S19: Documentation of fieldwork

Session Objectives ♂ In the last session, we have discussed the standards of documentation and the standard files to be maintained. The session goes into details about the audit working papers and other documents to be maintained. ♂ This session would ultimately be replaced by electronic documentation as and when the necessary infrastructure is in place.

Documentation of fieldwork – Audit Working Papers ♂ The audit working papers should document in details the audit procedures undertaken, the conclusions drawn and their relevance for the audit opinion. ♂ They should record the reasoning on all significant matters where the members of the audit teams have exercised judgment.

Documentation of fieldwork – Audit Working papers- Contd. ♂ The audit working papers help individual audit team members to make sure that they have completed all the work necessary. ♂ They provide the evidence to back up the opinion reached and allow review of the audit work to be carried out.

Audit Working Papers-I Audit Working papers should include ♂ All correspondence with the auditee, together with minutes of all meetings, duly authenticated by the auditor and the auditee. ♂ A checklist of all items seen and examined in Audit; ♂ The important milestones, i.e. dates of entry and exit conferences, the completion of audit of different accounts areas etc.

Audit Working Papers-II Audit working papers MUST show: ♂ Completion of all the audit procedures as per the plan; ♂ Justification and due authorisation for any departures from plan; ♂ Results of the audit procedures, drawing out clearly any errors or control weaknesses identified; ♂ that all errors or control weaknesses have been investigated and discussed with the management of the auditee, as necessary; ♂ any unresolved matters between the auditee and the auditee; ♂ Judgment and conclusions reached by audit and reasonings thereof; and, most important, ♂ Cross linking of all papers wherever necessary.

Documentation of specific steps of the audit process ♂ A detailed documentation needs to be done for all the issues reviewed/studied during the planning and implementation of audit viz. ♂ Understanding the business of the entity ♂ Inherent risk assessment ♂ Overall control environment ♂ IT control environment ♂ High level controls

Documentation Requirements: Understanding the business ♂ Document the external and internal factors reviewed to understand the entity’s business and functions ♂ External factors - Authorising Legislation, regulations issued under Authorising Legislation, Parliamentary Authority, political and business environment, financial and performance reporting requirements, future events and other factors ♂ Internal factors - Corporate Plans, Business Plans, Management Reports, Board Minutes, Organisational structure and Audit committees

Documentation Requirements: Inherent risk assessment ♂ Record the susceptibility of each significant audit area to material misstatement; ♂ Record the corresponding level of risk associated with it.

Documentation Requirements Overall control environment ♂ Document the overall control environment of the entity on the basis of the following: ♂ Organisational Structure and Assignment of Authority and Responsibility ♂ Human Resources Policies and Procedures ♂ Management’s Risk Assessment Process ♂ Reliability of Overall Financial Reporting and Budgetary Control ♂ Effectiveness of the Audit Committee ♂ Effectiveness of Internal Audit

Documentation Requirements – IT control environment ♂ Auditor should evaluate and document ♂ The complexity of the IT environment; ♂ The skill requirement and usability; ♂ Hardware and software – their user friendliness; ♂ Training and availability of adequate no. of skilled staff. ♂ The reliability of the IT systems is to record, compile and analyze accounting information; ♂ The impact it has on the overall control environment of the auditee.

Documentation Requirements - High level controls ♂ In respect of all the significant audit areas, auditor should identify the risk and record: ♂ Whether high level controls are in place to mitigate the risk; ♂ List all the high level controls and the authorities exercising them; ♂ Whether the controls are effective.

In brief documentation should show In brief documentation should show: ♂ What we were trying to achieve ♂ How we did it; ♂ What we found; ♂ What errors were found; ♂ What supporting evidence and documentation we used; ♂ Whether we did what we set out to do.