of the Auditor’s

Report:

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 should document:

- The circumstances encountered;- The new or additional audit procedures performed,

audit evidence obtained, and conclusions reached; and- When and by whom the resulting changes to audit

documentation were made, and (where applicable) reviewed.

Conclusion

“Tell the Story”