How To Assemble Audit Documentation 

a person working on financial audit documentation

Audits, and thus audit documentation, are a normal part of business and life. They happen all day and every day around you, whether you realize it or not. 

There are many types of audits covering topics such as financial audits, regulatory compliance audits, internal audits, and so much more. Each type of audit is different from the next as each all have their own documents needed to make them comprehensive and successful. 

When it comes to actually performing audits, the auditor has a comprehensive process of recording all the procedures your company undergoes; this evidence and analysis helps them come to a conclusion – this is their job and what a “Audit Documentation” actually does.

 

Financial Audits

Financial auditing is the most common type of audit, from either internally in the company or from a government agency such as the Internal Revenue Service (IRS).

When it comes to internal auditing, it is important to perform this on a consistent basis. One of the biggest benefits is to just know that your finances are in good standing and also to keep an agency such as the IRS off your doorstep where they can seize assets while performing an audit. 

However, when it comes to doing an audit, the auditor must record their procedures performed. Some of the procedures in a financial audit are:

  • Inspection: This is the start of any audit process, inspecting the record and documents that the company may have. In today’s day and age that can be either physical or digital records.
  • Observation: Observing the process of record keeping is next. This will show you how information and data are kept, stored, and processed, and it may lend some light on other steps in the auditing process. Records such as time and place that these observations happened should be kept in the audit documentation as well.
  • External Confirmation: Making sure you have permission to audit is a very important thing. Most people and companies will not let you see internal records if you do have the right paperwork to say you are allowed to do so. When performing an internal audit of a company, it is important to have an unbiased third party available to do the audit and audit documentation. 
  • Recalculation: This is the step in procedures where you check the math of the documents the person and/or company has provided to you for accuracy. This is another step to glimpse into the effectiveness of their record keeping.
  • Reperformance: The auditor in this step will independently perform a task in which the audit team at the company they are auditing does. This gives the auditor a chance to perform one of the most reliable tests for control in an audit and ample notes for the documentation, which is helpful for gathering direct evidence. 
  • Analytical procedures: This step is performed as an overall review of all the financial statements. This step is used by the auditor to make sure the company and/or person have an understanding of the procedures they have to follow before and while the auditing happens in terms of record keeping. 
  • Inquiry: While listed last here, inquiry is used throughout the whole auditing process. Any inquiry is normally paired with any other procedure the auditor will take to make sure compliance is happening. Within the audit documentation, the auditor has to prepare everything. A single inquiry should be noted down and time tracked as well as whether the inquiry was met or not met. 

a picture of a graph, representing the importance of audit documentation

Why Audit Documentation is important

All these processes help to show how an auditor got their evidence and to support every conclusion that is made in the audit. They will also show that all the accounting records either agreed with, or were reconciled during, the audit to the financial statements provided to the auditor. 

While all the procedures listed above may not need to be used, the ones you do use need to be documented and also explained why they were necessary for you to perform your audit. This will help keep the auditor in compliance and make sure no wrongdoing happened during the course of the audit which could skew results.  

Having an auditing document will also help with the planning of how to carry out the audit along with showing the performance of the auditor and help supervise the auditor if needed.

Any audit documentation should be done through enough that you are backing up the evidence and the procedures that you did but also so if someone else were to review your document, that they also can understand the nature in which you are auditing, the extent, the results you came to along with how you obtained the evidence and lastly how your conclusions were reached.

 

Types of Audit Documentation Files

When it comes to providing auditing services, there are different types of files you should be keeping on your client, Permanent and Current files.

Permanent files refer to the type of files you will need to keep for a long period of time. These files most likely will not change from year to year as you perform yearly audits. The types of documents in permanent files are things such as corporate charters, long term contracts, internal controls, and terms of stock and bond issued.

Current files are the type of files that will change based on the audit year you are working on. These are files such as current financial statements, meeting paperwork, audit plans, and programs, to name a few. 

An audit is something that is performed every day and all the time in the business world, and even the public world. Making sure the auditor is kept true to themselves and follows the necessary steps to perform a fair audit is key. Having good structured documentation will only help the process in the auditing moments but also as time goes on and the audits get reviewed. In the audit process, it is critical to ensure your company and documentation are on track; this can be a laborious task, but look no further. The expert team of technical writers at Essential Data are here to help ensure your company is on track with documentation of all types!

 

Whether you need a team of consultants to produce a complete line of documentation or a single technical writer for a brief project, Essential Data’s Engagement Manager will lead the project from start to finish. At Essential Data Corporation, the quality of our work is guaranteed. Contact us today to get started. (800) 221-0093 or sales@edc.us

 

Written by Dylan Friebel

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