مادة مراجعة الفرقة الرابعة شعبة محاضرة 2 بعد الميد تيرم د - احمد مختار

Auditing
Ch (7) Audit Evidence

Objective (7-7)
7-7 Documentation
Dr. Ahmed Mokhtar
Audit Documentation
• Auditing standards state that audit documentation is

the record of the audit procedures performed, relevant
audit evidence, and conclusions the auditor reached.
• Audit documentation should include all the information
the auditor considers necessary to adequately conduct
the audit
and to provide support for the audit report.
Audit documentation may also be referred to as working
papers or workpapers, although audit documentation
is usually maintained in computerized files.
Purposes of Audit Documentation
• The overall objective of audit documentation

is to aid the auditor in providing reasonable
assurance that an adequate audit was
conducted in accordance with auditing
standards.
List the purposes of audit documentation and
explain why each purpose is important?
Ownership of Audit Files
Audit documentation prepared during the
engagement, including schedules prepared by the
client for the auditor, is the property of the
auditor.
The only time anyone else, including the client, has
a legal right to examine the files is when they are
subpoenaed by a court as legal evidence or when
they are examined by approved peer reviewers or
regulatory inspectors.
At the completion of the engagement, audit files
are retained on the CPA’s premises for future
reference and to comply with auditing standards
related to document retention.
Confidentiality of Audit Files
• A member in public practice shall not disclose
any confidential client information without
the specific consent of the client
If auditors divulged this information to outsiders
or to client employees who have been denied
access, their relationship with management
would be seriously strained.
Requirements for Retention of Audit Documentation
• Auditing standards require that records for audits of

private companies be retained for a minimum of five
years.
• The Sarbanes–Oxley Act requires auditors of public
companies to prepare and maintain audit files and
other information related to any audit report in
sufficient detail to support the auditor’s conclusions,
for a period of not less than seven years.
• The law makes the knowing and willful destruction of
audit documentation within the seven-year period a
criminal offense subject to financial fines and
imprisonment up to ten years.
• the audit files include general information,
such as corporate data in the permanent files,
in addition to current files that contain
documentation of the auditor’s tests, the
financial statements, and audit report.
1-Permanent files contain data of a historical or
continuing nature pertinent to the current
audit. These files provide a convenient source
of information about the audit that is of
continuing interest from year to year. The
permanent files typically include the
following:
• Extracts or copies of such company documents
of continuing importance as the articles of
incorporation, bylaws, bond indentures, and
contracts. Each of these documents is
significant to the auditor for as many years as
it is in effect
• Analyses from previous years of accounts that
have continuing importance to the auditor
These include accounts such as long-term
debt, stockholders’ equity accounts, goodwill,
and fixed assets. Having this information in
the permanent files enables the auditor to
concentrate on analyzing only the changes in
the current year’s balance
• Information related to understanding internal
control and assessing control risk.
This includes organization charts, flowcharts,
questionnaires, and other internal control
information, including identification of
controls and deficiencies in the system.
• The results of analytical procedures from
previous years’ audits.
This information is useful in helping the auditor
decide whether there are unusual changes in
the current year’s account balances
2-The current files include all audit
documentation applicable to the year under
audit.
There is one set of permanent files for the client
and a set of current files for each year’s audit.
The following are types of information often
included in the current file:
• Audit Program Auditing standards require a
written audit program for every audit.
• Working Trial Balance Because the basis for
preparing the financial statements is the general
ledger, the amounts included in that record are
the focal point of the audit.
Each line item on the trial balance is supported by a
lead schedule, containing the detailed accounts
from the general ledger making up the line item
total. Each detailed account on the lead schedule
is, in turn, supported by proper schedules
supporting the audit work performed and the
conclusions reached.
• Adjusting Entries When the auditor discovers
material misstatements in the accounting
records, the financial statements must be
corrected.
• Supporting Schedules The largest portion of
audit documentation includes the detailed
supporting schedules prepared by the client
or the auditors in support of specific amounts
on the financial statements
Here are the major types of supporting schedules:
• Analysis. An analysis is designed to show the
activity in a general ledger account during the
entire period under audit, tying together the
beginning and ending balances. This type of
schedule is normally used for accounts such as
marketable securities; notes receivable;
allowance for doubtful accounts; property, plant,
and equipment; long-term debt; and all equity
accounts. The common characteristic of these
accounts is the significance of the activity in the
account during the year. In most cases, the
analysis has cross-references to other audit files.
• Trial balance or list. This type of schedule
consists of the details that make up a year-end
balance of a general ledger account. It differs
from an analysis in that it includes only those
items making up the end-of-the-period
balance. Common examples include trial
balances or lists in support of trade accounts
receivable, trade accounts payable, repair and
maintenance expense, legal expense, and
miscellaneous income
• Reconciliation of amounts. A reconciliation
supports a specific amount and is normally
expected to tie the amount recorded in the
client’s records to another source of
information. Examples include the
reconciliation of cash balances with bank
statements, the reconciliation of subsidiary
accounts receivable balances with
confirmations from customers, and the
reconciliation of accounts payable balances
with vendors’ statements.
• Substantive analytical procedures
• Summary of procedures. Another type of
schedule summarizes the results of a specific
audit procedure. A summary schedule
documents the extent of testing, the
misstatements found, and the auditor’s
conclusion based on the testing.
• Examination of supporting documents. A
number of special-purpose schedules are
designed to show detailed tests performed,
such as documents examined during tests of
controls and substantive tests of transactions.
These schedules show no totals, and they do
not tie in to the general ledger because their
purpose is to document the tests performed
and the results found. However, the schedules
must state a positive or negative conclusion
about the objective of the test.
• Informational. This type of schedule contains
information as opposed to audit evidence.
These schedules include information for tax
returns and SEC Form
• Outside documentation. Some of the content
of the audit files consists of outside
documentation gathered by auditors, such as
confirmation replies and copies of client
agreements. Although not “schedules” in the
usual sense, they are indexed and filed.
• Explain why it is important for audit
documentation to include each of the
following:
identification of the name of the client,
period covered, description of the contents,
initials of the preparer and the reviewer,
dates of the preparation and review, and an
index code.

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Auditing

Ch (7) Audit Evidence

• Auditing standards state that audit documentation is

• The overall objective of audit documentation

• Auditing standards require that records for audits of

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