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Sarbanes Oxley Act -
Auditing Standards |
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Public
Company Accounting Oversight
Board
Bylaws
and Rules – Standards –
AS3
June
9, 2004
AUDITING AND RELATED
PROFESSIONAL PRACTICE
STANDARDS
Auditing
Standard No. 3 – Audit
Documentation
Documentation of
Specific Matters
10.
Documentation of auditing procedures that
involve the inspection of
documents
or
confirmation, including tests of details, tests
of operating effectiveness of
controls,
and
walkthroughs, should include identification of
the items inspected.
Documentation
of
auditing procedures related to the inspection of
significant contracts or
agreements
should
include abstracts or copies of the
documents.
Note:
The identification of the items inspected may be
satisfied by indicating the
source
from which the items were selected and the
specific selection criteria,
for
example:
•
If an audit sample is selected from a population
of documents, the
documentation
should include identifying characteristics (for
example, the
specific
check numbers of the items included in the
sample).
•
If all items over a specific dollar amount are
selected from a population of
documents,
the documentation need describe only the scope
and the
identification
of the population (for example, all checks over
$10,000 from
the
October disbursements journal).
•
If a systematic sample is selected from a
population of documents, the
documentation
need only provide an identification of the
source of the
documents
and an indication of the starting point and the
sampling interval
(for
example, a systematic sample of sales invoices
was selected from the
sales
journal for the period from October 1 to
December 31, starting with
invoice number 452
and selecting every 40th
invoice).
11.
Certain matters, such as auditor independence,
staff training and proficiency
and
client
acceptance and retention, may be documented in a
central repository for the
public
accounting firm ("firm") or in the particular
office participating in the
engagement.
If
such matters are documented in a central
repository, the audit documentation of
the
engagement
should include a reference to the central
repository. Documentation of
matters
specific to a particular engagement should be
included in the audit
documentation
of the pertinent engagement.
12.
The auditor must document significant findings
or issues, actions taken to
address
them (including additional evidence obtained),
and the basis for the
conclusions
reached in connection with each engagement.
Significant findings or
issues
are substantive
matters that are important to the procedures
performed,
evidence
obtained, or conclusions reached, and include,
but are not limited to, the
following:
a.
Significant matters involving the selection,
application, and consistency of
accounting
principles, including related disclosures.
Significant matters
include,
but are not limited to, accounting for complex
or unusual
transactions,
accounting estimates, and uncertainties as well
as related
management
assumptions.
b.
Results of auditing procedures that indicate a
need for significant
modification
of planned auditing procedures, the existence of
material
misstatements,
omissions in the financial statements, the
existence of
significant
deficiencies, or material weaknesses in internal
control over
financial
reporting.
c.
Audit adjustments. For purposes of this
standard, an audit adjustment is
a
correction
of a misstatement of the financial statements
that was or should
have
been proposed by the auditor, whether or not
recorded by
management,
that could, either individually or when
aggregated with other
misstatements,
have a material effect on the company's
financial
statements.
d.
Disagreements among members of the engagement
team or with others
consulted
on the engagement about final conclusions
reached on
significant
accounting or auditing matters.
e.
Circumstances that cause significant difficulty
in applying auditing
procedures.
f.
Significant changes in the assessed level of
audit risk for particular audit
areas
and the auditor's response to those
changes.
g.
Any matters that could result in modification of
the auditor's report.
13.
The auditor must identify all significant
findings or issues in an
engagement
completion
document. This document may
include either all information necessary
to
understand
the significant findings, issues or
cross-references, as appropriate, to
other
available
supporting audit documentation. This document,
along with any documents
cross-referenced,
should collectively be as specific as necessary
in the circumstances
for
a reviewer to gain a thorough understanding of
the significant findings or
issues.
Note:
The engagement completion document prepared in
connection with the
annual
audit should include documentation of
significant findings or issues
identified
during the review of interim financial
information.
Retention of and
Subsequent Changes to Audit
Documentation
14.
The auditor must retain audit documentation for
seven years from the date the
auditor
grants permission to use the auditor's report in
connection with the issuance of
the
company's financial statements (report release
date), unless a longer period of
time
is
required by law. If a report is not issued in
connection with an engagement, then
the
audit
documentation must be retained for seven years
from the date that fieldwork
was
substantially
completed. If the auditor was unable to complete
the engagement, then
the
audit documentation must be retained for seven
years from the date the
engagement
ceased.
15.
Prior to the report release date, the auditor
must have completed all
necessary
auditing
procedures and obtained sufficient evidence to
support the representations in
the
auditor's report. A complete and final set of
audit documentation should be
assembled
for retention as of a date not more than 45 days
after the report release date
(documentation
completion date). If a report is not issued in
connection with an
engagement,
then the documentation completion date should
not be more than 45 days
from
the date that fieldwork was substantially
completed. If the auditor was unable
to
complete
the engagement, then the documentation
completion date should not be
more
than
45 days from the date the engagement
ceased.
16.
Circumstances may require additions to audit
documentation after the report
release
date. Audit documentation must not be deleted or
discarded after the
documentation
completion date, however, information may be
added. Any
documentation
added must indicate the date the information was
added, the name of
the
person who prepared the additional
documentation, and the reason for adding
it.
17.
Other standards require the auditor to perform
procedures subsequent to the
report
release date in certain circumstances. For
example, in accordance with AU
sec.
711,
Filings Under Federal Securities Statutes,
auditors are required to perform
certain
procedures
up to the effective date of a registration
statement.3/ The auditor must
identify
and document any additions to audit
documentation as a result of
these
procedures
consistent with the previous
paragraph.
3/
Section 11 of the Securities Act of 1933 makes
specific mention of the
auditor's
responsibility as an expert when the auditor's
report is included in a
registration
statement
under the 1933 Act.
18.
The office of the firm issuing the auditor's
report is responsible for ensuring
that
all
audit documentation sufficient to meet the
requirements of paragraphs 4-13 of
this
standard
is prepared and retained. Audit documentation
supporting the work performed
by
other auditors (including auditors associated
with other offices of the firm,
affiliated
firms,
or non-affiliated firms), must be retained by or
be accessible to the office
issuing
the
auditor's report.4/
4/
Section 106(b) of the Sarbanes-Oxley Act of 2002
imposes certain
requirements
concerning production of the work papers of a
foreign public accounting
firm
on whose opinion or services the auditor relies.
Compliance with this standard
does
not substitute for compliance with Section
106(b) or any other applicable
law.
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