Guide to Using International Standards on Auditing in - IFAC

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<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
Reporting
Paragraph #
Relevant Extracts from ISAs
230.10 The audi<strong>to</strong>r shall document discussions of significant matters with management, those
charged with governance, and others, including the nature of the significant matters discussed
and when and with whom the discussions <strong>to</strong>ok place. (Ref: Para. A14)
230.11 If the audi<strong>to</strong>r identified information that is inconsistent with the audi<strong>to</strong>r’s final conclusion
regarding a significant matter, the audi<strong>to</strong>r shall document how the audi<strong>to</strong>r addressed the
inconsistency. (Ref: Para. A15)
230.12 If, in exceptional circumstances, the audi<strong>to</strong>r judges it necessary <strong>to</strong> depart from a relevant
requirement in an ISA, the audi<strong>to</strong>r shall document how the alternative audit procedures performed
achieve the aim of that requirement, and the reasons for the departure. (Ref: Para. A18-A19)
240.46 The audi<strong>to</strong>r shall include in the audit documentation communications about fraud made <strong>to</strong>
management, those charged with governance, regula<strong>to</strong>rs and others.
The following exhibit lists the typical audit documentation that addresses the reporting or file completion phase.
Exhibit 16.4-3
Reporting
• Completed audit programs.
• Evidence of file reviews (that is, initials and checklists, etc.):
– Detailed (manager/supervisor review),
– Engagement partner review, and
– Engagement quality control review, where applicable.
• Information that is inconsistent with or contradicts the final conclusions.
• Summary of financial effect of unadjusted errors identified, and
management’s response (i.e., adjustments made).
• Non-trivial uncorrected misstatements.
• Significant matters arising:
– Actions taken <strong>to</strong> address them (including additional evidence
obtained), and
– The basis for the conclusions reached.
• If assistance was provided (where permissible under independence
requirements) in preparing draft financial statements, describe the
nature of discussions held with management <strong>to</strong> review the content of
the statements. This would include:
– Dates discussions were held,
– Explanations provided on the application of complex accounting
principles, and
– Major questions raised by management.
Comments
Take notes of verbal
discussions with
management on significant
matters and record their
responses. This will help
<strong>to</strong> ensure that audit
documentation contains
the reasoning for all
significant decisions made.
Include copies of relevant
emails or text messages
exchanged with the client
that address significant
matters.