Auditing Documentation

 

Did you know that in recent years, business engagement teams have started to fumble the ball and cut corners on PCAOB standards regarding audit documents? As the Johnson Global Accountancy says, “Audit Documentations Failures Have Become a Dangerously Easy Opportunity”.

Side Note: PCAOB stands for Public Company Accounting Oversight Board. The PCAOB is a nonprofit organization that oversees the audits of public companies.

What is the purpose of audit documents?

The purpose of an audit document is to get an overview of a company’s financial statements to make sure they are compliant with laws and regulations. Audit documentation is a form of document that shows procedures applied in an auditing process by the auditor. Similarly, an auditor will include in the audit document evidence obtained and conclusions reached.

In addition, the content of each document can vary in quality and type based on the professional’s judgment. Audit Documents can also hold specific document requirements – Appendix A Paragraph 15. Above all, an audit document needs to aid the auditor in the process of conducting and supervising an audit.

Audit Documentation Standards; Appendix A Paragraph 15

 

What are the different types of audit evidence?

The type of evidence used can vary in each audit document to achieve a specific purpose. However, here are some of the most commonly used forms of evidence.

Physical analysis

Auditors will typically do this type of analysis to confirm the existence of assets and/or their condition. This type of examination is the major source to obtain audit evidence on fixed assets.

Confirmations

This type of documentation relies on third parties to confirm various aspects of financial statements. For example, third parties can be entities such as a bank that confirms accounts payable records.

Documentary evidence

This evidence consists of internal processing documents, emails, and logs. Auditors use this documentation to vouch and trace parts of the auditing procedure.

Analytical procedures

Auditors will usually use this procedure to perform their calculations. Thus providing accurate evidence and truth to financial statements and any accounting record is given by the clients.

Oral evidence

Auditors will typically interrogate company leaders regarding business operations before designing the auditing procedures

Accounting Systems

This typically serves as a source of auditing evidence. It allows the auditor to access financial reporting documents and anything interconnected with financial statements.

Re-performance

A company’s control risks identify shortcomings by key internal control processes.

Observational Evidence

The auditor will observe and take notes of how a client processes their work. They specifically observe how the client goes about handling operations, policies, and protocols to find their weaknesses. 

What do audit documents include?

Audit documents will typically show that we have observed certain standards in the fieldwork. This includes:

  • Someone did properly and supervised work
  • A certain degree of internal control has been obtained to plan, determine, and time the extent to which they performed tests in the audit process.
  • Sufficient evidence is obtained during the auditing process so that they form an opinion on a reasonable basis.

Interestingly enough, audit documents go by another term; audit evidence. Moreover, examples of documents/evidence can consist of audit programs, analysis, confirmation/representation letters, entity documentation copies, and schedules prepared by the auditor. Similarly, this type of documentation can be in the form of paper, electronic, or any other form of media. 

When determining the extent of audit documents, the auditor should consider the following factors: 

  • Material misstatement related to an assertion, account, or class transaction.
  • The degree of judgment associated with performing tasks while evaluating results.
  • Nature of the auditing process
  • Up-to-date evidence with approval
  • Any exceptions identified, what are their nature and extent?
  • The possibility of not being able to document the basis of a conclusion from the available documentation of work performed. 

Furthermore, auditors should also include documentation of any issues they see based on their judgment. Similarly, auditors also need to include evidence to back up their judgment on the issues addressed and their conclusions reached. Here are some significant audit issues:

  • Significant issues involving appropriate selection, application, and consistency of accounting principles concerning financial statements can also include matters of related disclosure. 
  • Auditing procedure results that indicate financial statements and/or disclosures could be inaccurate in the content. Similarly, it includes auditing procedures that need to be modified and/or updated.
  • Any situations that can hinder the auditor from completing the auditing process and reaching a conclusion.
  • Any sort of findings that can potentially cause the auditor to modify their reports. 

A technical writer can help streamline the process of audit documentation and sort out all these potential issues.

Other things to consider with audit documents

The auditor has complete ownership of the audit document. Similarly, several states back up the legal details in their respective statutes. In addition, the auditor should maintain reasonable procedures long enough to meet their needs and satisfy any legal requirements for record retention.  

Moreover, auditors have an ethical obligation to censor and keep information about clients confidential. The auditor should adopt reasonable procedures that help maintain the confidentiality of a client’s information. In addition, they should also take into account adopting procedures that can restrict unauthorized access to the audit document. Lastly, at times, certain audit documents can serve as a reference tool. Clients should, however, not use it as a substitute for their accounting records.

Essentially, audit documents are used to document records of planning, work performance, procedures performed, evidence obtained, and conclusion reached by the auditor. If you would like more information on this or other forms of technical documentation, check our website for related articles.

 

How Essential Data Corporation can help you 

Whether you need a single technical writer for a brief project, or a team of consultants to produce a complete line of documentation, the quality of our work is guaranteed for you. Our clients’ work closely with an Engagement Manager from one of our 30 local offices for the entire length of your project at no additional cost. Contact us at (800) 221-0093 or sales@edc.us