Guide to Using International Standards on Auditing in - IFAC

17.03.2014 Views
208 ong>Guideong> ong>toong> ong>Usingong> ong>Internationalong> ong>Standardsong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts documents according ong>toong> the stage when documents are prepared in the audit process. Note that completion documents (on paper files) are usually filed near the ong>toong>p of the file for easy reference. The second index groups documents by the financial statement area such as payables, receivables, sales, etc. In this file, all the documents relating ong>toong> risk assessment and risk response for invenong>toong>ry would be maintained under the invenong>toong>ry chapter. A third alternative would be ong>toong> combine the two approaches with some documents organized by the stage in the audit process, and others by the financial statement area. Exhibit 16.2-1 Index by Audit Phase (extracts from an index) 100-200 Financial statements and audiong>toong>r’s report 201-300 Tax returns, etc. 301-400 File completion such as memos on significant decisions, checklists and management representation letters 401-500 Audit planning, including audit strategy and materiality 501-600 Risk assessment, including understanding the entity and internal control 601-700 Risk response, including detailed audit plans by financial statement area 701- 799 Other supporting documents such as trial balances and reports 800 Financial reporting frameworks Index by Financial Statement Area (extracts from an index) 10 Financial statements and audiong>toong>r’s report 11 File completion memos, checklists, etc. 12 Overall audit strategy 15 Materiality A Cash C Receivables D Invenong>toong>ry BB Payables DD Long-term debt 20 Revenues 30 Purchases 40 Payroll 50 Taxation 100 Subsequent events 120 Contingencies 150 Other supporting documents such as trial balances and reports 16.3 Common Questions about Audit Documentation Common questions about audit documentation include the following. Exhibit 16.3-1 Question Who Owns the Audit File? Are Copies of Entity Records Examined Required ong>toong> Be Kept on the Audit File? Response Unless otherwise specified by legislation or regulation, audit documentation is the property of the audit firm. No. All that is required is some identifying characteristics of the transactions/ procedure being examined, so that the work could be replicated or exceptions investigated as necessary. Identifying characteristics include: • Dates and unique transaction numbers for a test of details; • Scope of procedure and the population used (i.e., all journal entries over a specified amount from the journal register); • Source, starting point, and sampling interval for systematic samples;

209 ong>Guideong> ong>toong> ong>Usingong> ong>Internationalong> ong>Standardsong> on Auditing in the Audits of Small- and Medium-Sized Entities Volume 1—Core Concepts Question Response Does Each Page of the Audit File Need To Be Initialled and Dated by the Preparer and Then by the Reviewer? Should ALL Considerations and Use of Professional Judgments Be Documented? Are Preliminary Drafts of Financial Statements Required To Be Kept if Materially Inconsistent with the Final Financial Statements? Is It Necessary ong>toong> Document Non- Compliance with ISA Requirements that Are Really Not Applicable ong>toong> the Audit? • For staff inquiries, their names, job designations, and dates of inquiry; and • For observations, the process or matter being observed, relevant individuals, their respective responsibilities, and where/when the observation was carried out. However, abstracts or copies of the entity’s records (such as significant contracts and agreements) may be included if considered appropriate. No. The discipline of initialling working papers (as ong>toong> who performed and who reviewed the audit work) has the effect of holding the engagement team accountable. However, this does not mean that each page of the working paper file needs ong>toong> be initialled and dated. For example, the evidence of preparation and review could be indicated for each section, module or unit in the file rather than the individual pages. The preparation of working papers (typically at assistant level) and their detailed review (typically at the manager level) would involve initialling every working paper section, module or unit, whereas a general review (at the partner level) might involve only looking at key sections of the file where significant professional judgments were made. No. It is neither necessary nor practicable for the audiong>toong>r ong>toong> document every matter considered, or professional judgment made. It is the significant matters and significant judgments made on those matters during the audit that need ong>toong> be documented. Documentation of significant matters and judgments explains the audiong>toong>r’s conclusions, and reinforces the quality of the judgments. This can often be achieved through the preparation of the significant issues memorandum at the completion of the audit. No. There is no requirement ong>toong> retain documentation that was incorrect or superseded. No. Other than in exceptional circumstances, compliance is required with each ISA requirement that is “relevant.” An ISA is clearly not relevant when the entire ISA is not applicable, or when an ISA requirement is conditional and the condition does not exist.

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