The Audit & Its Importance

The auditing of documentation entangles around the examination of a company’s financial positions/cash flow and accounting systems. These auditors are librated of the underlying company as well as can be external or internal depending on the type of audit. Auditors are required to conduct different procedures and collect evidence to support their work during audits. To know more about what it is & why it is essential and much more. Read On!

 

What is Audit Documentation?

Audit documentation records procedures conducted, evidence obtained, and conclusions collected as part of an audit process. However, audit documentation also includes the conclusions that auditors collect based on their work. 

 

Audit documentation is one of the most important aspects of the auditing process. There comes the International Standards on Auditing (ISAs) to provide guidance to the auditors on audit documentation, objectives, and general principles governing an audit of financial statements.

 

 Generally, the auditing report is prepared in written form but as of now, numerous auditors prepare it in the form of digital form. 

 

Key points -

  • Records of audit procedures performed 
  • Audit evidence obtained 
  • The conclusion reached by the auditors

 

What is the Importance of Auditing Documentation?

 

Auditing documentation is an essential part of auditing procedures. The working paper prepared by the auditor, the explanations provided to the auditor, and the conclusions reached, all are evidenced by documentation. 

Insufficient or poor documentation may be assessed as a drawback while performing an audit. However, if there is no working paper to prove, then it may raise the question of the work done, in case any material misstatement is reported. Poor or incomplete documentation can draw the auditor into difficulties. 

 

Documentation is important because -

  • It supports other auditors' understanding of the procedures considered & the conclusions arrived at.
  • It is a piece of the quality control approach over audit work.
  • It furnishes proof of the auditor’s assignment in case of future reference.
  • can be used as a defense if the auditor is ever blamed for negligence.
  • Some companies/firms also use it as a training tool for junior auditors.
  • It helps other auditors for future reviews and examinations.
  • Audit documentation describes the roles and responsibilities of individuals in an audit.

 

Factors to consider when document audit work

 

It is not feasible for the auditors to audit all the aspects they have done during their audit working days. Therefore, the auditors need to decide (what details should be recorded in the content of audit documentation) based on their experience & professional judgment factors. In such cases, the auditor has to consider the following factors while documenting their audit work.

 

  • The nature and extent of exceptions that are found 
  • The importance of audit proofs that are collected
  • The nature of the audit process that is essential to be done
  •  The complexities & size of the audited business 
  • The identified risks of material misstatement pertaining to financial statements

 

Moreover, the audit’s content can be different from one audit document to another due to the nature of the engagement & audit procedures. The audit process also can be distinct from one client to another based on the risks and nature of the client’s business. 

 

Examples of Audit Documentation

Audit documentation contains various types of records. Audit firms generally dictate the documents that their auditors need to sustain. Auditing standards also provide some guidance for the records. However, there is no checklist for the audit documentation process. For most audit work, the following are the elements that are included in audit documentation-

 

  • Audit plan documents
  • Checklist 
  • The analysis is done by the auditor
  • Confirmation letters
  • Representation letters 
  • Documents of clients’ records
  • Summaries of essential findings



Note - It is worth noting that the ISAs demand auditors to fulfill the two types of criteria when preparing audit documentation. 

 

  • The first is to prepare audit documentation that furnishes the evidence of their base to be at a conclusion of all objectives. 
  • The second criterion is that the prepared records must denote - The auditor has planned & performed as per the guidance of ISAs.

 

If there is any other regulation standard applicable to the auditor, then they must also confirm it. Standard of auditing 230 made certain permissible administrative changes to be made out in the audit documentation within 60 days from the date of the auditor’s report. Such as deleting or dumping displaced documentation, sorting, & cross-referencing working papers, etc. 



Note-All the information expressed above in the article is carried from credible and authentic resources and has been published after moderation. Any change in the information other than fact must be believed as a human error. The article/blog we write is to provide updated information. You can raise any query on matters related to article content at marketing@myitronline.com. 

 

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