Which one of the following statements about audit documentation is not correct ?

Correct — B, (b) Audit file and audit documentation are the same. The booklet sets 'not' in bold italic — the item asks which statement is NOT correct — and this is the one that collapses two defined terms into each other.

Standard on Auditing 230, Audit Documentation, defines both terms and defines them separately.

AUDIT DOCUMENTATION means the record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached. The standard adds that terms such as 'working papers' or 'workpapers' are also sometimes used to describe it.

AUDIT FILE means 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.

So the documentation is the CONTENT — what the auditor recorded — and the file is the CONTAINER in which that content is assembled for a particular engagement. One is the record, the other the folder. They are related as a book is related to the shelf it sits on, and no more identical than that. The distinction is not pedantry: SA 230 attaches different obligations to the two, requiring the auditor to assemble the audit documentation in an audit file and complete the administrative process of assembly on a timely basis after the date of the auditor's report — ordinarily not more than sixty days after it — and then to retain the file for a period no shorter than seven years from the date of the auditor's report, or the date of the group auditor's report where that is later.

The distinction is also the reason auditing practice keeps PERMANENT and CURRENT audit files. The permanent file holds material of continuing relevance across engagements — the memorandum and articles, extracts of important legal documents, the organisation chart, a note on the accounting system and internal controls, copies of past financial statements. The current file holds material relating to the year under audit — the audit programme, the trial balance, confirmations, working schedules, minutes of the year's meetings, the management representation letter. Two files, one body of documentation.

The other three statements are each drawn from SA 230 and are correct, as the notes below set out.

Why the others are wrong

• (a)Audit documentation includes audit programmes. — This statement IS correct. SA 230 gives examples of audit documentation and audit programmes are among them, along with analyses, issues memoranda, summaries of significant matters, letters of confirmation and representation, checklists, and correspondence including e-mail concerning significant matters. An audit programme is the written plan of the procedures to be carried out on each area of the audit, ordinarily with space against each step for the initials of the person who performed it and a reference to the working paper produced — so it is simultaneously an instruction, a record of what was done and a control over the work. SA 300 explains its place: the overall audit strategy sets the scope, timing and direction of the audit, and the more detailed audit plan, of which the programme forms part, follows from it.
• (c)Audit documentation includes summaries of significant matters. — This statement IS correct, and summaries of significant matters are among the examples SA 230 itself lists. Their purpose goes beyond record-keeping. SA 230 requires the documentation to be sufficient to enable an experienced auditor, having no previous connection with the audit, to understand the nature, timing and extent of the procedures performed, their results and the evidence obtained, and the significant matters arising with the conclusions reached and the significant professional judgments made in reaching them. A summary of significant matters — sometimes called a completion memorandum — is what makes that possible without a reader having to reconstruct the audit from the raw papers. It is also the document a reviewer or a regulator turns to first.
• (d)Audit documentation may be recorded on paper or electronic or any other media. — This statement IS correct. SA 230's definition of the audit file expressly contemplates 'one or more folders or other storage media, in physical or electronic form', and the standard is drafted to be neutral as to the medium in which documentation is prepared and retained. Working papers may be on paper, on film, in electronic form or on another medium; what matters is that the record satisfies the sufficiency test and is protected. The standard requires the auditor to assemble the documentation and to adopt appropriate procedures for maintaining its confidentiality and safe custody, its integrity, accessibility and retrievability, and its retention for the required period. Note the wording as printed in the option, 'on paper or electronic or any other media', whose three items are not grammatically parallel; the substance is correct.

SA 230, Audit Documentation, governs what the auditor records and how the record is kept. Its central requirement is a standard of sufficiency measured by a hypothetical reader: the documentation must be such that an EXPERIENCED AUDITOR having no previous connection with the audit can understand the nature, timing and extent of the audit procedures performed, the results and the audit evidence obtained, and the significant matters arising during the audit together with the conclusions reached and the significant professional judgments made in reaching them. To meet that standard the auditor must record the identifying characteristics of the items tested, who performed the work and the date it was completed, and who reviewed it and when. Documentation serves several purposes at once — it assists the engagement team in planning and performing the audit, enables supervision and review, records evidence that supports the auditor's opinion, provides a record of matters of continuing significance for future audits, and enables quality control reviews and external inspections. The administrative timetable is part of the standard: assembly of the final audit file is to be completed on a timely basis after the date of the auditor's report, ordinarily not more than sixty days after it, and thereafter the auditor may not delete or discard documentation before the end of the retention period, which is not shorter than seven years from the date of the auditor's report. Where the auditor finds it necessary to modify or add to documentation after assembly, he must record the reasons, when and by whom the change was made, and who reviewed it.

Key facts

• SA 230 defines audit documentation as the record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached; 'working papers' is used as a synonym.
• SA 230 defines an audit file as 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.
• The documentation is the content; the file is the container — they are not the same thing.
• Documentation must enable an experienced auditor with no previous connection with the audit to understand the nature, timing and extent of the procedures, their results and the evidence obtained, and the significant matters and conclusions.
• The auditor must record who performed the work and the date it was completed, and who reviewed it and when.
• Examples of audit documentation include audit programmes, analyses, issues memoranda, summaries of significant matters, letters of confirmation and representation, checklists and correspondence.
• Assembly of the final audit file is to be completed on a timely basis after the date of the auditor's report, ordinarily not more than sixty days after it.
• The retention period for the audit file is not shorter than seven years from the date of the auditor's report.
• Audit files are kept as permanent files, holding matter of continuing relevance, and current files, holding matter relating to the year under audit.

Common traps

• Answering the positive question. Three of the four statements are drawn from the standard.
• Treating the audit file and the audit documentation as interchangeable. SA 230 defines them separately.
• Assuming documentation must be on paper. The standard is medium-neutral.
• Confusing the sixty-day assembly period with the seven-year retention period.

• practice — not a real PYQ

  Under SA 230, the assembly of the final audit file is ordinarily to be completed within :

  • (a)Thirty days after the date of the auditor's report
  • (b)Sixty days after the date of the auditor's report
  • (c)Ninety days after the date of the auditor's report
  • (d)One year after the date of the auditor's report

  Answer(b) Sixty days after the date of the auditor's report

• practice — not a real PYQ

  Under SA 230, audit documentation must be sufficient to enable which of the following to understand the work done ?

  • (a)The management of the entity
  • (b)An experienced auditor having no previous connection with the audit
  • (c)Any shareholder of the entity
  • (d)The audit committee alone

  Answer(b) An experienced auditor having no previous connection with the audit