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Aas 3 Documentation

This document outlines standards for audit documentation. It states that auditors should document important matters that provide evidence the audit was performed according to principles. Documentation includes working papers prepared by the auditor to aid in planning, supervision, and supporting the audit opinion. Working papers should record the audit plan, procedures, conclusions, and significant judgements. They should be sufficiently detailed for an auditor to understand the overall audit but do not need to document every observation. Ownership and custody of working papers belongs to the auditing firm.

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Rishabh Gupta
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315 views

Aas 3 Documentation

This document outlines standards for audit documentation. It states that auditors should document important matters that provide evidence the audit was performed according to principles. Documentation includes working papers prepared by the auditor to aid in planning, supervision, and supporting the audit opinion. Working papers should record the audit plan, procedures, conclusions, and significant judgements. They should be sufficiently detailed for an auditor to understand the overall audit but do not need to document every observation. Ownership and custody of working papers belongs to the auditing firm.

Uploaded by

Rishabh Gupta
Copyright
© Attribution Non-Commercial (BY-NC)
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Download as DOC, PDF, TXT or read online on Scribd
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Documentation

The following is the text of the Statement on Standard Auditing Practices (SAP) 3 issued by the
Council of the Institute of Chartered Accountants of India on "Documentation". This Statement
should be read in conjunction with the "Preface to the Statements on Standard Auditing
Practices" issued by the Institute.

Introduction

1. Statement on Standard Auditing Practices (SAP 1), "Basic Principles Governing an Audit"
(Paragraph 11), states: "The auditor should document matters which are important in providing
evidence that the audit was carried out in accordance with the basic principles." The purpose of
this Statement is to amplify the basic principle outlined above.

2. Documentation, for purposes of this Statement, refers to the working papers prepared or
obtained by the auditor and retained by him, in connection with the performance of his audit.

3. Working papers:

* aid in the planning and performance of the audit;

* aid in the supervision and review of the audit work; and

* provide evidence of the audit work performed to support the auditor's opinion.

Form and Content

4. Working papers should record the audit plan, the nature, timing and extent of auditing
procedures performed, and the conclusions drawn from the evidence obtained.

5. The form and content of working papers are affected by matters such as:

* The nature of the engagement.

* The form of the auditor's report.

* The nature and complexity of the client's business.

* The nature and condition of the client's records and degree of reliance on internal
controls.

* The needs in particular circumstances for direction, supervision and review of work
performed by assistants.

6. Working papers should be designed and properly organised to meet the circumstances of each
audit and the auditor's needs in respect thereof. The standardisation of working papers (for
example checklists, specimen letters, standard organisation of working papers) improves the
efficiency with which they are prepared and reviewed. It also facilitates the delegation of work
while providing a means to control its quality.

7. Working papers should be sufficiently complete and detailed for an auditor to obtain an overall
understanding of the audit. The extent of documentation is a matter of professional judgement
since it is neither necessary nor practical that every observation, consideration or conclusion is
documented by the auditor in his working papers.

8. All significant matters which require the exercise of judgement, together with the auditor's
conclusion thereon, should be included in the working papers.

9. To improve audit efficiency, the auditor normally obtains and utilises schedules, analyses and
other working papers prepared by the client. In such circumstances, the auditor should satisfy
himself that these working papers have been properly prepared. Examples of such working
papers are detailed analyses of important revenue accounts, receivables, etc.

10. In the case of recurring audits, some working paper files may be classified as permanent
audit files which are updated currently with information of continuing importance to succeeding
audits, as distinct from current audit files which contain information relating primarily to the audit
of a single period.

11. A permanent audit file normally includes:

* Information concerning the legal and organisational structure of the entity. In the case of
a company, this includes the Memorandum and Articles of Association. In the case of a
statutory corporation, this includes the Act and Regulations under which the corporation
functions.

* Extracts or copies of important legal documents, agreements and minutes relevant to


the audit.

* A record of the study and evaluation of the internal controls related to the accounting
system. This might be in the form of narrative descriptions, questionnaires or flow charts,
or some combination thereof.

* Copies of audited financial statements for previous years.

* Analysis of significant ratios and trends.

* Copies of management letters issued by the auditor, if any.

* Record of communication with the retiring auditor, if any, before acceptance of the
appointment as auditor.

* Notes regarding significant accounting policies.

* Significant audit observations of earlier years.

12. The current file normally includes:

* Correspondence relating to acceptance of annual reappointment.

* Extracts of important matters in the minutes of Board Meetings and General Meetings,
as are relevant to audit.

* Evidence of the planning process of the audit and audit programme.


* Analysis of transactions and balances.

* A record of the nature, timing and extent of auditing procedures performed, and the
results of such procedures.

* Evidence that the work performed by assistants was supervised and reviewed.

* Copies of communications with other auditors, experts and other third parties.

* Copies of letters or notes concerning audit matters communicated to or discussed with


the client, including the terms of the engagement and material weaknesses in relevant
internal controls.

* Letters of representation or confirmation received from the client.

* Conclusions reached by the auditor concerning significant aspects of the audit,


including the manner in which exceptions and unusual matters, if any, disclosed by the
auditor's procedures were resolved or treated.

* Copies of the financial information being reported on and the related audit reports.

Ownership and Custody of Working Papers

13. Working papers are the property of the auditor. The auditor may, at his discretion, make
portions of or extracts from his working papers available to his client.

14. The auditor should adopt reasonable procedures for custody and confidentiality of his working
papers and should retain them for a period of time sufficient to meet the needs of his practice and
satisfy any pertinent legal or professional requirements of record retention.

Effective Date

15. This Statement on Standard Auditing Practices becomes operative for all audits relating to
accounting periods beginning on or after July 1, 1985.

______________________________

*
Issued in July, 1985.

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