Working paper content
Even though the engagement partner’s main concern is that the correct opinion is expressed, every engagement file still needs to address certain basic documentation matters. Quality partners, engagement quality control reviewers and other reviewers sometimes miss finer details that can make all the difference with regard to facilitating re-performance and clearly supporting conclusions drawn. This article explains how to get it right in an efficient and practical manner.
Key documentation requirements
The objective of audit documentation is to provide a sufficient and appropriate record of the basis for the auditor’s report, and evidence that the audit was planned and performed in accordance with International Standards on Auditing (ISAs), and applicable legal and regulatory requirements.
The auditor must prepare audit documentation that will enable an experienced auditor, having no previous connection with the audit, to understand the work performed, results, evidence obtained, judgments and conclusions. The auditor must document the identifying characteristics of the specific items tested, details of discussions of significant matters and how inconsistencies were addressed. Any departures from ISAs must also be clearly addressed in the audit documentation.
Audit evidence must be obtained on time. Matters arising after the audit report date and modification of audit documentation after final file assembly must be clearly described, explained and reviewed to ensure that the integrity of the audit documentation remains intact.
The IRBA Public Inspections Report 2018 identified the following common deficiencies in fieldwork, audit evidence and documentation:
- Audit work not documented in sufficient detail on file to be re-performable by another experienced auditor and to enable an experienced auditor to come to the same conclusion
- Contradictory working papers, and contradiction between working papers and opinion
- Sole reliance on working papers and representations prepared by the client
- Working papers not compliant with the requirements of the standards
- Absent sampling methodology
- Inappropriate population used for a sample selection
- Insufficient extent of testing, in relation to assessed risk
- Insufficient testing at assertion level
- All relevant assertions for material classes of transactions, account balances and disclosures not addressed by audit work
- Inappropriate source documentation and direction of testing
- Lead schedule, according to working papers, not in agreement with financial statements; or disclosures, according to notes, not in agreement with primary financial statements, with no documented explanation of the conclusion
- Unidentified or unaddressed material misstatements and departures from standards
- Lack of demonstrated professional scepticism in assessing audit evidence
- Integrity of audit file, and conduct of engagement team and firm in doubt: modification of working paper file after 60-day file assembly period and shortly before inspection date.
Root causes for these findings are ascribed to deficient training, supervision and review, and consultation with superiors during the audit, as well as time pressure. Clearly, auditors need to pay more attention to documentation of audit evidence and reviewing audit documentation, in terms of the relevant requirements.