5/17/2024

CHAPTER 10:
DOCUMENTATION
Instructor: Assoc.Prof. Doan Thanh Nga, CPA (Australia)

CHAPTER 10 LEARNING OBJECTIVES

10-1 Understand the purpose of documentation

10-2 Understand form and content of documentation
10-3 Understand safe custody and retention of documentation
10-4 Identify ownership and right of access to documentation

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OBJECTIVE 10-1
Understand purpose of documentation

10-1 UNDERSTAND PURPOSE OF DOCUMENTATION

 Definition:
Audit documentation (Working paper - WP): The record of
procedures performed, relevant evident obtained and conclusions
the audit reached.

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10-1 UNDERSTAND PURPOSE OF DOCUMENTATION (CONT.)

 Assurance provider record their work to:

• Assist the audit team to plan and perform the audit
• Assist relevant members of the team to direct and supervise work
• Enable the audit team to be accountable for its work
• Retain record of matters of continuing significance to future audits
• Enable an experienced auditor to carry out quality control reviews
• Enable an experienced auditor to conduct external inspections in accordance
with applicable legal, regulatory or other requirements.

OBJECTIVE 10-2
Understand form and content of
documentation

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10-2 FORM AND CONTENT OF DOCUMENTATION

 Form and content of WP are affected by matters such as:
• The size and complexity of the entity
• The nature of audit procedures to be performed
• The identified risks of material misstatement
• The significance of the audit evidence obtained
• The nature and extent of exception identified
• The need to document a conclusion or the basis for a conclusion not readily
determinable
• The audit methodology and tools used

10-2 FORM AND CONTENT OF DOCUMENTATION (CONT.)

Context example: Audit file

Workbook: page 218

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10-2 FORM AND CONTENT OF DOCUMENTATION (CONT.)

 Structure of WP (Workbook – page 219 & 220)
• The name of client • The sample size determined
• The reporting date • The work done
• The file reference of working paper
• A key to any audit ticks and symbols
• The date of preparation
• Appropriate cross-referencing
• The subject of the working paper
• The name of reviewer • The results obtained

• The date of review • Analysis of errors

• The objective of the work done • Other significant observations
• The source of information • The conclusion drawn
• How any sample was selected • The key points highlighted

Workbook – page 219

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10-2 FORM AND CONTENT OF DOCUMENTATION (CONT.)

10.2.1. Automated and Electronic WP

 Automated working papers

 Electronic working papers

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10-2 FORM AND CONTENT OF DOCUMENTATION (CONT.)

10.2.1. Automated and Electronic WP (cont.)
Automated WPs
 Overview of Automated WPs:
• Documenting of audit work much easier
• Programs aid preparation of WP, lead schedules, trial balance and the
financial statement
• Automatically cross referenced, adjusted and balanced by computer

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10-2 FORM AND CONTENT OF DOCUMENTATION (CONT.)

10.2.1. Automated and Electronic WP (cont.)

Automated WPs (cont.)
 Advantages of Automated WPs:
• The risks of errors is reduced
• The WP are neater and easier to review
• The time saved is substantial as adjustment can be made easily to all working papers.

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10-2 FORM AND CONTENT OF DOCUMENTATION (CONT.)

10.2.1. Automated and Electronic WP (cont.)

 Electronic WPs
• Electronic WPs do not involve any automatic calculations
• The form of database containing all of WPs make up an electronic audit file.
• Electronic WPs can be cross – referenced with the program, and then signed off
electronically by preparer and by reviews with various levels of authority
• These days, most documents are scanned and sorted electronically rather than in paper
form.

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10-2 FORM AND CONTENT OF DOCUMENTATION (CONT.)

10.2.2. Filing Working papers

 Permanent audit files

 Current audit files

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10-2 FORM AND CONTENT OF DOCUMENTATION (CONT.)

10.2.2. Filing Working papers (cont.)
Permanent audit file (PAF)
 Definition: PAF contains any information of continuing importance to the audit
 Content of PAF
 Engagement letters
 New Client Questionnaire
 The memorandum and articles of association
 Other legal documents such as prospectuses, leases, sale agreements
 Details of the history of the client’s business
 Board minutes of continuing relevance
 Previous years’ signed account and analytical procedures
 Accounting systems notes, previous years’ control questionnaires

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10-2 FORM AND CONTENT OF DOCUMENTATION (CONT.)

10.2.2. Filing Working papers (cont.)

Current audit file (CAF)

 Definition: contain any information of relevance to the current year’s audit.

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10-2 FORM AND CONTENT OF DOCUMENTATION (CONT.)

10.2.2. Filing Working papers (cont.)
 Current audit file (CAF)
 Content of CAF
• Financial statement • Audit planning memorandum
• Account checklists • A summary of unadjusted errors
• Management account details • Time budgets and summaries
• Reconciliations of management accounts
• Written representations from
and financial statements
management
• Report to partner including details of
significant events and errors • Notes of board minutes
• Review notes • Communication with third parties with
experts or other auditors

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10-2 FORM AND CONTENT OF DOCUMENTATION (CONT.)

10.2.2. Filing Working papers

 Current audit file (CAF)
 Content of WPs cover each audit area:
• A lead schedule
• Problems encountered and conclusion draw
• Audit plans
• Risk assessments
• Sampling plans
• Analytical procedures
• Detail of test of detail and test of control

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OBJECTIVE 10-3
Understand safe custody and retention of
documentation

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10-3 SAFE CUSTODY AND RETENTION OF DOCUMENTATION

 ICAEW requires all firms should have a document retention policy and
that Registered Auditors to keep all audit working papers required by
auditing standards for at least 6 years from the end of the accounting
period to which they relate
 Assurance work must be confidential and good security procedures
 Paper documents must be securely, in locked premises
• Electronic documents should be protected by electronic controls

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OBJECTIVE 10-4
Identify ownership of and right of access to
documentation

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10-4 OWNERSHIP OF AND RIGHT OF ACCESS TO DOCUMENTATION

 WPs are the property of the assurance providers

 Report is the property of the client once it has been issued
 Assurance providers must follow ethical guidance on the confidentiality of
working papers
 The Firm may show WPs to client at their discretion.
 Information should not be made available to third parties without the permission
of the client.

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Interactive question 1: Documentation

The auditor will prepare documentation in relation to the fieldwork carried out on
an assurance engagement. Indicate whether the following are, or are not, valid
reasons for preparing such documentation.
Requirement

(a) To comply with the law  Valid  Not valid

(b) To provide a record of matters of continuing  Valid  Not valid
significance to future audits.
(c) To facilitate review by senior staff.  Valid  Not valid
(d) To prove adherence to ISAs in a litigious situation.  Valid  Not valid

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Further question practice

Workbook: page 225

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CHAPTER 10: DOCUMENTATION

Summary of this chapter 10

Workbook: page 224

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