1. AUDIT DOCUMENTATION (ISA 230) 2. Planning an audit of financial statements (ISA 300) Khawar Shahzad Jaffar ACCA, CPA
ISA 230 – Nature and Purposes of Audit Documentation 2. Audit documentation that meets the requirements of this ISA and the specific documentation requirements of other relevant ISAs provides: a.
Evidence of the auditor’s basis for a conclusion about the achievement of the overall objectives of the auditor; and
b.
Evidence that the audit was planned and performed in accordance with ISAs and applicable legal and regulatory requirements.
ISA 230 – Nature and Purposes of Audit Documentation 3. Audit documentation serves a number of additional purposes, including the following:
Assisting the engagement team to plan and perform the audit.
Assisting members of the engagement team responsible for supervision to direct and supervise the audit work, and to discharge their review responsibilities in accordance with ISA 220.
Enabling the engagement team to be accountable for its work.
Enabling the conduct of quality control reviews and inspections in accordance with ISQC 1 or national requirements that are at least as demanding.
Enabling the conduct of external inspections in accordance with applicable legal, regulatory or other requirements.
ISA 230 – Objective 5. The objective of the auditor documentation that provides:
is
to
prepare
a. A sufficient and appropriate record of the basis for the auditor’s report; and b. Evidence that the audit was planned and performed in accordance with ISAs and applicable legal and regulatory requirements.
ISA 230 – Definitions 6. For purposes of the ISAs, the following terms have the meanings attributed below: a. Audit documentation – The record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached (terms such as “working papers” or “work papers” are also sometimes used). b. Audit file – One or more folders or other storage media, in physical or electronic form, containing the records that comprise the audit documentation for a specific engagement.
ISA 230 – Definitions c. Experienced auditor – An individual (whether internal or external to the firm) who has practical audit experience, and a reasonable understanding of: d. Audit processes; e. ISAs and applicable legal and regulatory requirements; f.
The business environment in which the entity operates; and
g. Auditing and financial reporting issues relevant to the entity’s industry.
ISA 230 – Requirements Timely Preparation of Audit Documentation 7. The auditor shall prepare audit documentation on a timely basis. Documentation of the Audit Procedures Performed and Audit Evidence Obtained Form, Content and Extent of Audit Documentation 9. The auditor shall prepare audit documentation that is sufficient to enable an experienced auditor, having no previous connection with the audit, to understand:
ISA 230 – Requirements a. The nature, timing and extent of the audit procedures performed to comply with the ISAs and applicable legal and regulatory requirements; b. The results of the audit procedures performed, and the audit evidence obtained; and c. Significant matters arising during the audit, the conclusions reached thereon, and significant professional judgments made in reaching those conclusions.
ISA 230 – Requirements 9. In documenting the nature, timing and extent of audit procedures performed, the auditor shall record: a. The identifying characteristics of the specific items or matters tested; b. Who performed the audit work and the date such work was completed; and c.
Who reviewed the audit work performed and the date and extent of such review.
ISA 230 – Requirements 10. The auditor shall document discussions of significant matters with management, those charged with governance, and others, including the nature of the significant matters discussed and when and with whom the discussions took place. 11. If the auditor identified information that is inconsistent with the auditor’s final conclusion regarding a significant matter, the auditor shall document how the auditor addressed the inconsistency.
ISA 230 – Requirements Departure from a Relevant Requirement 12.If, in exceptional circumstances, the auditor judges it necessary to depart from a relevant requirement in an ISA, the auditor shall document how the alternative audit procedures performed achieve the aim of that requirement, and the reasons for the departure. Matters Arising after the Date of the Auditor’s Report 14.If, in exceptional circumstances, the auditor performs new or additional audit procedures or draws new conclusions after the date of the auditor’s report, the auditor shall document:
ISA 230 – Requirements a.
The circumstances encountered;
b.
The new or additional audit procedures performed, audit evidence obtained, and conclusions reached, and their effect on the auditor’s report; and
c.
When and by whom the resulting changes to audit documentation were made and reviewed.
Assembly of the Final Audit File 14.The auditor shall assemble the audit documentation in an audit file and complete the administrative process of assembling the final audit file on a timely basis after the date of the auditor’s report.
ISA 230 – Requirements 15.After the assembly of the final audit file has been completed, the auditor shall not delete or discard audit documentation of any nature before the end of its retention period. 16.In circumstances other than those envisaged in paragraph 13 where the auditor finds it necessary to modify existing audit documentation or add new audit documentation after the assembly of the final audit file has been completed, the auditor shall, regardless of the nature of the modifications or additions, document: a.
The specific reasons for making them; and
b.
When and by whom they were made and reviewed.
ISA 300 – The Role and Timing of Planning 2. Planning an audit involves establishing the overall audit strategy for the engagement and developing an audit plan. Adequate planning benefits the audit of financial statements in several ways, including the following:
Helping the auditor to devote appropriate attention to important areas of the audit.
Helping the auditor identify and resolve potential problems on a timely basis.
Helping the auditor properly organize and manage the audit engagement so that it is performed in an effective and efficient manner.
ISA 300 – The Role and Timing of Planning
Assisting in the selection of engagement team members with appropriate levels of capabilities and competence to respond to anticipated risks, and the proper assignment of work to them.
Facilitating the direction and supervision of engagement team members and the review of their work.
Assisting, where applicable, in coordination of work done by auditors of components and experts.
ISA 300 – Objective 
The objective of the auditor is to plan the audit so that it will be performed in an effective manner.
ISA 300 – Requirements Involvement of Key Engagement Team Members 5. The engagement partner and other key members of the engagement team shall be involved in planning the audit, including planning and participating in the discussion among engagement team members. Preliminary Engagement Activities 7. The auditor shall undertake the following activities at the beginning of the current audit engagement: a.
Performing procedures required by ISA 220 regarding the continuance of the client relationship and the specific audit engagement;
ISA 300 – Requirements b. Evaluating compliance with relevant ethical requirements, including independence, in accordance with ISA 220; and c.
Establishing an understanding of the terms of the engagement, as required by ISA 210.
Planning Activities 7. The auditor shall establish an overall audit strategy that sets the scope, timing and direction of the audit, and that guides the development of the audit plan.
ISA 300 – Requirements 8. In establishing the overall audit strategy, the auditor shall: a.
Identify the characteristics of the engagement that define its scope;
b.
Ascertain the reporting objectives of the engagement to plan the timing of the audit and the nature of the communications required;
c.
Consider the factors that, in the auditor’s professional judgment, are significant in directing the engagement team’s efforts;
d.
Consider the results of preliminary engagement activities and, where applicable, whether knowledge gained on other engagements performed by the engagement partner for the entity is relevant; and
e.
Ascertain the nature, timing and extent of resources necessary to perform the engagement.
ISA 300 – Requirements 9. The auditor shall develop an audit plan that shall include a description of: a.
The nature, timing and extent of planned risk assessment procedures, as determined under ISA 315.
b.
The nature, timing and extent of planned further audit procedures at the assertion level, as determined under ISA 330.
c.
Other planned audit procedures that are required to be carried out so that the engagement complies with ISAs.
ISA 300 – Requirements 10. The auditor shall update and change the overall audit strategy and the audit plan as necessary during the course of the audit. 11. The auditor shall plan the nature, timing and extent of direction and supervision of engagement team members and the review of their work.
ISA 300 – Requirements Documentation 12. The auditor shall include in the audit documentation: a. The overall audit strategy; b. The audit plan; and c.
Any significant changes made during the audit engagement to the overall audit strategy or the audit plan, and the reasons for such changes.
ISA 300 – Requirements Additional Engagements
Considerations
in
Initial
Audit
13. The auditor shall undertake the following activities prior to starting an initial audit: a. Performing procedures required by ISA 220 regarding the acceptance of the client relationship and the specific audit engagement; and b. Communicating with the predecessor auditor, where there has been a change of auditors, in compliance with relevant ethical requirements.