Guide to Using International Standards on Auditing in - IFAC

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206 <strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts 16.1 Overview Audit file documentation (whether maintained on paper or electronically) plays a critical role in: • Assisting the engagement team in planning and performing the audit; • Providing evidence <strong>to</strong> demonstrate that the planned audit procedures were in fact performed; • Assisting engagement reviewers (including engagement quality control reviewers) in carrying out their responsibilities in accordance with professional standards; • Recording the judgments involved in forming the audit opinion; and • Recording matters of continuing significance for future audits of the entity. CONSIDER POINT There is no need <strong>to</strong> provide documentation about ISA requirements that are not relevant in the circumstances. This would apply where the entire ISA is not relevant (such as ISA 610, when the entity has no internal audit function), or where the ISA requirement is conditional and the condition does not exist. Good audit documentation is appropriately organized, and provides a record of the work done, the audit evidence obtained, the significant professional judgments applied, and the conclusions reached. Exhibit 16.1-1 The Need for Audit File Documentation • Supports the basis for the audi<strong>to</strong>r’s conclusions concerning every relevant financial statement assertion. • Provides evidence that the engagement complies with professional standards. • Provides evidence that the underlying accounting records agree or reconcile with the financial statements. Audit documentation for smaller entities will generally be less extensive than for larger entities. This particularly applies where: • The engagement partner performs all the audit work. Documentation would not include matters related <strong>to</strong> team discussions, allocation of responsibilities, or supervision; and • Some matters are so straightforward that they can be more conveniently addressed in a single document with cross-references <strong>to</strong> supporting working papers. This could include one or more of the areas such as the understanding of the entity and its internal control, the overall audit strategy and audit plan, materiality, assessed risks, significant matters noted, and the conclusions reached. Many ISAs contain specific documentation requirements that serve <strong>to</strong> clarify the requirements of ISA 230. The following table provides a reference <strong>to</strong> the paragraphs in ISAs that outline specific documentation requirements. This does not imply that there are no documentation requirements in the ISAs that are not included in the list below.
207 <strong>Guide</strong> <strong>to</strong> <strong>Using</strong> <strong>International</strong> <strong>Standards</strong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts Exhibit 16.1-2 ISA Title Paragraphs 210 Agreeing the Terms of Audit Engagements 10-12 220 Quality Control for an Audit of Financial Statements 24-25 230 Audit Documentation All 240 The Audi<strong>to</strong>r’s Responsibilities Relating <strong>to</strong> Fraud in an Audit of Financial Statements 44-47 250 Consideration of Laws and Regulations in an Audit of Financial Statements 29 260 Communication with Those Charged with Governance 23 300 Planning an Audit of Financial Statements 12 315 Identifying and Assessing the Risks of Material Misstatement Through 32 Understanding the Entity and Its Environment 320 Materiality in Planning and Performing an Audit 14 330 The Audi<strong>to</strong>r’s Responses <strong>to</strong> Assessed Risks 28-30 450 Evaluation of Misstatements Identified During the Audit 15 540 Auditing Accounting Estimates, Including Fair Value Accounting Estimates, and 23 Related Disclosures 550 Related Parties 28 600 Special Considerations—Audits of Group Financial Statements (Including the Work 50 of Component Audi<strong>to</strong>rs) 610 <strong>Using</strong> the Work of Internal Audi<strong>to</strong>rs 13 16.2 Audit File Organization An area <strong>to</strong> be addressed by firm-wide policies is audit file organization and indexing. A consistent approach using a standard index has a number of advantages, such as the following: • Enables specific working papers <strong>to</strong> be easily located and shared among audit team members; • Facilitates file review by the various reviewers such as the manager, engagement partner, engagement quality control reviewer, and quality control moni<strong>to</strong>rs; • Provides consistency between audit files in the firm; and • Assists with quality control functions such as checking for missing sign-offs, invalid cross-references, and unclear review notes. Audit documentation is usually organized in<strong>to</strong> logical divisions of work using an indexing system. If the file is electronic, the indexing can be in the form of folders and sub-folders. As each piece of audit documentation is created, it will be given a unique reference that ties directly in<strong>to</strong> the overall file index. Two examples of possible audit file indices are summarized in the exhibit below. The first example groups
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Guide to Using International Standards on Auditing in - IFAC

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