Joanne M. Flood - Wiley Practitioner's Guide to GAAS 2020

The engagement partner is responsible for the direction, supervision, and performance of the engagement in compliance with GAAS, legal and regulatory requirements, and firm policies. The partner is also responsible for the appropriateness of the report, performance of reviews, and that sufficient appropriate evidence has been obtained. (AU-C220.17–.19)

The auditor with final responsibility for the audit should inform members of the engagement team about:

Their responsibilities

The responsibilities of the partners

The objectives of the procedures they are to perform

Nature of the entity’s business

Risk-related issues

Problems that may arise

Details of the approach to the engagement

(AU-C 220.A12)

Supervision includes:

Tracking the engagement progress

Considering the competence of engagement team members

Addressing significant findings or issues

Identifying matters for consultation or referral to other team members

(AU-C 220.A14)

The engagement partner is responsible for reviews that follow the firm’s policies and procedures. In order to be sure he or she is satisfied that the audit evidence is sufficient and appropriate to support the conclusion, the engagement partner should review the audit documentation and discuss the engagement with the auditor. This should be done on or before the date of the auditor’s report. (AU-C 220.18–.19) It is important that the partner review the documentation and not just rely on staff opinions.

The suitably experienced auditors should review the work of each team member and consider if:

1 The work was performed in accordance with professional standards and legal and regulatory requirements.

2 Significant issues were raised and considered.

3 Consultations, if necessary, took place and were documented.

4 The nature, timing, and extent of the work were appropriate.

5 Work performed supports the conclusion and is documented, and the evidence supports the auditor’s report.

6 Objectives were achieved.

(AU-C 220.A16)

The engagement partner’s review should allow time to resolve issues. (AU-C 220.A17)

The engagement partner is also responsible for ensuring that team members undertake consultation on matters outside their expertise. This consultation may be with other team members, other audit firm staff, or experts outside the firm. The partner must be satisfied with the consultations in terms of nature and scope and that the conclusions are understood and have been implemented. (AU-C 220.20)

If the firm requires a quality control review, the engagement partner should determine that a reviewer has been appointed in a timely manner and that the engagement partner discusses with the reviewer any significant findings or issues. The audit report should not be released until the quality control review is completed. (AU-C 220.21)

As part of the review, the reviewer should:

Discuss the significant findings with the engagement partner

Read the financial statements

Read the draft audit report

Select and review audit documents related to significant judgments

Evaluate conclusions

Consider whether the report is appropriate

(AU-C 220.22)

If differences of opinion arise among firm personnel about accounting or auditing issues in an audit, the engagement team should follow the firm’s policies and procedures. (AU-C 220.23) Procedures to consider may include:

1 Consultation to attempt resolution

2 Documentation of an assistant’s disagreement, if he or she wants to be disassociated from the final resolution

3 Documentation of the basis for the final resolution

The audit firm must establish a monitoring process. Policies and procedures should provide reasonable assurance that the above elements of quality control are suitably designed and effectively applied. (AU-C 220.24) Monitoring involves:

1 Relevant and adequate policies and procedures that are complied with by members of the firm

2 Appropriate guidance and practice aids

3 Effective professional development activities

Audit documentation should include:

Compliance and ethical issues identified

How those issues were resolved

Conclusions on independence compliance

Discussions that support those conclusions

Conclusions reached regarding the acceptance and continuance of audit engagements

Nature and scope of consultations undertaken during the course of the audit engagement

Conclusions resulting from those consultations

(AU-C 220.25)

In addition, the engagement quality control reviewer should document:

That the firm’s engagement quality control procedures were performed

The date the engagement quality control review was completed

An affirmation that the reviewer is not aware of any unresolved matters that would cause the reviewer to believe that the judgment and conclusions of the engagement team were inappropriate.

(AU-C 220.26)

Scope

Definitions of Terms

Objective of AU-C Section 230

Requirements

Requirement for Audit Documentation

Form, Content, and Extent of Audit Documentation

Ownership and Confidentiality

Standardization of Audit Documentation

Preparation of Audit Documentation

Quality of Audit Documentation

Audit Documentation Deficiencies

Documentation Requirements in Other Sections

Interpretations

Providing Access to or Copies of Audit Documentation to a Regulator

AU-C 230 Illustrations

AU-C 230 concerns the audit documentation the auditor is expected to prepare. See also other standards, laws, or regulations. (AU-C 230.01)

Source: AU-C 230.06.For definitions related to this standard, see Appendix A, “Definitions of Terms”: Audit documentation, Audit file, Documentation completion date, Experienced auditor, Report release date.

AU-C Section 230.05 states that:

The objective of the auditor is to prepare documentation that provides

1 a sufficient and appropriate record of the basis for the auditor’s report; and

2 evidence that the audit was planned and performed in accordance with GAAS and applicable legal and regulatory requirements.

(AU-C Section 230.05)

The auditor must prepare audit documentation, on a timely basis, in sufficient detail to provide evidence:

About the conclusions reached; and

That the audit was planned and performed in accordance with GAAS and relevant legal and regulatory requirements.

(AU-C 230.02)

The form and content of the audit documentation should be designed for the specific engagement.

Audit documentation also:

Helps the team plan the audit

Provides information for supervisors to direct the audit

Provides documentation for review

Supplies backup that the team performed as required by standards

Provides files to be used on future audits

Provides documentation for internal review and inspections and external reviews

Provides documentation for successor auditors

Helps auditors understand prior year words