Professional Documents
Culture Documents
under
the
guidance
of
project
guide
Prof.
during the academic year 2015-16. The information submitted is true to the best
of my knowledge.
Date:
Place:
Signature
Introduction
Audit
The general definition of an audit is an evaluation of a person, organization, system,
process, enterprise, project or product. The term most commonly refers to audits in
accounting, internal auditing, and government auditing, but similar concepts also exist in
project management, quality management, water management, and energy conservation.
Auditing is defined as a systematic and independent examination of data, statements,
records, operations and performances (financial or otherwise) of an enterprise for a stated
purpose. In any auditing the auditor perceives and recognizes the propositions before him for
examination, collects evidence, evaluates the same and on this basis formulates his judgment
which is communicated through his audit report.
History
Historically, the word auditing has been derived from Latin word audire which means to
hear. According to Dicksee, traditionally auditing can be understood as an examination of
accounting records undertaken with a view to establishing whether they completely reflect
the transactions correctly for the related purpose. In addition the auditor also expresses his
opinion on the character of the statements of accounts prepared from the accounting records
so examined as to whether they portray a true and fair picture.
Objective of Study
The purpose of this study is to establish standards and provide guidance on Audit
Documentation. The exercise of professional judgment is integral in applying the provisions
of this section. For example, professional judgment is used in determining the quantity, type,
and content of audit documentation consistent with this section.
The auditor must prepare audit documentation in connection with each engagement in
sufcient detail to provide a clear understanding of the work performed (including the
Nature, timing, extent and results,
Research Problem
Audit is a vast term, to gather information regarding every aspect is not possible. To
obtain all the first hand data regarding Audit Documentation of specific organisation is also
not feasible.
The major problem faced while completing this project is the Time Constraint and
Resource Constraint.
Sometimes it so happened that I came across data that was relevant but not required
hence I couldnt use it. So, I have tried to be up to the point where as information is
concerned.
The data is gathered majorly from the secondary sources so is assumed to be True to its
form.
Research Methodology
Methodology plays a very important role in any project work. The effectiveness of the
Project depends on the correctness of the data collected and mainly the research methodology
used to collect the data.
Primary data
Primary data is data collected from an economist or analyst. It is the first hand
information gathered to satisfy the research need.
Here due to the time constraint the primary data could not be gathered.
Secondary data
Secondary data is the data that already exists which has been collected by some other
person or organization for their use and is generally made available to other researchers free
or at a concessional rata. Major use of the internet in business research is in the area of
secondary research the research report and database maintained by major research companies
are also available on the net.
Here the secondary data is obtained from the Internet
Review of Literature
Meaning of Documentation
The word document is used to refer to a written or printed paper that bears the original,
official, or legal form of something and can be used to furnish decisive evidence or
information. Documentation refers to the act or an instance of the supplying of documents
or supporting references or records.
According to SA 230 on Audit Documentation issued by the Institute of Chartered
Accountants of India Documentation refers to 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). Audit documentation is an
essential element of audit quality. Although documentation alone does not guarantee audit
quality, the process of preparing sufficient and appropriate documentation contributes to the
quality of an audit. The need for documentation originated in Western Countrieswhere
auditors were increasingly being hauled up before Courts of law. Documentation is the only
way an auditor can prove to outsiders that an effective audit was planned and performed
The requirements and contents for documentation may differ from case to case.
Assurance Engagements
Assurance refers to the auditors satisfaction as to the reliability of an assertion being made
by one party for use by another party. The degree of satisfaction achieved and therefore the
level of assurance which may be provided is determined by the procedures performed and
their results. There are three types of assurance engagements a chartered accountant may
perform:
(a) A reasonable assurance engagement.
Reasonable assurance means a high, but not absolute, level of assurance. The objective of a
reasonable assurance engagement is a reduction in assurance engagement risk to an
acceptably low level in the circumstances of the assurance engagement as the basis for a
positive form of expression of the chartered accountants conclusion.
In an audit, the Chartered Accountant provides a high (but not absolute) level of assurance on
the reliability of financial statements. The auditor provides a positive opinion which
essentially states that based on the work performed the financial statements comply with
relevant accounting standards and principles
(b) A limited assurance engagement.
The objective of a limited assurance engagement is a reduction in assurance engagement risk
to a level that is acceptable in the circumstances of the assurance engagement, but where that
risk is greater than for a reasonable assurance engagement, as the basis for a negative form of
expression of the chartered accountants conclusion.
In a limited assurance engagement, the chartered accountant expresses the conclusion in the
negative form, for example, Based on our work described in this report, nothing has come to
ourattention that causes us to believe that internal control is not effective, in all material
respects, based on XYZ criteria.
(c) Nil assurance engagement
Other frequently performed engagements in which no assurance is given include
care,
Confidentiality, professional behaviour)
Acceptance and continuance of client relationships and specific assurance
engagements.
Assignment of assurance engagement teams.
Assurance engagement performance.
Monitoring
Data Analysis
Scope
This guideline shall be used by auditors in preparing documentation that provide
sufficient and appropriate record of the auditors work.
(i)
Evidence for the auditors basis for a conclusion about the achievement of
the overall objectives of the auditor;
Evidence that the audit was planned and performed in accordance with ISAs
and applicable legal and regulatory requirements.
(ii)
Assisting members of the engagement team to direct and supervise the audit
work
1. The exact nature, timing and extent of evidence-gathering procedures will vary
from one assurance engagement to the next. In theory, infinite variations in
evidence-gathering procedures are possible. In practice, however, these are
difficult to communicate clearly and unambiguously. The chartered accountant
has to attempt to communicate them clearly and unambiguously and uses the
form appropriate to a reasonable assurance engagement or a limited assurance
engagement.
2. Reasonable assurance is a concept relating to accumulating evidence necessary
for the chartered accountant to conclude in relation to the subject matter
information taken as a whole. To be in a position to express a conclusion in the
positive form required in a reasonable assurance engagement, it is necessary for
the chartered accountant to obtain sufficient appropriate evidence as part of an
iterative, systematic assurance engagement process involving:
risks,
using
combination
of
inspection,
observation,
Form of documentation
Audit documentation may be in the form of:
Paper;
Electronic files; or
Other media.
leadsheet on audit documentation 5110. Likewise, the Nat West balance listed on the cash
leadsheet (audit documentation 5110) must also show a reference FROM the Nat West bank
reconciliation audit documentation 5114.
reconciliation or at the cash leadsheet, the reviewer will be able to find the other piece of
information.
As mentioned above, you must also fill in the relevant SAS documents (e.g., MAP) for the
tests performed and reference to the audit documentation where you have documented the
audit work performed to address the risks.
Click on the link (by holding down the Ctrl key) to be taken to Referencing and Symbol
Illustration.
Link the audit documentation where you have performed testing of risks to further
information needed to support the work performed.
If there is too much information to put on the face of a working paper then it should be put in
a tickmark.Tickmarks are used to provide additional context and/or support for information
contained in a Working Paper or within an engagement item. A tickmark is a reference to a
separate worksheet within the audit documentation where more details are given. This is to
prevent the leadsheet and document, where testing is performed, from becoming too crowded
with information, allowing the reviewer to see all of the pertinent information on the main
working paper, such as what work was done and the results of the testing to address the risks
of material misstatement. The reviewer can then go to the tickmark worksheet to see further
details; usually found as the last worksheet within the audit documentation.
A tickmark reference should be put next to the information that needs further explanation.
This clearly identifies what work was performed relative to the specific information, prevents
reviewer confusion of what the tickmark is referring to, and allows for clean, easy-to-read
audit documentation.
Some member firms have guidelines for the type of information that should or should not be
included in a tickmark, such as, details of errors found. Some member firms prefer to have
this documented in the working paper so they can easily identify errors found. Check with
your member firm on preferences in documentation.
o Click on the link (by holding down the Ctrl key) to be taken toTickmark
Worksheet Illustration.
Each field senior may have different preferences for how work is documented and therefore
it is important to check with your field senior before starting any work.
For additional guidance on what needs to be documented, refer to the following:
Performance SupportUsing the Model Audit Program
Performance SupportWorking with
AAM - P020: Prepare and Control Audit Documentation and P040: Review of Audit
Documentation
Any unused tickmarks should be left blank and any information in old tickmarks should
be deleted and the tickmark left blank. For example, if there is existing information for the
prior period, that is no longer applicable or incorrect in the current period, you should
either delete the old information and leave the tickmark blank or update the information
for current period.
When you receive your reviewed audit documentation, read all the review notes
first. If you have any questions about any of them, make sure you talk to the
reviewer before attempting to answer them.
Review notes need to be cleared in the audit documentation and not in the actual
review note. This is because at the end of the audit, all review notes are removed
from the file. Thus, if the audit work is included in the review note, it will be lost.
For example, the field senior may leave a review note asking you to document the
entity staff with whom you spoke, and when you spoke with them. During
completion of your testing, you would document this in the audit documentation.
In the review note, you would write that you had updated the audit documentation
as asked.
When you clear a review note, you should put your initials and a short comment
on the work you have done to address the comment in the review note. This
allows the reviewer to see quickly what additional work you have done without
re-reviewing all of the audit documentation.
You must clear all review notes on your work prior to the issuing of the audit
report. These could be from your field senior, audit manager, or audit engagement
partner.
You should never delete a review note raised by someone else unless you have
been specifically asked to do so. Reviewers will delete a review note once they
are satisfied that it has been addressed appropriately.
For more information on Review note template and Excel review notes, refer to Performance
SupportWorking with .
Other Requirements
i
ii
Audit documentation provides evidence that the audit complies with the ISAs.
It is unnecessary for the auditor to document separately (as in a checklist, for
example) compliance with matters for which compliance is demonstrated by
documents included within the audit file.
For example:
The existence of an adequately documented audit plan demonstrates that the auditor
If the auditor judges it necessary to depart from a relevant requirement in an ISA, the auditor
shall document how the alternative audit procedures performed achieve the aim of that
requirement, and the reasons for the departure.
The auditor shall assemble the audit documentation in an audit file and complete the
administrative process of assembling the final audit file on a timely basis after the
ii
iii
file is ordinarily not more than 60 days after the date of the auditors report.
The completion of the assembly of the final audit file after the date of the auditors
report is an administrative process that does not involve the performance of new audit
iv
auditors report.
After the assembly of the final audit file has been completed, the auditor shall not
delete or discard audit documentation of any nature before the end of its retention
vi
period.
The retention period for audit engagements ordinarily is not shorter than five years
vii
from the date of the auditors report, or, if later, the date of the group auditors report.
In circumstances where the auditor finds it necessary to modify existing audit
documentation or add new audit documentation after the assembly of the final audit
file has been completed, the auditor shall, regardless of the nature of the
modifications or additions, document:
The specific reasons for making them; and
When and by whom they were made and reviewed.
The auditor shall also consider the documentation requirements of other laws, regulations
and standards.
understand the work that was performed and the conclusions reached.
After the report release date, auditors will have 45 days to assemble a complete
and final set of audit documentation.
Changes to the documentation after the audit completion date must be made
Establishes a new requirement that the auditor complete the assembly of the final audit file
on a timely basis after the date of the auditors report, and provides guidance indicating that
an appropriate time limit for this would ordinarily be 60 days after the date of the auditors
report. The revised ISA also resulted in the establishment of a new requirement in
International Standard on Quality Control (ISQC) 1, Quality Control for Firms that Perform
Audits and Reviews of Historical Financial Information, and Other Assurance and Related
Services Engagements, for firms to set up policies and procedures for the timely completion
of the assembly of the final engagement files.
Establishes a new requirement that the auditor not delete or discard audit documentation
after the final audit file has been assembled, unless the retention period for the audit
documentation has elapsed. The revised ISA also resulted in expanded guidance in ISQC 1
on the retention of engagement documentation. This guidance indicates that the retention
period for audits ordinarily is no shorter than five years from the date of the auditors report,
or, if later, the date of the group auditors report.
The standard is effective for audits of financial periods beginning on or after June 15,
2006.
In the case of recurring audits, some working paper files may be classified as
permanent audit files, which are updated currently with information of continuing importance
to succeeding audits. In contrast current audit files contain information relating primarily to
the audit of a single period.
A) A permanent audit file normally includes:
1. Copy of initial appointment letter if the engagement is of recurring nature
2. Record of communication with the retiring auditor, if any, before acceptance
of the appointment as auditor
3. NOC from previous auditor
4. Information concerning the legal and organisational structure of the entity.
In the case of a company, this includes the Memorandum and Articles of Association.
In the case of a statutory corporation, this includes the Act and Regulations under which the
corporation functions .i.e.
i.
ii.
iii.
The proposed standard would have required that any changes to the working papers after
completion of the engagement be documented without deleting or discarding the original
documents. Such documentation must indicate the date the information was added, by whom
it was added, and the reason for adding it.
One commenter recommended that the Board provide examples of auditing procedures that
should be performed before the report release date and procedures that may be performed
after the report release date. Some commenters also requested clarification about the
treatment of changes to documentation that occurred after the completion of the engagement
but before the report release date. Many commenters recommended that the Board more
specifically describe post-issuance procedures. The Board generally agreed with these
comments.
The final standard includes two important dates for the preparation of audit documentation:
(1) the report release date and (2) the documentation completion date.
Prior to the report release date, the auditor must have completed all necessary auditing
procedures, including clearing review notes and providing support for all final
conclusions. In addition, the auditor must have obtained sufficient evidence to support
the representations in the auditor's reports before the report release date.
After the report release date and prior to the documentation completion date, the
auditor has 45 calendar days in which to assemble the documentation.
During the audit, audit documentation may be superseded for various reasons. Often, during
the review process, reviewers annotate the documentation with clarifications, questions, and
edits. The completion process often involves revising the documentation electronically and
generating a new copy. The SEC's final rule on record retention, Retention of Records
Relevant to Audits and Reviews,
5/
explains that the SEC rule does not require that the
of the Auditor's Report. Auditors should not discard any previously existing documentation in
connection with obtaining and documenting evidence after the report release date.
The auditor may perform certain procedures subsequent to the report release date. For
example, pursuant to AU sec. 711, Filings Under Federal Securities Statutes, auditors are
required to perform certain procedures up to the effective date of a registration statement. The
auditor should identify and document any additions to audit documentation as a result of
these procedures. No audit documentation should be discarded after the documentation
completion date, even if it is superseded in connection with any procedures performed,
including those performed pursuant to AU sec. 711.
Additions to the working papers may take the form of memoranda that explain the work
performed, evidence obtained, and conclusions reached. Documentation added to the working
papers must indicate the date the information was added, the name of the person adding it,
and the reason for adding it. All previous working papers must remain intact and not be
discarded.
Documentation added to the working papers well after completion of the audit or other
engagement is likely to be of a lesser quality than that produced contemporaneously when the
procedures were performed. It is very difficult to reconstruct activities months, and perhaps
years, after the work was actually performed. The turnover of both firm and company staff
can cause difficulty in reconstructing conversations, meetings, data, or other evidence. Also,
with the passage of time memories fade. Oral explanation can help confirm that procedures
were performed during an audit, but oral explanation alone does not constitute persuasive
other evidence. The primary source of evidence should be documented at the time the
procedures are performed, and oral explanation should not be the primary source of
evidence. Furthermore, any oral explanation should not contradict the documented evidence,
and appropriate consideration should be given to the credibility of the individual providing
the oral explanation.
Multi-Location Audits and Using the Work of Other Auditors
The proposed standard would have required the principal auditor to maintain specific audit
documentation when he or she decided not to make reference to the work of another auditor.
The Board also proposed an amendment to AU sec. 543 concurrently with the proposed audit
documentation standard. The proposed amendment would have required the principal auditor
to review the documentation of the other auditor to the same extent and in the same manner
that the audit work of all those who participated in the engagement is reviewed.
Commenters expressed concerns that these proposals could present conflicts with certain
non-U.S. laws. Those commenters also expressed concern about the costs associated with the
requirement for the other auditor to ship their audit documentation to the principal auditor. In
addition, the commenters also objected to the requirement that principal auditors review the
work of other auditors as if they were the principal auditor's staff.
Audit Documentation Must be Accessible to the Office Issuing the Auditor's
Report
After considering these comments, the Board decided that it could achieve one of the
objectives of the proposed standard (that is, to require that the issuing office have access to
those working papers on which it placed reliance) without requiring that the working papers
be shipped to the issuing office. Further, given the potential difficulties of shipping audit
documentation from various non-U.S. locations, the Board decided to modify the proposed
standard to require that audit documentation either be retained by or be accessible to the
issuing office.
In addition, instead of requiring that all of the working papers be shipped to the issuing
office, the Board decided to require that the issuing office obtain, review, and retain certain
summary documentation. Thus, the public accounting firm issuing an audit report on
consolidated financial statements of a multinational company may not release that report
without the documentation described in paragraph 19 of the standard.
The auditor must obtain and review and retain, prior to the report release date,
documentation described in paragraph 19 of the standard, in connection with work performed
by other offices of the public accounting firm or other auditors, including affiliated or nonaffiliated firms, that participated in the audit. For example, an auditor that uses the work of
another of its offices or other affiliated or non-affiliated public accounting firms to audit a
subsidiary that is material to a company's consolidated financial statements must obtain the
documentation described in paragraph 19 of the standard, prior to the report release date. On
the other hand, an auditor that uses the work of another of its offices or other affiliated or
Conclusion
Significance of Audit Documentation
The auditor must prepare audit documentation in connection with each engagement in
sufficient detail to provide a clear understanding of the work performed (including the nature,
timing, extent, and results of audit procedures performed), the audit evidence obtained and its
source, and the conclusions reached.
The significance of Audit documentation can be explained as follows:
Provides the principal support for the representation in the auditor's report that the auditor
performed the audit in accordance with generally accepted auditing standards.
Provides the principal support for the opinion expressed regarding the financial
information or the assertion to the effect that an opinion cannot be expressed.
Assists the audit team to plan and perform the audit;
Self-Defence in a Court of Law: Onus in a Court proceeding lies on the auditor to prove
that he was not professionally negligent in the performance of his duties
Self-defence in case Consumer Protection Act, 1986 is invoked.
Audit evidence in case of Review by FRRB- Financial Reporting Review Board-The
FRRB reviews the general-purpose financial statements either suo motto or on a
reference made to it by any regulatory body like, Reserve Bank of India, Securities and
Exchange Board of India, Insurance Regulatory and Development Authority, Department
of Company Affairs, etc. The FRRB also reviews the general-purpose financial
statements of enterprises relating to which serious accounting irregularities in the
general-purpose financial statements have been highlighted by the media reports.
To fulfil statutory requirements under Chartered Accountants Act, 1949
To fulfil requirements of Peer Review wherein working papers will also be reviewed in
order to establish whether the attestation work has been carried out as per norms of
Technical, Ethical and Professional Standards
To fulfil requirements of Quality Review-[Chapter VII A of Chartered Accountants Act
1949 Sections 28A to Sections 28D] Assists auditors who are new to an engagement and
review the prior year's documentation to understand the work performed as an aid in
planning and performing the current engagement;
Assists members of the audit team responsible for supervision to direct and supervise the
audit work, and to review the quality of work performed, in accordance with SA220
Quality Control for Audit Work;
Powers and duties of auditors- Companies Bill 2009 [clause 126] and punishment for
contravention [Clause 130] where an auditor contravenes any provisions with regard to his
duties and functions/ renders services that he is not allowed under the Bill / signing the audit
report, then he will be punishable with fine which is not less than Rs.25, 000 but may extend
to Rs.5 lakhs. Where the auditor wilfully contravenes these provisions, then he will be
punishable with imprisonment for a term which may extend to one year or with fine not less
than Rupees One Lakh but may extend to Rupees Twenty Five lakh or with both. Where
the auditor has been so convicted, he shall be liable to refund the remuneration received by
him to the company and also pay for damages for losses resulting from any incorrect or
misleading statements in his audit report
Demonstrates the accountability of the audit team for its work by documenting the
procedures performed, the audit evidence examined, and the conclusions reached;
Retains a record of matters of continuing significance to future audits of the same entity;
Assists quality control reviewers (for example, internal inspectors) who review
documentation to understand how the engagement team reached significant conclusions
and whether there is adequate evidential support for those conclusions;
Appropriate documentation contributes to the quality of an audit
Documentation fulfils the need to document oral discussions of significant matters and
communicate to those charged with governance, as discussed in, SA260 Communication
with those Charged with Governance.
Appendix
Bibliography
Websites
1.
2.
3.
4.
5.
6.
www.wikipedia.com
www.thehindubusinessline.com
www.ehow.com
www.icisa.cag.gov.in
www.pcaobus.org
www.caaa.in