Here, i will post ISA 23O audit documentation standard itself which probably will be examined. As this standard revised last year,where there is insufficient time period to examine in November/December 2006 sitting.In the student accountant,there is a highlight in exam notes shows ISA 230 Audit Documentation (Revised). The word "revised" probably giving a hint to the candidates, however either will come out in the exam, nobody knows.Nonetheless, a knowledge on this ISA is useful for future reference for those who will sit for P7 Advanced Audit and Assurance in the new ACCA syllabus.As this is the last chance to sit under the current syllabus,will you make it count, or blow it? every information and topics is critical.
ISA 230 Audit Documentation
- The auditor should prepare, on a timely basis, audit documentation that
provides:
(a) A sufficient and appropriate record of the basis for the auditor’s
report; and
(b) Evidence that the audit was performed in accordance with ISAs
and applicable legal and regulatory requirements. - Preparing sufficient and appropriate audit documentation on a timely basis
helps to enhance the quality of the audit and facilitates the effective review
and evaluation of the audit evidence obtained and conclusions reached before
the auditor’s report is finalized.
- In addition to these objectives, audit documentation serves a number of
purposes, including:
(a) Assisting the audit team to plan and perform the audit;
(b) Assisting members of the audit team responsible for supervision to
direct and supervise the audit work, and to discharge their review
responsibilities in accordance with ISA 220, “Quality Control for
Audits of Historical Financial Information;”
(c) Enabling the audit team to be accountable for its work;
(d) Retaining a record of matters of continuing significance to future audits;
(e) Enabling an experienced auditor to conduct quality control reviews and
inspections1 in accordance with ISQC 1, “Quality Control for Firms that
Perform Audits and Reviews of Historical Financial Information, and
Other Assurance and Related Services Engagements;” and
(f) Enabling an experienced auditor to conduct external inspections in
accordance with applicable legal, regulatory or other requirements.
- Definitions
In this ISA:
(a) “Audit documentation” means the record of audit procedures
performed,relevant audit evidence obtained, and conclusions the
auditor reached (terms such as “working papers” or “workpapers” are
also sometimes used); and
(b) “Experienced auditor” means an individual (whether internal or external
to the firm) who has a reasonable understanding of (i) audit processes,
(ii) ISAs and applicable legal and regulatory requirements, (iii) the
business environment in which the entity operates, and (iv) auditing and
financial reporting issues relevant to the entity’s industry. - Nature of Audit Documentation
- Audit documentation may be recorded on paper or on electronic or other
media. It includes, for example, audit programs, analyses, issues memoranda,
summaries of significant matters, letters of confirmation and representation,
checklists, and correspondence (including e-mail) concerning significant
matters. Abstracts or copies of the entity’s records, for example,specific contracts and agreements, may be included as part of audit documentation if considered appropriate. Audit documentation, however, is not a substitute for the entity’s accounting records. The audit documentation for a specific audit engagement is assembled in an audit file.
- Form, Content and Extent of Audit Documentation
The auditor should prepare the audit documentation so as to enable an
experienced auditor, having no previous connection with the audit, to
understand:
(a) The nature, timing, and extent of the audit procedures performed
to comply with ISAs and applicable legal and regulatory
requirements;
(b) The results of the audit procedures and the audit evidence
obtained; and
(c) Significant matters arising during the audit and the conclusions
reached thereon.
- The form, content and extent of audit documentation depend on factors such
as:
• The nature of the audit procedures to be performed;
• The identified risks of material misstatement;
• The extent of judgment required in performing the work and evaluating
the results;
• The significance of the audit evidence obtained;
• The nature and extent of exceptions identified;
• The need to document a conclusion or the basis for a conclusion not
readily determinable from the documentation of the work performed or
audit evidence obtained; and
• The audit methodology and tools used.
**Oral explanations by the auditor, on their own, do not represent adequate
support for the work the auditor performed or conclusions the auditor reached,
but may be used to explain or clarify information contained in the audit
documentation.
- Documentation of the Identifying Characteristics of Specific Items or Matters
Being Tested
In documenting the nature, timing and extent of audit procedures
performed, the auditor should record the identifying characteristics of the
specific items or matters being tested. - Recording the identifying characteristics serves a number of purposes. For
example, it enables the audit team to be accountable for its work and facilitates
the investigation of exceptions or inconsistencies. Identifying characteristics
will vary with the nature of the audit procedure and the item or matter being
tested. For example:
• For a detailed test of entity-generated purchase orders, the auditor may
identify the documents selected for testing by their dates and unique
purchase order numbers.
• For a procedure requiring selection or review of all items over a specific
amount from a given population, the auditor may record the scope of
the procedure and identify the population (for example, all journal
entries over a specified amount from the journal register).
• For a procedure requiring systematic sampling from a population of
documents, the auditor may identify the documents selected by
recording their source, the starting point and the sampling interval (for
example, a systematic sample of shipping reports selected from the
shipping log for the period from April 1 to September 30, starting with
report number 12345 and selecting every 125th report).
• For a procedure requiring inquiries of specific entity personnel, the
auditor may record the dates of the inquiries and the names and job
designations of the entity personnel.
• For an observation procedure, the auditor may record the process or
subject matter being observed, the relevant individuals, their respective
responsibilities, and where and when the observation was carried out.
-The auditor may consider it helpful to prepare and retain as part of the audit
documentation a summary (sometimes known as a completion memorandum)
that describes the significant matters identified during the audit and how they
were addressed, or that includes cross-references to other relevant supporting
audit documentation that provides such information. Such a summary may
facilitate effective and efficient reviews and inspections of the audit
documentation, particularly for large and complex audits. Further, the
preparation of such a summary may assist the auditor’s consideration of the
significant matters.
-The auditor should document discussions of significant matters with
management and others on a timely basis.
-The audit documentation includes records of the significant matters discussed,
and when and with whom the discussions took place. It is not limited to
records prepared by the auditor but may include other appropriate records such
as agreed minutes of meetings prepared by the entity’s personnel. Others with
whom the auditor may discuss significant matters include those charged with
governance, other personnel within the entity, and external parties, such as
persons providing professional advice to the entity.
-If the auditor has identified information that contradicts or is inconsistent
with the auditor’s final conclusion regarding a significant matter, the
auditor should document how the auditor addressed the contradiction or
inconsistency in forming the final conclusion.
Documentation of Departures from Basic Principles or Essential Procedures
-The basic principles and essential procedures in ISAs are designed to assist the
auditor in meeting the overall objective of the audit. Accordingly, other than in
exceptional circumstances, the auditor complies with each basic principle and
essential procedure that is relevant in the circumstances of the audit.
-Where, in exceptional circumstances, the auditor judges it necessary to
depart from a basic principle 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 reasons for the departure. This involves the
auditor documenting how the alternative audit procedures performed were
sufficient and appropriate to replace that basic principle or essential procedure.
Identification of Preparer and Reviewer
In documenting the nature, timing and extent of audit procedures
performed, the auditor should record:
(a) Who performed the audit work and the date such work was
completed; and
(b) Who reviewed the audit work performed and the date and extent of
such review.
Assembly of the Final Audit File
-The auditor should complete the assembly of the final audit file on a
timely basis after the date of the auditor’s report.
-After the assembly of the final audit file has been completed, the auditor
should not delete or discard audit documentation before the end of its
retention period.
*When 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 should, regardless of the
nature of the modifications or additions, document:
(a) When and by whom they were made, and (where applicable)
reviewed;
(b) The specific reasons for making them; and
(c) Their effect, if any, on the auditor’s conclusions.
Changes to Audit Documentation in Exceptional Circumstances after
the Date of the Auditor’s Report
When exceptional circumstances arise after the date of the auditor’s
report that require the auditor to perform new or additional audit
procedures or that lead the auditor to reach new conclusions, the auditor
should document:
(a) The circumstances encountered;
(b) The new or additional audit procedures performed, audit evidence
obtained, and conclusions reached; and
(c) When and by whom the resulting changes to audit documentation
were made, and (where applicable) reviewed.
ISA 230 also,are important in the following ISA's which contain specific documentation
requirements and guidance:-
- ISA 210
- ISA 220 (For paper 3.1 ACCA)
-Quality Control For Adits Of Historical Financial Information - ISA 240
- ISA 250
- ISA 260
- ISA 300
- ISA 315
- ISA 330
- ISA 505
- ISA 580
- ISA 600 (For paper 3.1 ACCA) -Using the Work of Another Auditor
Above are just some important heading,summarised which i think is important of the ISA 230 for the exam,a full documentation can be obtain from www.ifac.org
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