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    F Lecture o L 15 3 Documentation and Obtaining Consideration of Laws and

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    behroz khan
    1. Audit documentation is an essential part of audit quality as it provides evidence of the work performed by the auditor and the conclusions reached. 2. SA 230 defines audit documentation and sets requirements for audit firms to prepare documentation that provides sufficient evidence of achieving audit objectives and that the audit was planned and performed according to standards. 3. Examples of audit documentation include engagement letters, audit programs, analyses of account balances, summaries of significant matters, and correspondence. Documentation provides evidence of the auditor's basis for conclusions.

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    F Lecture o L 15 3 Documentation and Obtaining Consideration of Laws and

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    behroz khan
    30 views9 pages
    1. Audit documentation is an essential part of audit quality as it provides evidence of the work performed by the auditor and the conclusions reached. 2. SA 230 defines audit documentation and sets requirements for audit firms to prepare documentation that provides sufficient evidence of achieving audit objectives and that the audit was planned and performed according to standards. 3. Examples of audit documentation include engagement letters, audit programs, analyses of account balances, summaries of significant matters, and correspondence. Documentation provides evidence of the auditor's basis for conclusions.

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    f Lecture o l 15 3 Documentation and Obtaining Consideration of Laws And

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    1. Audit documentation is an essential part of audit quality as it provides evidence of the work performed by the auditor and the conclusions reached. 2. SA 230 defines audit documentation and sets requirements for audit firms to prepare documentation that provides sufficient evidence of achieving audit objectives and that the audit was planned and performed according to standards. 3. Examples of audit documentation include engagement letters, audit programs, analyses of account balances, summaries of significant matters, and correspondence. Documentation provides evidence of the auditor's basis for conclusions.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    30 views9 pages

    F Lecture o L 15 3 Documentation and Obtaining Consideration of Laws and

    Uploaded by

    behroz khan
    1. Audit documentation is an essential part of audit quality as it provides evidence of the work performed by the auditor and the conclusions reached. 2. SA 230 defines audit documentation and sets requirements for audit firms to prepare documentation that provides sufficient evidence of achieving audit objectives and that the audit was planned and performed according to standards. 3. Examples of audit documentation include engagement letters, audit programs, analyses of account balances, summaries of significant matters, and correspondence. Documentation provides evidence of the auditor's basis for conclusions.

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    of 9

    DOCUMENTATION AND OBTAINING

    CONSIDERATION OF LAWS AND


    REGULATIONS IN AN AUDIT (ISA 230 & 250)
    Audit documentation is an essential element of audit quality and
    has always been a critical component of an audit process as it
    evidences the work done by the auditor. The Auditing and
    Assurance Standards Board has brought out this revised edition of
    the Implementation Guide to SA 230, “Audit Documentation”
    whose first edition was issued in 2013.

    Documentation” defined

    SA 230, “Audit Documentation” defines audit documentation as


    “The record of audit procedures performed, relevant audit
    evidence obtained, and conclusions the auditor reached (terms
    such as “working papers” or “work papers” are also sometimes
    used”.

    Hence, “document”, in the context of audit refers more to that


    which is required to be maintained by an auditor to record his
    findings during the course of the audit.

    Scope of SA 230

    1
    Ans:SA 230 deals with the auditor’s responsibility to prepare audit
    documentation for an audit of financial statements. It is to be adapted as
    necessary in the circumstances when applied to audits of other historical
    financial information. The specific documentation requirements of other SAs

    do not limit the application of SA 230. Laws or regulations may establish


    additional documentation requirements.
    Nature and Purpose of Audit Documentation?
    Audit documentation that meets the requirements of this SA and
    the specific documentation requirements of other relevant SAs
    provides:
    (a): Evidence of the auditor’s basis for a conclusion about the
    achievement of the overall objectives of the auditor; and
    • Objective:
    Prepare documentation that provides:
    i) Sufficient & Appropriate record of basis of auditor’s
    report
    ii) Evidence that audit was planned & performed in
    accordance with SAs Provides
    I. evidence of auditor’s basis to conclude on achieving
    overall audit objectives ; &
    II. II. evidence that audit was planned & performed as per
    SAs & applicable legal, regulatory requirements.
    III. • Timely, sufficient & appropriate audit documentation
    enhances audit quality,
    2
    IV. • facilitates effective review & evaluation of audit
    evidence obtained & conclusions reached before
    finalizing audit reports.

    Documentation is essential because….

     It supports the auditor’s basis for a conclusion


    about achieving the auditor’s objectives.
     Provides evidence that audit was planned and performed.
     It assists supervision and review.
     It results in better conceptual clarity, clarity of
    thought and expression.
     It facilitates better understanding and helps
    avoid misconception.
     It supports and evidences compliance with
    standards, applicable legal & regulatory
    requirements.
     It results in better conceptual clarity, clarity of
    thought and expression.
     It facilitates better understanding and helps
    avoid misconception.
     It supports and evidences compliance with
    standards, applicable legal & regulatory
    requirements.

    3
    Form and Content of Documentation
    The form and content of audit documentation should be designed to
    meet the circumstances as necessary of the particular audit. It
    should satisfy the requirements of the governing standards and
    substantiate the conclusions arrived at by the auditor.The form and
    content of documentation depends on various factors such as:
     Size, nature and type of entity.
     Risk assessment.
     Materiality.
     Sampling methods, etc.
    Documents are segregated into those forming part of the
    Permanent Audit File and Current Audit File. Permanent
    audit file contains those documents, the use of which is
    not restricted to one time period, and extends to
    subsequent audits also. e.g. Engagement letter,
    Communication with previous auditor, Memorandum of
    Association, Articles of Association, Organization
    structure, List of directors/partners/trustees/bankers/
    lawyers, etc. On the other hand, a current audit file
    contains those documents relevant for that time period of
    audit.
    Documentation includes the following:
     Understanding the entity.
     Time and cost constraints.
     Audit Programme.
     Risk assessment.
    4
     Team discussion.
     Working papers pertaining to significant areas.
     Review points.
     Communication with those charged with governance
     Basis for conclusions.
     Reporting & completion.
     Quality/Engagement quality control review.
    In general, a working paper may contain the following:
     Risk and controls relevant to the area.
     Assertions to be tested and satisfied.
     Substantive and analytical procedures performed.
     Persons performing/reviewing the work.
     Dates on which the work was performed/reviewed.
     Extent of review.
     Documents prepared by client.
     Nature, type and size of the entity.
    Audit documentation may be lesser in case of less complex
    entities and small entities as compared to large and complex
    entities.
    Examples of the audit documentation
    A4:.Examples of audit documentation include the following:
     Engagement letter.
     Audit programmes defined, with details of work carried out
    and  results filled, including planning memorandum.
    5
     Analyses of various account balance through
    comparatives and corroborative.
     Summaries of significant matters.
     Letters of confirmation and representation.
     Checklists.
     Correspondence (including e-mail) concerning
    significant matters.
     Abstracts or copies of the entity’s records/contracts/
    agreements.
     Audit documentation, however, is not a substitute for the
    entity’s accounting records and vice versa.
    A significant matter is a finding or issue that, in the auditor's
    judgment, is significant to the procedures performed, evidence
    obtained, or conclusions reached. Significant matters either are, or
    could be, important to our audit opinion/report, or to the support for
    the assurance engagement opinion/conclusion(s).

    Auditors Responsibility
    We conducted our audit in accordance the SA’s issued by the ICAI – These
    Standards require that we comply with the ethical requirements & plan &
    perform the audit to obtain reasonable assurance whether the financial
    statements are free from MM
    Material Misstatement (MM)
    Material - important, significant, substantial
    Misstatement – false incorrect statement MM is untrue information in FS that
    could affect the financial decision of one who relies on the statement /

    6
    misleads users MM – not true and fair MM - result of omissions - errors of
    transactions & balances
    True and Fair – Factually correct & faithfully represent without bias
    Faithfully represent economic substance of the transaction rather than the
    legal form
    Over-under valuation of asset/ liability Omission of asset / liability Non-
    disclosure of charges on assets Accounting policies not followed consistently
    unusual- exceptional, non-recurring items not disclosed separately Accounts
    not drawn as per ARFF / Schedule III of Co’s Act Non Compliance with AS -
    Sec 143(3)(e) / IFRS - disclosure of deviation with reasons & financial impact
    Examples of significant matters?
    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 SA31
    significant risks mean an identified and assessed risk of
    material misstatement that, in the auditor’s judgment,
    requires special audit consideration.
     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
    7
    opinion or the inclusion of an Emphasis of Matter paragraph
    in the auditor’s report.

    CONCLUSION: When assessing how important it is for an audit firm to


    maintain adequate documentation for all audit engagements, students should
    focus on the extent to which an audit firm relies on working papers prepared.
    This reliance is not limited to the importance placed on them in allowing the
    audit firm to arrive at a conclusion about the truth and fairness of financial
    statements – it extends as well to reliance on the fact that they have been
    prepared in a professional manner to defend any subsequent allegations that
    the audit firm has acted negligibly in the event of an alleged audit failure. By
    following the procedures and guidance set out in ISA 230, audit firms should
    be assured that audit documentation has been prepared in a professional
    manner

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