Audit certification or work/working documents, is all memorandum, verifications, correspondence, agendas, audit plans and letters of representation created during an audit battle which can be in the signifier of documents, electronic files, or other media. Audit certification serves the intent of supplying grounds, which the hearer uses to back up the decisions reached during the battle. It besides facilitates the planning, public presentation and supervising of the audit battle. Because audit certification facilitates all these activities, it besides serves as a footing for reappraisal of the completeness and quality of the work being performed.
Due to its importance in record maintaining, audit certification establishes the unity of audits and the Board ‘s inadvertence. Because it is relied on for reappraisal of work, decisions reached, and the grounds collected, it is indispensable that it is complete and apprehensible. Incomplete certification increases the trouble of reappraisal, and hence clear and complete certification increases the quality of the audit work performed. Reappraisals are indispensable in reexamining an independent accounting house ‘s conformity with criterions and inspecting public accounting houses.
On September 29, 2003, the Board held a public roundtable treatment to discourse issues of audit certification criterions. The treatment was intended to hear the positions of public companies, public accounting houses, investor groups, and regulative organisations. This treatment was guided by a set of aims and issues the Board focused on in bettering audit certification criterions. The focal point was on alterations to certification after release day of the month, indispensable elements, grade of item, and keeping of audit certification, the treatment besides included the consequence on certification that the determination to utilize secondary hearers work in the audit certification.
Based on the input provided by the roundtable, Board staff, and 30 eight remark letters provided by hearers, regulators, professional associations, authorities bureaus and others, the Board concluded that the SAS No. 96, Audit Documentation was deficient in run intoing the demands of standard puting under Section 103 ( a ) of the act. The Board so issued proposed scrutinizing criterion titled Audit Documentation. Additionally, the 30 eight remarks changed demands and other alterations were made to do it easier to understand.
The aims of audit certification is to supply records of the grounds used to back up the decisions of the hearer every bit good as facilitate the planning, public presentation, and supervising of the battle. Besides, audit certification allows for reappraisal of audit work to guarantee the completion of work, every bit good as the quality. Audit certification is created for: planning, public presentation, process, grounds and decisions of the hearer during the battle.
Reviewers of audit certification include: hearers new to an battle, supervisory forces, engagement supervisors and quality referees, replacement hearer, internal and external review squads, advisers engaged by the audit commission, and representatives of a party to an acquisition. Auditors new to an battle will look to anterior twelvemonth certification to obtain a better apprehension in order to ease current twelvemonth planning and better public presentation. Engagement supervisors will reexamine certification to better understand decisions reached by hearers and whether proper grounds was obtained to make those decisions.
Hearers must fix certification for each battle to the criterions of the PCAOB. Audit certification includes memorandums, verifications, correspondence, agendas, audit plans, and letters of representation in the signifier of documents, electronic files or other media. Audited account paperss must incorporate sufficient item in order to supply a clear apprehension of intent, beginning, and decisions reached. Additionally, certification should be organized in a mode that of import issues and findings can be linked.
Audit certification provides support for representations in the audit study and hence should supply that the battles conformity with PCAOB criterions, support footing of the hearer ‘s decisions of relevant fiscal statement averments, and supply that accounting records agreed/reconciled with fiscal statements.
Audit certification criterion besides requires that all processs, grounds, and decisions from the battle be recorded for all those who participate including specializer used by the hearer to measure fiscal statement averments. Documentation must turn out that the work was really performed by the hearer. It must besides be complete plenty for a experient hearer with no anterior cognition of the battle to understand nature, timing, and consequences of processs performed, grounds obtained, and decisions reached. The experient hearer must besides be able to find who performed work at what clip and who reviewed it.
In finding the extent of necessary certification for an battle an hearer should see the nature of audit process, hazard of material misstatement, extent of judgement, significance of grounds collected, and need for revelation of extra decisions. Adequate certification is necessary because it will finally back up the hearer ‘s decisions. However, the hearer must besides include all information that is inconsistent or contradictory to their decisions. This means that all processs performed, recorded documenting audiences, declarations, and differences in judgement between those involved in the battle must be included. If the audit certification is determined to be uncomplete after the completion day of the month the hearer must show that processs were performed, grounds was collected and decisions were reached harmonizing to the averments of the fiscal statements, in the signifier of permeant other grounds. Oral communicating can assist clear up grounds but, entirely, is non considered permeant other grounds.
Documentation of processs, including testing of inside informations, trial of runing effectivity of controls, and walkthroughs, should include points inspected. Documentation of processs performed to inspect contracts and understandings must include abstracts or transcripts, placing these paperss may run into these criterions by bespeaking the beginning and standards. Sample paperss should hold placing features, defined range of choice from sample, and designation of beginning and get down point.
Documents specific to the battle should be included in the audit certification. However, some certification can be kept at a cardinal depository at the office of the battle squad, if referenced in the audit certification for case, paperss on hearer independency, staff preparation and proficiency, and client credence and keeping. Within the audit certification, the hearer must include important findings and issues, the actions taken, and the decisions reached, including but non limited to choice application, and consistence of accounting rules, findings that consequence in alteration of audit processs, audit accommodations, dissensions, trouble in using processs alterations in accessed audit hazard and response to alter, and anything that requires alteration to the audit study. The engagement completion papers includes important findings that help apprehension of findings, issues and cross mentions. The engagement completion papers should be specific plenty for reviewer to understand findings, and should include findings from interim reappraisals.
Unless required by jurisprudence all audit paperss must be retained for seven old ages from assorted release day of the months depending on whether it was issued with fiscal statements and if the audit battle was completed. If the hearer grants the steadfast permission to utilize the audit study with their one-year study, so the start day of the month from the keeping period is the day of the month permission is granted. If the study is non used with the house ‘s fiscal statements so the completion of field work serves as a start day of the month, and if the battle is non completed so the start day of the month for keeping is the day of the month the battle ends. Additionally, 40 five yearss prior to each release day of the month, the hearer must hold complete and concluding audit paperss that are ready for keeping.
After the completion day of the month, 40 five yearss before the release day of the month, the hearer can non cancel or fling any audit certification. However, certification can be added after the release day of the month so long as the day of the month, every bit good as the individual whom added the information and why it was added, is recorded. This includes stuff added after the release day of the month because of other criterion demands and paperss provided by other hearers. The criterion besides requires that the house publishing the hearer ‘s study must obtain, retain and reexamine all paperss provided by other hearers, including engagement completion papers, a list of fraud hazard factors and the response and consequences of processs, findings that are inconsistent or contradictory of decisions, findings that affect consolidation or uniting histories, information required for publishing house to accommodate the fiscal statements audited by other hearer, agenda of audit accommodations, lacks and material failings in internal control, letters of representation from direction, and communications with audit commission. However, if the issue hearer references the other hearer in the study he should ignore this and mention to AU sec.543.