Question

The audit documentation is another of the International Standards for Auditing and Auditing Evidence. What do you know about the standards? Explain the details.

Answer 1

International iStandards ion iAuditing i(ISA) irefer ito iprofessional istandards idealing iwith ithe iresponsibilities iof ithe iindependent iauditor iwhile iconducting ithe ifinancial iaudit iof ifinancial iinfo. iThese istandards iare iissued iby iInternational iFederation iof iAccountants i(IFAC) ithrough ithe iInternational iAuditing iand iAssurance iStandards iBoard i(IAASB). iThe iISAs iinclude irequirements iand iobjectives ialong iwith iapplication iand iother iexplanatory imaterial. iThe iauditor iis iobligatory ito ihave iknowledge iabout ithe iwhole itext iof ian iISA, icounting iits iapplication iand iother iexplanatory imaterial, ito ibe iaware iof ithe iobjectives iand ito iapply ithe irequirements iaptly.

Analyzing ithe icomparability iof inational iaccounting ias iwell ias iauditing istandards iwith iinternational istandards, idetermine ithe idegree iwith iwhich iapplicable iauditing iand iaccounting istandards iare icomplied, iand ianalyze istrengths iand iweaknesses iof ithe iinstitutional iframework iin isustaining ihigh-quality ifinancial ireporting.

Assist ithe icountry iin ideveloping iand iimplementing ia icountry iaction iplan ifor iimprovement iof iinstitutional icapacity iwith ia iview iof istrengthening ithe icorporate ifinancial ireporting isystem iof ithe icountry.

Auditing ievidence iis ithe iinformation icollected ifor ireview iof ia icompany's ifinancial itransactions, iinternal icontrol ipractices, iand iother iitems inecessary ifor ithe icertification iof ifinancial istatements iby ian iauditor ior icertified ipublic iaccountant i(CPA). iThe iamount iand itype iof iauditing ievidence iconsidered ivary iconsiderably ibased ion ithe itype iof ifirm ibeing iaudited ias iwell ias ithe irequired iscope iof ithe iaudit.

1.            Auditing ievidence iis ithe iinformation icollected iby ian iauditor ito iascertain ithe iaccuracy iand icompliance iof ia icompany's ifinancial istatements.

2.            The iauditing ievidence iis imeant ito isupport ithe icompany's iclaims imade iin ithe ifinancial istatements iand itheir iadherence ito ithe iaccounting ilaws iof itheir ilegal ijurisdiction.

3.            Examples iof iauditing ievidence iinclude ibank iaccounts, imanagement iaccounts, ipayrolls, ibank istatements, iinvoices, iand ireceipts.

4.            Good iauditing ievidence ishould ibe isufficient, ireliable, iprovided ifrom ian iappropriate isource, iand irelevant ito ithe iaudit iat ihand.

i i i i i i i i i i i i i i i i i i i i i i i i i i i i iAudit idocumentation i i istandard iestablishes igeneral irequirements ifor idocumentation ithe iauditor ishould iprepare iand iretain iin iconnection iwith iengagements iconducted ipursuant ito ithe istandards iof ithe iPublic iCompany iAccounting iOversight iBoard i("PCAOB"). iSuch iengagements iinclude ian iaudit iof ifinancial istatements, ian iaudit iof iinternal icontrol iover ifinancial ireporting, iand ia ireview iof iinterim ifinancial iinformation. iThis istandard idoes inot ireplace ispecific idocumentation irequirements iof iother istandards iof ithe iPCAOB.

Audit idocumentation iis ithe iwritten irecord iof ithe ibasis ifor ithe iauditor's iconclusions ithat iprovides ithe isupport ifor ithe iauditor's irepresentations, iwhether ithose irepresentations iare icontained iin ithe iauditor's ireport ior iotherwise. iAudit idocumentation ialso ifacilitates ithe iplanning, iperformance, iand isupervision iof ithe iengagement, iand iis ithe ibasis ifor ithe ireview iof ithe iquality iof ithe iwork ibecause iit iprovides ithe ireviewer iwith iwritten idocumentation iof ithe ievidence isupporting ithe iauditor's isignificant iconclusions. iAmong iother ithings, iaudit idocumentation iincludes irecords iof ithe iplanning iand iperformance iof ithe iwork, ithe iprocedures iperformed, ievidence iobtained, iand iconclusions ireached iby ithe iauditor. iAudit idocumentation ialso imay ibe ireferred ito ias iwork ipapers ior iworking ipapers.

i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i i iAudit idocumentation irefers ito ithe irecords ior idocumentation iof iprocedures ithat iauditors iperformed ithe iaudit ievidence ithat ithey iobtained iand ithe iconclusion ithat imakes iby ithem ibased ion ithe ievidence iobtained. iAudit idocumentation iis isometimes icalled iaudit iworking ipaper ior iworking ipaper.

Internal icontrol idocuments ithat iauditor iprepare iin iMS iwords, iMS iexcel ior iother iapplication iis ithe iexample iof iaudit idocumentation.

Another ibest iexample ithat idescribes iaudit idocumentation iwould ibe ithe iworking ipaper ithat iauditor iprepares ito idocument iand itest idepreciation iexpenses.

i i i i i i i i i i i i iAudit iworking ipapers irefer ito ithe idocuments ithat iprepare iby ior iuse iby iauditors ias ipart iof itheir iworks. iThose idocuments iinclude ithe isummary iof ithe iclient’s inature iof ithe ibusiness, ibusiness iprocess iflow, iaudit iprogram, idocuments ior iinformation iobtained ifrom ithe iclient ias iwell ias iaudit itesting idocuments.

Audit idocumentation iis ivery iimportant ifor iauditor iespecially iin ithe iareas iof iquality icontrol iof ithe iaudit. iIt iis irequired iby iISA ithat ithe iaudit idocumentation ishould ibe iprepared iin ithe iform ithat iothers isenior iauditor iwho iis inot iinvolved iwith ithe iaudit iengagement ipreviously icould iunderstand ithe iwork ithat iperforms iwhen ihe ireviews ithe idocuments.

The ifollowing iis ithe ikey iinformation ithat ishould ihave iin ithe iaudit idocumentation:

1. The inature iof iinformation ior idata ithat ibeing iprepare ior idocuments

2. Timing iincluding ithe iaudit iperiod ithat icovers, iand ithe idate iprepare

3. Name iof ithe iauditor iwho iprepares iaudit iworking ipapers

4. The iextent iof ithe iaudit iprocedures iperformed ito icomply iwith ithe iISAs iand iapplicable ilegal iand iregulatory irequirements.

5. The ievidence ithat iauditor iobtains ithe iprocedures ithat ithey iuse ifor itesting iand ithe iresult iof itesting ishould iproperly iand iclearly idocument iin ithe iaudit iworking ipapers. iThis iis ito iensure ithat ithe ireviewer icould ieasily iperform ithe iquality ireview iand ito iprove ithat ithe irelevant istandards iare iimplementing.

6. During ian iaudit, ithe iauditor imight ifound ithe isignificant imater irelated ito ifinancial istatements, itheir iethics, ias iwell ias itheir iprocess. iThe iauditor ishould iclearly idocument ithese ithings.

7. Some itesting ior isampling irequire iauditor iuse itheir iprofessional ijudgment iand iits iimportance ito idocuments ithose ijudgments.

The iobjective iof iaudit idocumentation:

Before ithe iauditor icould imake ia iconclusion ion ifinancial istatements iwhether ithose ifinancial istatements iare ifree ifrom imaterial imisstatement ior ithey icontain ithe imisstatement, ithe iauditor ineeds ito imake isure ithat ithey ihave ienough ievidence ito isupport itheir iconclusion.

Enough ievidence ihere iis isometimes icalled isufficient iand iappropriate ievidence. iTherefore, iaudit idocumentation iis iimportant ifor ithe isuccess iof iaudit iworks.

Summary iof iaudit idocumentation:

1. It iprovides ievidence iof ithe iauditor’s ibasis ifor ia iconclusion iabout ithe iachievement iof ithe ioverall iobjective.

2. It iprovides ievidence ithat ithe iaudit iwas iplanned iand iperformed iin iaccordance iwith iISAs iand iother ilegal iand iregulatory irequirements.

3. It iassists ithe iengagement iteam ito iplan iand iperform ithe iaudit.

4. It iassists iteam imembers iresponsible ifor isupervision ito idirect, isupervise iand ireview iaudit iwork.

5. It ienables ithe iteam ito ibe iaccountable ifor iits iwork.

6. It iallows ia irecord iof imatters iof icontinuing isignificance ito ibe iretained.

7. It ienables ithe iconduct iof iquality icontrol ireviews iand iinspections i(both iinternal iand iexternal).

The iauditor imust idocument ithe iprocedures iperformed, ievidence iobtained, iand iconclusions ireached iwith irespect ito irelevant ifinancial istatement iassertions. i iAudit idocumentation imust iclearly idemonstrate ithat ithe iwork iwas iin ifact iperformed. iThis idocumentation irequirement iapplies ito ithe iwork iof iall ithose iwho iparticipate iin ithe iengagement ias iwell ias ito ithe iwork iof ispecialists ithe iauditor iuses ias ievidential imatter iin ievaluating irelevant ifinancial istatement iassertions. iAudit idocumentation imust icontain isufficient iinformation ito ienable ian iexperienced iauditor, ihaving ino iprevious iconnection iwith ithe iengagement:

1. To iunderstand ithe inature, itiming, iextent, iand iresults iof ithe iprocedures iperformed, ievidence iobtained, iand iconclusions ireached, iand

2. To idetermine iwho iperformed ithe iwork iand ithe idate isuch iwork iwas icompleted ias iwell ias ithe iperson iwho ireviewed ithe iwork iand ithe idate iof isuch ireview.

Note: iAn iexperienced iauditor ihas ia ireasonable iunderstanding iof iaudit iactivities iand ihas istudied ithe icompany's iindustry ias iwell ias ithe iaccounting iand iauditing iissues irelevant ito ithe iindustry.