ACT501 Chap.8 Audit Documentation and Assembling the Audit File
Audit Documentation and Assembling the Audit File
Two purposes pointing in different directions
Audit documentation, or working papers, is the written record of the work done including planning, of the evidence that bore on it, and of the conclusions reached. Its first purpose is to hold a full and fitting record of what the report was founded on, which faces inwards towards the opinion.
Its second is to show that the work was carried out under the auditing standards that applied and under whatever law and regulation governed it, which faces outwards towards anyone later asking whether the standard was met.
A conclusion that was reached but never recorded is, for the second purpose, a conclusion that cannot be shown to have been reached.
Five further functions
Documentation assists the team to plan and perform the audit. It helps those in charge of supervision to direct, oversee and review what was done, including engagement quality reviews.
It shows the accountability of each team member for their own share of the work. It keeps a note of anything that will still matter when the next audit comes round. And it enables external inspections.
The third is the unexpected one, and it is why the format rules require names and dates rather than treating them as clerical.
The standard of detail is a named reader
What is written down must be enough for a seasoned auditor who has never touched this engagement to follow three things: what work was done, when it happened and how widely it went, with the name and date of whoever did it and of whoever reviewed it and how far that review went; what the work turned up and what evidence came with it; and the significant matters that arose along the way with the conclusions settled on them.
That seasoned auditor is defined as somebody with real experience on engagements and a fair grasp of the way an audit runs, of the standards and the requirements that bind it, of the setting the business trades in, and of the accounting and auditing questions its industry raises.
So the file need not explain what an audit is; it must explain what this audit did.
What a complete file contains
Records of how the audit was planned and carried out, of the work done, of the evidence it produced and of the conclusions finally reached.
The examples given run from the broadest decisions to the narrowest evidence: the overall audit strategy and the audit plan; audit programmes recording the nature, timing and extent of procedures; issues memoranda; analyses and analytical procedure worksheets;
internal control questionnaires; letters of confirmation and representation; summaries of significant matters; correspondence including electronic mail on significant matters; and abstracts or copies of the entity's own records such as significant contracts.
Format, and the element that fails most often
Every paper carries a heading with the entity name, the title of the paper and the year-end date;
an index number so a trail runs from the statements into the file; cross-references linking a paper to the others it draws on; tick marks recording what the auditor did to an item, each carrying a written key that explains it; signatures or initials of preparer and reviewer; and the dates of performance and review.
The tick mark is the element that fails in practice, because it is quick to apply and the meaning feels obvious at the time. A column of ticks with no legend records that somebody looked at something, which fails the experienced-auditor test outright.
Two files, and how long each lives
An audit file is a folder, a set of folders or any other store, on paper or electronic, holding the papers for one engagement.
The permanent file holds material with continuing implications: the corporate charter, the organisation chart, the chart of accounts, important contracts, internal control documentation, the terms of stock and bond issues, and prior years' analytical procedures, statements and reports.
The current file holds what belongs to this engagement and period: the current statements and report, the engagement letter, staff assignment notes, the assessment of audit risks, the determination of materiality, and the plan and programmes.
The papers belong to the auditor, and so do documents the entity drew up when asked to, yet none of them may go to anyone else without the client agreeing, because of the confidentiality principle.
The rule that bites after the file closes
The clerical job of putting the finished file together is done promptly once the report carries a date, and in any case inside sixty days of its release.
After that, documentation may not be deleted or discarded before the end of its retention period, which is an absolute prohibition. Adding to or modifying documentation is not forbidden; doing so silently is. Any modification or addition after assembly must record the specific reasons for it, and when and by whom it was made and reviewed.
What this chapter covers
- 01
Two purposes: the basis for the report, and evidence of compliance
- 02
Five further functions, including individual accountability
- 03
The experienced-auditor standard of detail
- 04
What the file must let a stranger understand
- 05
Contents, from strategy through programmes to evidence
- 06
Six format elements, and the tick mark that fails without a legend
- 07
Indexing and cross-referencing as a two-way trail
- 08
Permanent and current files, and the test of continuing significance
- 09
Ownership, confidentiality and retention minima
- 10
Sixty days to assemble, and what may happen afterwards
A conclusion added after assembly: permitted, forbidden, or conditional?
- 3State what the prohibition after assembly actually covers.
- 3State the condition attached to additions and modifications.
- 2Identify the separate and more serious question behind the filing one.
Key terms
- Audit Documentation
- The written record of the work done, of the evidence that bore on it and of the conclusions reached. Also called working papers.
- Experienced Auditor
- Somebody with real experience on engagements and a fair grasp of the way an audit runs, of the standards, of the setting the business trades in and of the accounting and auditing questions its industry raises.
- Permanent File
- Documentation with continuing implications for the entity, such as the corporate charter, important contracts and internal control documentation.
- Current File
- Documentation belonging to one engagement and period, such as the engagement letter, the materiality determination and the audit programmes.
- Cross-referencing
- Linking a working paper to the other papers that support it or that it supports, so a reviewer can move between a figure and its evidence in both directions.
- Tick Mark
- A mark put beside an item to record an action the auditor took, which must always carry a written key explaining what that action was.
- Lead Schedule
- A summary of the accounts making up one group, which must agree to the nominal ledger, to the adjustments made and to the audited figures.
Audit Documentation and Assembling the Audit File FAQ
How detailed does a working paper have to be?
Detailed enough that an experienced auditor with no previous connection to the engagement could understand three things from it: the nature, timing and extent of the procedures performed together with who did the work and reviewed it and when, the results and the evidence obtained, and the significant matters that arose with the conclusions reached.
The test is a reader rather than a length, and because that reader is defined as competent in auditing and in the entity's industry, the file does not have to explain the subject, only this engagement.
Can anything be changed after the file is assembled?
Yes, but never silently, and nothing may be removed. The absolute prohibition is on throwing anything out, or wiping it, before its keeping period has run out. Adding new documentation or modifying existing documentation remains possible, on condition that the specific reasons are documented together with when the change was made, by whom, and by whom it was reviewed.
The sixty-day period applies to completing the assembly of the final file after the report is released, not to a general freeze.
What is the difference between owning the file and being free to release it?
Ownership and confidentiality point in opposite directions and both hold. The working papers belong to the auditor, and so do documents the entity drew up when asked to, so the client has no right to take them away. At the same time none of them may go to anyone else without the client agreeing, because the professional code imposes a duty of confidentiality over information picked up during the work.
Owning something and being free to pass it on are two different questions.
Exam move
Take a single figure from any set of accounts and draw the trail backwards: statement, working trial balance, lead schedule, supporting schedule, source document. Give each level an index reference of your own invention and write what would be cross-referenced in each direction. Ten minutes of that makes the format rules obvious rather than arbitrary, and it is the same trail a reviewer or an inspector walks.
Working through Audit Documentation and Assembling the Audit File in ACT501? Sia is AskSia’s AI Accounting tutor — ask any ACT501 Audit Documentation and Assembling the Audit File question and get a clear, step-by-step explanation grounded in how ACT501 is taught and assessed. Read this chapter free, then take your hardest questions to Sia.
