AS 1215: Audit Documentation | Auditing and Ethics for CA Intermediate PDF Download

Introduction

This standard outlines general requirements for the documentation that auditors must prepare and retain in connection with engagements conducted under the standards of the Public Company Accounting Oversight Board (PCAOB). These engagements include audits of financial statements, audits of internal control over financial reporting, and reviews of interim financial information. This standard does not replace specific documentation requirements found in other PCAOB standards.

Objectives of Audit Documentation

Audit documentation is the written record supporting the auditor's conclusions and representations, whether included in the auditor's report or otherwise. It facilitates the planning, performance, and supervision of the engagement and is the basis for reviewing the quality of the work by providing written evidence supporting the auditor's significant conclusions. Audit documentation includes records of the planning and performance of the work, procedures performed, evidence obtained, and conclusions reached by the auditor. It may also be referred to as work papers or working papers.

Note: An auditor’s representations to a company's board of directors, audit committee, stockholders, investors, or other interested parties are typically included in the auditor’s report accompanying the company’s financial statements. Additionally, the auditor may make oral representations to the company or others on a voluntary basis or if necessary to comply with professional standards, even in engagements without an issued report.

Audit documentation is reviewed by members of the engagement team performing the work and may also be reviewed by others, such as:

• Auditors new to an engagement who review prior year's documentation to aid in planning and performing the current engagement.
• Supervisory personnel reviewing documentation prepared by other team members.
• Engagement supervisors and quality reviewers who evaluate how the engagement team reached significant conclusions and whether there is adequate evidential support.
• Successor auditors reviewing a predecessor auditor's documentation.
• Internal and external inspection teams assessing audit quality and compliance with standards, laws, rules, regulations, and the auditor's quality control policies.
• Others, such as advisors engaged by the audit committee or representatives of parties to an acquisition.

Audit Documentation Requirement

The auditor must prepare detailed audit documentation for each engagement conducted under PCAOB standards. The documentation should provide a clear understanding of its purpose, source, and conclusions, and be appropriately organized to link to significant findings or issues. Examples of audit documentation include memoranda, confirmations, correspondence, schedules, audit programs, and letters of representation. This documentation can be in paper, electronic files, or other media.

Since audit documentation supports the representations in the auditor's report, it should:

• Demonstrate compliance with PCAOB standards.
• Support the basis for the auditor’s conclusions on every relevant financial statement assertion.
• Show that the underlying accounting records agreed or reconciled with the financial statements.

The auditor must document the procedures performed, evidence obtained, and conclusions reached regarding relevant financial statement assertions. This documentation should clearly show that the work was indeed performed, covering the work of all participants in the engagement, including specialists. It must contain sufficient information for an experienced auditor with no previous connection to the engagement to understand the nature, timing, extent, and results of the procedures performed, and to determine who performed and reviewed the work, along with relevant dates.

Note: An experienced auditor has a reasonable understanding of audit activities and is familiar with the company's industry and the accounting and auditing issues pertinent to it.

When determining the nature and extent of documentation for a financial statement assertion, the auditor should consider:

• The nature of the auditing procedure.
• The risk of material misstatement associated with the assertion.
• The extent of judgment required in performing the work and evaluating results.
• The significance of the evidence obtained for the assertion being tested.
• The responsibility to document a conclusion that isn’t readily determinable from the documentation of procedures performed or evidence obtained.

Beyond documentation supporting final conclusions, audit documentation must include information identified as significant findings or issues that contradict the auditor's final conclusions. Relevant records to be retained include procedures performed in response to this information and documentation of consultations or resolutions of differences in professional judgment among the engagement team or with others.

If the auditor becomes aware, after the documentation completion date, of a lack of documentation or evidence that procedures were performed, they must demonstrate that sufficient procedures were performed, evidence obtained, and appropriate conclusions reached. This demonstration requires persuasive other evidence; oral explanations alone are insufficient but may clarify written evidence.

If sufficient procedures were performed and evidence obtained, but documentation is inadequate, the auditor should prepare additional documentation. If the auditor cannot demonstrate that sufficient procedures were performed, they must comply with AS 2901 for omitted procedures after the report date.

Documentation of risk assessment procedures and responses to risks of misstatement should include a summary of identified risks and the auditor's assessment of risks of material misstatement at the financial statement and assertion levels, along with the auditor's responses to these risks.

Documentation of Specific Matters

Documentation of procedures involving document inspection or confirmation should include identification of the items inspected. This can be satisfied by indicating the source and selection criteria for items. For example:

• For audit samples, documentation should include identifying characteristics (e.g., specific check numbers).
• For items over a specific amount, documentation should describe the scope and population (e.g., all checks over $10,000 from the October disbursements journal).
• For systematic samples, documentation should provide the source of documents, starting point, and sampling interval.

Certain matters, such as auditor independence, staff training, and client acceptance, may be documented in a central repository. The engagement’s audit documentation should reference this repository. Matters specific to an engagement should be included in the engagement’s documentation.

The auditor must document significant findings or issues, actions taken to address them, and the basis for conclusions reached. Significant findings or issues include:

• Important matters involving accounting principles and related disclosures.
• Results of auditing procedures indicating a need to modify planned procedures, presence of material misstatements, or internal control deficiencies.
• Accumulated misstatements and evaluation of uncorrected misstatements.
• Disagreements among the engagement team or with others consulted on significant accounting or auditing matters.
• Difficulties in applying auditing procedures.
• Changes in risk assessments and modifications to audit procedures.
• Risks of material misstatement determined to be significant and the results of related auditing procedures.
• Any matters that could modify the auditor's report.

Note: In engagements related to brokers and dealers, significant findings or issues include assessment and responses to special risks, systems, processes, and controls for the appropriateness of subject matter, and evaluation of nonconformity instances.

Significant findings or issues must be identified in an engagement completion document, which may include all necessary information or cross-references to supporting documentation. This document should enable a reviewer to understand significant findings or issues thoroughly.

Note: For annual audits, this document should include significant findings from interim financial reviews. In attestation engagements for brokers and dealers, documentation of significant findings can be included in the engagement completion document for the financial statement audit.

Retention of and Subsequent Changes to Audit Documentation

The auditor must retain audit documentation for seven years from the date they grant permission to use the auditor's report in connection with the company's financial statements (the report release date), unless a longer period is required by law. If no report is issued, the documentation must be retained for seven years from the date fieldwork was substantially completed. If the engagement is not completed, the documentation must be retained for seven years from the date the engagement ceased.

Before the report release date, the auditor must complete all necessary auditing procedures and obtain sufficient evidence to support the representations in the auditor's report. A complete and final set of audit documentation should be assembled for retention within 45 days after the report release date (the documentation completion date). If no report is issued, the documentation completion date should be within 45 days from the date fieldwork was substantially completed. If the engagement is not completed, the documentation completion date should be within 45 days from the date the engagement ceased.

Additional audit documentation may be required after the report release date. Audit documentation must not be deleted or discarded after the documentation completion date, but new information can be added. Any added documentation must indicate the date it was added, the name of the person who prepared it, and the reason for adding it.

Certain standards require the auditor to perform procedures after the report release date. For example, AS 4101 requires auditors to perform specific procedures up to the effective date of a registration statement. Any additions to audit documentation as a result of these procedures must be identified and documented accordingly.

The office issuing the auditor’s report is responsible for ensuring that all audit documentation meets the necessary requirements. Documentation supporting work performed by other offices of the firm and other auditors must be retained by, or made accessible to, the office issuing the auditor’s report.

The office issuing the auditor’s report must obtain, review, and retain the following documentation related to work performed by other offices of the firm and other auditors before the report release date:

• An engagement completion document.
• A list of significant risks and responses.
• Information on significant findings or issues that contradict final conclusions.
• Findings affecting consolidating or combining accounts.
• Information for reconciling financial statements amounts.
• A schedule of accumulated misstatements and evaluations of uncorrected misstatements.
• All significant deficiencies and material weaknesses in internal control.
• Letters of representation from management.
• All matters communicated to the audit committee.

Additional documentation may be required beyond this standard's requirements.