Documentation SA 230

Meaning
4.1 Documentation’ refers to the working papers prepared and obtained by the auditor
and retained by him in connection with performance of an audit.

Objective
4.2 Working papers are the auditor’s principal record of the work performed and
conclusion reached regarding significant matters. Working paper provides evidence of
the auditor’s exercise of due care and helps the auditor in conducting and supervising
the audit engagement.
In addition to these objectives, audit documentation serves a number of purposes,
including:
• Assisting the audit tem to plan and perform the audit;
• Assisting members of the audit tem responsible for supervision to direct and
supervise the audit work, and to discharge their review responsibilities in
accordance with Quality Control for Audits;
• Enabling the audit team to be accountable for its work;
• Retaining a record of matters of continuing significance to future audits;
• Enabling an experienced auditor to conduct quality control reviews and
inspections in accordance with generally accepted auditing standards; and
• Enabling an experienced auditor to conduct external inspections in accordance
with applicable legal, regulatory or other requirements.

Design and preparation of working papers

4.3 The best way of preparing and evaluating a set of working papers is to consider
whether at some future date an auditor with no previous connection with the
engagement could review them and testify as to the audit work performed and the
related audit findings. Working papers facilitate the delegation of work while
providing a means to control its quality.

Contents of working papers

4.4 working papers should state -
• Client’s name.
• Type of engagement.
• Nature of client’s business.
• Degree of reliance on internal control.
• Sources of information.
• Conclusion reached.
• Supervision and review of work performed by assistant.
Classification of working papers
4.5 Working paper files may be classified as –
• Permanent audit files.
• Current files.

Permanent audit files:

3.6 Audit should be organised in such a way that:
• Memorandum and articles of association of company.
• Bye-laws or regulation in case of society or co-operative society.
• Record of study and evaluation of internal control.
• Copies of audited financial statements of previous years.
• Record of communication with retiring auditor.
• Notes regarding significant accounting policies.
• Important audit observations of earlier years.

Current file- Includes the following –

• Correspondence relating to acceptance of annual appointments.
• Minutes of meeting of board of director or executive committee.
• Audit program.
• Evidence of work performed by the assistant and reviewed by seniors.
• Communication with client regarding audit matter.
• Conclusion reached about significant aspects of audit.

4.5-1 Working Paper – records prepared by the auditor of the following:

• Procedure applied
• Test performed
• Information obtained
• Important conclusion reached
The following are examples of working papers:
• Audit Program
• Memoranda
• Letters of confirmation
• Representation letters abstracts or photocopies of document
• Schedule or commentaries
• Electronic media containing data.

Documentation of Departures from basic principles or Essential procedures

4.6 Where, in exceptional circumstances, the auditor judges it necessary to depart
from a basic principal or an essential procedure that is relevant in the circumstances of
the audit, the auditor should document how the alternative audit procedures performed
achieve the objective of the audit, and, unless otherwise clear, the reason for the
departure. This involves the auditor documenting how the alternative audit procedures
performed were sufficient and appropriate to replace that basic principal or essential
procedure.
Ownership and custody of working papers
4.7 As per para 13 of SA230, the working papers are the property of the auditor.
Auditor may at his discretion can make available working papers to his client.
Unauthorised access of working papers should be prevented to maintain
confidentiality of client’s business.

Time for retention of working papers

4.9 Para 14 of SA 230 states that the auditor should retain working papers for a period
of time sufficient to meet the requirements of practice and satisfy any permanent legal
or professional requirement of record retention.