Formation of the final audit file - International Standards on Auditing

Forming the final audit file

The auditor is obliged to create the audit documentation in the audit file and complete the administrative process of forming this file on a regular basis after the date of issue of the audit report. After the completion of the audit file, the auditor has no right to destroy or remove from it any type of audit documentation until the expiration of the compulsory storage.

The regular preparation of sufficient and appropriate audit documentation helps to ensure high quality of the audit and effectiveness of supervision with regard to audits and evaluation of the audit evidence obtained and conclusions drawn from them before the date of issuance of the audit report.

The form, content and scope of the audit documentation depend on such factors as:

• the size and complexity of the organization;

• the nature of the audit procedures performed;

• identified risks of significant distortion;

• the significance of the audit evidence obtained;

• the nature and extent of the identified exceptions;

• the need to document the findings or the basis for conclusions that are evident from the documentation of the work performed or the audit evidence obtained;

• Audit methodology and means of conducting it.

The audit documentation can be written on paper, electronic or other media. Examples of audit documentation include:

• the audit program;

• analysis results;

• compiled memorandums;

• Reviews on significant issues;

• letters by assignment and letters of presentation;

• checklists;

• correspondence (including e-mail) on significant issues.

The audit documentation provides evidence that the audit meets the requirements of the MCA. For example:

• the availability of an adequately documented audit plan demonstrates that the auditor has planned an audit;

• the existence of a signed assignment letter in the audit file demonstrates that the auditor has agreed the terms of the assignment with the management and, if necessary, with the persons who have the management functions;

• The audit report that contains a properly modified audit opinion indicates that the auditor meets the requirements of the MCA to express a modified opinion in the circumstances.

Expression of judgment on the importance of the issue requires an objective analysis of facts and circumstances. Examples of significant issues include the following:

• issues that lead to significant risks;

• the results of the audit procedures indicating that (a) the financial statements may be significantly distorted, or (b) the need to review the auditor's past assessment of the risks of material misstatement and the auditor's response to these risks;

• circumstances that cause significant difficulties for the auditor in applying the necessary audit procedures;

• circumstances that may lead to a modification of the audit opinion or to the inclusion of a paragraph that attracts attention in the audit report.

Identifying characteristics may vary depending on the nature of the audit procedure or the nature of the object or issue. For example:

• for detailed tests of purchase orders for an organization, the auditor can identify the documents selected for testing by their date and number;

• for procedures that require the selection of a set of documents by the method of systematic selection, the auditor can identify the selected documents by indicating their source, starting point and sampling interval;

• for procedures requiring discussion with the organization's staff, the auditor records the interview dates, name and position of the organization's representative;

• for the monitoring procedures, the auditor can describe the process or issue under observation, the specific performers, their duties and when and where the observation was conducted.

The MCA 220 requires the auditor to oversee the work done by reviewing the audit documentation. This requirement means documenting that the auditor's work was verified by whom and when it was verified.

Documentation is not limited to records made by the auditor himself, but may include other appropriate records, such as meeting records prepared by the organization's staff and agreed with the auditor.

Formation of the final audit file. Firms must establish policies and procedures for the regular completion of the formation of the audit file and the storage of documents. The proper time period for completing the audit file generation period is usually not more than 60 days from the date of the audit report. In a normal situation, the period for keeping the audit documentation is at least 5 years from the date of the audit report or, if that date is later, from the date of the audit report on the group of companies.

An example of circumstances in which the auditor may find it necessary to modify the existing audit documentation or add new audit documentation after the audit file has been generated is the need to clarify the audit documentation in connection with the comments received during the monitoring inspections carried out by internal or external parties.

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