What is audit documentation?

 

Auditors are responsible to prepare audit documentation for an audit of financial statements. Audit documentation is necessary to support audit opinion on financial statements and confirmation of audit was planned and performed in accordance with accepted auditing standards  and applicable legal and regulatory requirements .

Simply speaking audit documentation consists of the record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached.  The term “working papers” is often used for audit documentation. Each audit assignment is accompanied by audit documentation.

Audit documentation provides information about:

•  The nature, timing and extent of the audit procedures performed. This includes the identifying characteristics of the specific items or matters tested, who performed the audit work and the date such work was completed, who reviewed the audit work performed and the date of such reviews.
• The results of the audit procedures performed, and the audit evidence obtained; and
• Significant matters arising during the audit, the conclusions reached thereon, and significant professional judgments made in reaching those conclusions.

Examples of significant matters include:

● Matters that give rise to significant risks of material misstatement.

● 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.

Audit documentation may be recorded on paper or on electronic or other media. 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 audit methodology and tools used.

Example of audit documentation include audit programs, analysis, letters of confirmation and representation,  checklists, correspondence (including e-mail) concerning significant matters, copies or abstracts of client specific contracts and agreements.

In conclusion it should be noted that  preparation of audit documentation is essential part of audit process without which auditors  would not be able to form an audit opinion and produce an audit report on  financial statements.

ISA 230 Audit documentation