Topic 13: Audit Documentation

Concurring Partner

A partner in the same firm as the engagement partner who is tasked with reviewing the work performed by the audit team to ensure the quality and thoroughness of the audit engagement.

Engagement Letter

The written agreement between an auditor and his or her client outlining details relating to the audit engagement

A 'concurring partner' is a partner in a different firm that reviews the work of the audit team assigned to the audit engagement. True False

False This statement is false. A concurring partner comes from within the same audit firm that is conducting the audit.

ASB and IAASB auditing standards allow the auditor ______ days following the report release date to compile a completed set of audit documentation. -60 -45 -90 -30

-60 ASB and IAASB standards allow the auditor 60 days following the report release date to compile a completed set of audit documentation.

PCAOB standards require that the auditor retain audit documentation for _______ years from the report release date, while ASB and IAASB standards require audit documentation to be retained for _______ years from the report release date. -7, 7 -7, 5 -5, 7 -5, 5

-7, 5 PCAOB standards require that documentation be retained for 7 years following the report release date, while ASB and IAASB standards require that documentation be retained for 5 years.

Which of the following is NOT one of the purposes of audit documentation? -Provide support for the conclusions reached by the auditor -Provide evidence that the audit was carried out in accordance with GAAS -Facilitate the planning, performance, and supervision of the audit engagement -Serves as the basis for review of the work performed -Each of the above IS a purpose of audit documentation

-Each of the above IS a purpose of audit documentation Each of these is a purpose of audit documentation as outlined in Auditing Standard Number 3.

Which of the following is NOT a type of audit documentation that auditors should include in their files? -The audit program -The engagement letter -Copies of the client's financial statements -Each of the above is a type of audit documentation that the auditor should include in the file

-Each of the above is a type of audit documentation that the auditor should include in the file Each of these is a type of audit documentation that the auditor should consider including in the file.

Which of the following methods might the auditor use to document their discussion regarding the susceptibility of the financial statements to material misstatements? -Include transcripts from their meeting -Write a note in a memo that the discussion occurred and the date it occurred -Include a check mark in the audit program next to the step requiring this discussion -Each of the above is an appropriate method for documenting this discussion.

-Include transcripts from their meeting Providing the transcript of the meeting is the only method out of these options that provides adequate documentation of this meeting. Indicating that it happened is not enough information.

Each of the following is a potential source of review of audit documentation except: -The PCAOB inspection program -The AICPA peer review program -Concurring partner review -Reviews by other clients to decide whether to hire the auditor -All of the above are potential sources of review of the audit documentation

-Reviews by other clients to decide whether to hire the auditor Other audit clients do not have access to audit documentation since it contains confidential client information.

Audit Program

A form of audit documentation developed at the planning stage of an audit which includes a description of the nature, extent, and timing of: risk assessment procedures, substantive audit procedures at the relevant assertion levels, and other planned audit procedures that are required for compliance with GAAS.

Work Papers

A term used by auditors in referring to documentation of audit work performed, such as the performance of substantive testing.

Unqualified Audit Opinion

An opinion expressed by the auditor that the financial statements are fairly presented in all material respects in accordance with the established criteria.

The primary source of review of audit documentation comes from outside of the auditing firm, with little review occurring from within the firm itself. True False

False This statement is false. While there are many sources of potential review of audit work outside of the firm, most auditing firms have many layers of review within the firm to ensure accuracy, adequacy, professionalism, and compliance with regulation and firm policy.

PCAOB Inspection Reports

The report on a periodic inspection of the work conducted by auditors as well as the audit firm's quality control procedures which is conducted by an inspector employed by the PCAOB.

The form of audit documentation depends on the nature of the type of audit test performed. True False

True

Audit documentation is meant to provide support for conclusions drawn by the auditor, to provide evidence that the audit was performed in compliance with GAAS, and facilitates the planning, performance, and supervision of the engagement as well as the review of the quality of work. True False

True Each of these four purposes of audit documentation is listed in Auditing Standard Number 3.

Under PCAOB rules, auditors are not allowed to delete or modify any documentation following the completion of audit documentation. True False

True This statement is true, while auditors can add to the documentation following its completion with the appropriate explanation, they cannot modify or delete existing documentation.

In addition to providing documentation regarding the factors that support their conclusions, the auditor should document evidence that contradicts their final decision as well as how the auditor resolved the conflict. True False

True This statement is true. Auditors should document both supporting evidence as well as any evidence that they found that contradicted their ultimate decision along with how they resolved the conflict between the two sets of evidence.

An audit program is a form of audit documentation that provides evidence that the audit was planned and that the necessary audit steps were performed. True False

True This statement is true. The audit program indicates the steps to be taken in the audit. As such, it provides evidence that the audit was properly planned and that it was carried out.

One benefit of audit documentation is to provide a defense to the auditor in lawsuits where it is alleged that the auditor did not comply with GAAS. True False

True This statement is true. When an auditor is sued for negligence, their audit documentation can provide evidence that their work was performed in compliance with GAAS.