Preparing Audit Documentation

7/27/2019 Preparing Audit Documentation

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Performance SupportPreparing AuditDocumentation

The information in this performance support is provided to help you prepare audit documentation

for all of your audit work throughout the engagementfrom planning and controls to substantiveprocedures. This document discusses the importance of why all work needs to be documented,

details what to document in your working papers, defines review notes, provides guidance andprocedures for clearing review notes, and tips on how to safeguard your audit documentation.

This performance support will cover the following topics (click on a link to go to the topic):

WHY DO YOU DOCUMENT YOUR WORK? WHAT NEEDS TO BE DOCUMENTED?

o Details of Work Performed Illustrationo Referencing and Symbol Illustrationo Tickmark Worksheet Illustration

WHAT IS A REVIEW NOTE AND HOW DO I DEALWITH IT?o Review Note IllustrationTemplateo Review Note IllustrationExcel

WHAT DOES IT MEAN TO SAFEGUARD MY AUDIT DOCUMENTATION?WHY DO YOU DOCUMENT YOUR WORK?

Documentation is a key part of our audit; it provides support for the audit opinion given on the

financial statements and is evidence of the work we have done. Our documentation should bedetailed enough to enable an experienced auditor, having no previous connection with the audit,

to understand the nature, timing, and extent of the audit procedures performed, the results of theaudit procedures performed, the audit evidence obtained, any significant matters arising during

the audit, and conclusions reached.

If you do not document your work properly, then the audit field senior or audit manager may

think that you have not understood your assignment or have not completed the audit procedures.Proper documentation will also help to reduce the amount of review notes (review notes are

described later in this performance support) you receive, as your work will be easier to follow,

and you will not have to spend time amending poor documentation. Documentation prepared at

the time the work is performed is likely to be more accurate than documentation prepared

subsequently, therefore audit documentation should be prepared on a timely basis.

The regulatory environment has become more rigorous over time, with the auditing standards we

need to comply with becoming stricter. Proper and timely documentation of the work performed

is the best way to demonstrate compliance with these regulations and standards.

A common view to documentation is if its not documented, its not done.

For further information, refer to the Audit Approach Manual (AAM) P020: Prepare and Control

Audit Documentation and P040: Review of Audit Documentation.


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WHAT NEEDS TO BE DOCUMENTED?

Audit documentation is the record of audit procedures performed, relevant audit evidence

obtained, and conclusions the auditor reached (terms such as working papers or workpapers

are also sometimes used. The term refers to both electronic (Word, Excel, documents) andmanual (hard copy paper) documents. The terms working papers or workpapers are also

sometimes used.

Your audit documentation would typically include the following:

Identify the audit engagement. This means stating the entity name and period end (e.g.,XYZ Company, year ended December 31, 2012).

Who performed the work Audit documentation needs to have a preparer signoff. This means that any review notes

on the work can be directed to the appropriate person, even if the audit fieldwork has

been finished.

You will also need to sign off the detailed audit procedure(s) in the Risk Assessment andAudit Plan (RAAP) and Model Audit Program (MAP), including references to the audit

documentation where the testing was performed.

When you sign off on a working paper within , you also need to update the header andfooter to ensure the signoff is updated in the document. You can update the headers andfooters for all documents at once using the Document Manager button. Click onRefreshDocuments and select Update headers and footers.

When the work was performed The date the work was performed will allow the reviewer to establish a timeline for the

audit. If audit work is done in stages (e.g., partial testing at interim and completion of

testing of the risks at year-end), or if subsequent events occur, it will be clear when theinitial work was performed and what evidence was available at that time. This isespecially important if there is more than one audit visit, or if an audit takes place over

several months.

o For example, you have performed audit procedures for the inventory balance at theyear-end on 31 December, attending the entitys inventory count and found no errors.Two weeks later, the warehouse burns down and the entire inventory is destroyed.

By dating your work, the field senior can tell that it was performed before the fire and

thus needs to be updated for this subsequent event.

Details of the work performed The audit documentation should also state the risk that is being addressed, the audit

procedures performed, and the results of the audit testing performed on the identified

risks. The substantive procedures to perform can be found in the Model Audit Programs,both regarding test of controls and substantive procedures to address the risks identified.

Click on the link (by holding down the Ctrl key) to be taken toDetails of WorkPerformed Illustration.

A key/legend to any symbols/highlighting used in the audit documentation.


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A key/legend at the bottom of the audit documentation or in the tickmark sheet willexplain the meaning of any symbols or highlighting used. Even if a symbol/highlighting

seem obvious (such as symbol to show that the numbers add up correctly) you need

to explain what it means. You should ask your field senior if there any common symbolsthat you should use.

Click on the link (by holding down the Ctrl key) to be taken toReferencing and SymbolIllustration.

Referencing the work performed. All work performed should be cross referenced to andfrom any other audit documentation that it supports, or is supported by.

o Referencing is a top-down approach.o First, reference from the general ledger (top) to the leadsheet (down). It is essential

that the leadsheet matches the general ledger because, as auditors, we provide anopinion on the financial statements produced from the general ledger.

o Then, reference from the leadsheet (top) to the audit documentation (down) where weare performing our audit procedures. The audit documentation where we documentour testing should be referenced, finally, to any supporting documentation included inthe audit file.

o Referencing and cross referencing should be done in red so that it is clear to see. Manual (i.e., hard copies of audit documentation or working papers) should be denoted

with an M.

Cross-reference all audit documentation. Wherever you have referenced to, that audit documentation should show a reference

from, bringing you back to the original audit documentation. This means that whatever

audit documentation the field senior reviews, they will be able to find all of the linkeddocumentation.

For example: If the Nat West bank reconciliation is put on file and is given 5114 as itsaudit documentation reference number, the period-end balance should be referenced TO

the cash leadsheet on audit documentation 5110. Likewise, the Nat West balance listed

on the cash leadsheet (audit documentation 5110) must also show a reference FROM theNat West bank reconciliation audit documentation 5114. This way, whether looking at

the bank reconciliation or at the cash leadsheet, the reviewer will be able to find the other

piece of information.

As mentioned above, you must also fill in the relevant SAS documents (e.g., MAP) forthe tests performed and reference to the audit documentation where you have documentedthe audit work performed to address the risks.

Click on the link (by holding down the Ctrl key) to be taken toReferencing and SymbolIllustration.

Link the audit documentation where you have performed testing of risks to furtherinformation needed to support the work performed.


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If there is too much information to put on the face of a working paper then it should beput in a tickmark. Tickmarks are used to provide additional context and/or support for

information contained in a Working Paper or within an engagement item. A tickmark is a

reference to a separate worksheet within the audit documentation where more details aregiven. This is to prevent the leadsheet and document, where testing is performed, from

becoming too crowded with information, allowing the reviewer to see all of the pertinentinformation on the main working paper, such as what work was done and the results ofthe testing to address the risks of material misstatement. The reviewer can then go to the

tickmark worksheet to see further details; usually found as the last worksheet within the

audit documentation.

A tickmark reference should be put next to the information that needs further explanation.This clearly identifies what work was performed relative to the specific information,

prevents reviewer confusion of what the tickmark is referring to, and allows for clean,easy-to-read audit documentation.

Some member firms have guidelines for the type of information that should or should notbe included in a tickmark, such as, details of errors found. Some member firms prefer tohave this documented in the working paper so they can easily identify errors found.Check with your member firm on preferences in documentation.

o Click on the link (by holding down the Ctrl key) to be taken toTickmark WorksheetIllustration.

Each field senior may have different preferences for how work is documented and therefore it is

important to check with your field senior before starting any work.

For additional guidance on what needs to be documented, refer to the following:

Performance SupportUsing the Model Audit Program Performance SupportWorking with AAM - P020: Prepare and Control Audit Documentation and P040: Review of Audit

Documentation


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Details of Work Performed Illustration


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Referencing and Symbol Illustration


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Tickmark Worksheet Illustration

WHAT IS A REVIEW NOTE AND HOW DO I DEAL WITH IT?

A review note is a tool used by reviewers to comment on your audit documentation. These willbe raised by your field senior, audit manager, and/or engagement partner throughout the audit

and are comments you must address.

Review notes can cover all kind of points, from asking you to expand on an explanation you

documented to asking you to increase your sample size and do additional testing. You can also

raise review notes as reminders for yourself or for other team members if you have notcompleted your audit section before your last day on the engagement.

Review notes may be raised in different ways:

1) Using the Review Note Template working paper:Review Note Templatethis is a Word template within . Reviewers may use this

template for leaving queries on SAS documents and manual audit documentation as a

Per Details of Work Performed

Illustration, these are the

tickmark s referenced on the

working paper

This information is too

detailed to include on

the face of the working

paper, therefore we

document the details in

tickmarks shown here.

Any result,

misstatement, identified

etc. should be

documented in the main

working paper. Furtherdetail can still be in the

tickmark.

Any unused tickmarks should be left blank and any information in old tickmarks should be deleted and the

tickmark left blank. For example, if there is existing information for the prior period, that is no longer

applicable or incorrect in the current period, you should either delete the old information and leave the

tickmark blank or update the information for current period.


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review note cannot be created directly in these documents. That does not mean the

reviewer will not use this template for Word and Excel files as well.

2) Word and Excel electronic review notes using Tools:Word and Excel review noteselectronic review notes created using Tools within Word

and Excel. Reviewers may use this method to attach their comment directly to the auditwork about which they have a comment.

3) Manual hand written review note document (occasionally used).Click on the link (by holding down the Ctrl key) to be taken toReview Note Illustration

TemplateorReview Note IllustrationExcel

See below for some general dos and do nots of review notes:

a When you receive your reviewed audit documentation, read all the review notes first.If you have any questions about any of them, make sure you talk to the reviewerbefore attempting to answer them.

b

Review notes need to be cleared in the audit documentation and not in the actualreview note. This is because at the end of the audit, all review notes are removed

from the file. Thus, if the audit work is included in the review note, it will be lost.

c For example, the field senior may leave a review note asking you to document theentity staff with whom you spoke, and when you spoke with them. During

completion of your testing, you would document this in the audit documentation. In

the review note, you would write that you had updated the audit documentation asasked.

d When you clear a review note, you should put your initials and a short comment onthe work you have done to address the comment in the review note. This allows the

reviewer to see quickly what additional work you have done without re-reviewing allof the audit documentation.

e You must clear all review notes on your work prior to the issuing of the audit report.These could be from your field senior, audit manager, or audit engagement partner.

f You should never delete a review note raised by someone else unless you have beenspecifically asked to do so. Reviewers will delete a review note once they aresatisfied that it has been addressed appropriately.

For more information on Review note template and Excel review notes, refer to Performance

SupportWorking with .


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Review Note Illustration- Template

Review Note IllustrationExcel


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