Sarbanes Oxley Act The Audit documentation standard Essay

Under Sarbanes-Oxley Act of 2002, subdivision 103 ( a ) ( 2 ) ( A ) ( I ) directs the Public Company Accounting Oversight Board ( “ PCAOB ” or “ Board ” ) to set up auditing criterions that require registered public accounting houses to fix and keep audit certification “ in sufficient item to back up the decisions reached: ” in the audit study. Therefore, the Board made audit certification a precedence. This standard require readying of audit papers include an audit of fiscal statements, an audit of internal control over fiscal coverage, and a reappraisal of interim fiscal information. However, the criterion does non replace specific certification demands of other criterions of the PCAOB.

The audit certification criterion is one of the fundamental on which both the unity of audit and Board ‘s inadvertence will rest. The quality and unity of an audit depends on the being of a complete and apprehensible record of the work the hearer performed, the decisions the hearer reached, and the grounds the hearer obtained that supports those decisions. On September 29, 2003, PCAOB started a standards-development undertaking on audit certification by convening a public roundtable treatment, with representatives from public companies, public accounting houses, investor groups, and regulative organisations, to discourse issues and hear positions on the topic. PCAOB posed several inquiries in the meeting to assist place the aims and appropriate range and signifier of audit certification. On November 17, 2003, the Board developed and issued a proposed scrutinizing criterion titled, Audit Documentation for remark. And the terminal, PCAOB received 38 remark letters from hearers, regulators, professional associations, authorities bureaus, and others. There were some alterations made harmonizing from these remarks, and other alterations made the demands of the criterion easier to understand.

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Audit certification facilitates the planning, public presentation, and supervising of the battle, and is the footing for the reappraisal of the quality of the work because it provides the referee with written certification of the grounds back uping the hearer ‘s important decisions. Audit certification besides includes records of the planning and public presentation of the work, the processs performed, grounds obtained, and decisions reached by the hearer. Audit certification may be referred to work documents or working documents.

Auditor should show to a company ‘s board of managers or audit commission, shareholders, investors, or other interested parties are normally included in the hearer ‘s study attach toing the fiscal statements of the company. However, hearer may do unwritten representations to the company or others, either on a voluntary footing or if necessary to follow with professional criterions, including in connexion with an battle for which an hearer ‘s study is non issued.

In Addition, audit certification normally reviewed by members of the battle squad executing the work and might be reviewed by others, which include:

Hearers who are new to an battle and reexamine the anterior twelvemonth ‘s certification to understand the work performed as an assistance in planning and executing the current battle

Supervisory forces who review certification prepared by helpers on the battle.

Engagement supervisors and engagement quality referees who review certification to understand how the battle squad reached important decisions and whether there is equal evidentiary support for those decision.

A replacement hearer who reviews a predecessor hearers ‘ audit certification.

Internal and external review squads that review certification to measure audit quality and conformity with scrutinizing and related professional pattern criterions ; applicable Torahs, regulations, and ordinances ; and the hearer ‘s ain quality control policies.

Others, including advisers engaged by the audit commission or representatives of a party to an acquisition.

There are some demands of audit certification. Audit certification has to be prepared in equal item to supply a clear apprehension of its intent, beginning, and the decisions reached. In add-on, the certification has to be right organized to supply a clear nexus to the important findings or issues. Audit certification may be in the signifier of paper, electronic files, or other media. The audit certification should show that the battle complied with the criterions of the PCAOB and back up the footing for the hearer ‘s decisions refering every relevant fiscal statement averment. It should besides show that the underlying accounting records agreed or reconciled with the fiscal statements. Audit certification pulp contain sufficient information to enable an experient hearer to understand the nature, timing, extent, and consequences of the processs performed, grounds obtained, and decisions reached. The hearer has to find who performed the work and the day of the month such work was completed every bit good as the individual who reviewed the work and the day of the month of reappraisal.

The audit certification has to back up the hearer ‘s concluding decisions, so it must incorporate information the hearer has identified associating to important findings or issues that is inconsistent with or contradicts the hearer ‘s concluding decisions. If hearer can find and demonstrates that sufficient processs were performed, sufficient grounds was obtained, and appropriate decisions were reached, but the certification is non sufficient, hearer have to see adding extra information. On the other manus, if hearer can non find or show, hearer should follow with the commissariats of AU sec. 390, Consideration of Omitted Procedures After the Report Date.

There are demands of certification for specific affairs. Documentation should hold designation for scrutinizing processs that involve the review of paperss or verification, including trials of inside informations, trials of runing effectivity of controls, and walkthroughs. The designation of the points inspected may be satisfied by bespeaking the beginning from which the points were selected and the specific choice standards. Other affairs like hearer independency, staff preparation and proficiency and client credence and keeping, may be documented in a cardinal depository for the public accounting house ( “ house ” ) or in the peculiar office participating in the battle. At the same clip, the audit certification should include a mention to cardinal depository.

Significant findings or issues are substantial affairs that are of import to the processs performed, grounds obtained, or decisions reached, and in clued all affairs that could ensue in alteration of the hearer ‘s study. Auditor must place all important findings or issues in an engagement completion papers. The papers with any paperss cross-referenced should jointly be every bit specific as necessary for referees to derive a thorough apprehension of the important findings or issues.

The last portion in the Auditing Standard is keeping of and subsequent alterations to scrutinize certification. The hearer must maintain audit certification for seven old ages from the day of the month the hearer grants permission to utilize the hearer ‘s study in connexion with the issue of the company ‘s fiscal statements ( study release day of the month ) , unless a longer period of clip is required by jurisprudence. However, if a study is non issued in connexion with an battle, so the audit certification must be retained for seven old ages from the day of the month that fieldwork was well completed. If the hearer was unable to finish the battle, so the audit certification must be retained for seven old ages from the day of the month the battle ceased.

The hearer must finish all necessary auditing processs and obtained sufficient grounds to back up the representations in the hearer ‘s study within anterior to the study release day of the month. Audit certification must non be deleted or discarded after the certification completion day of the month, but information may be added with indicant of day of the month, name of the individual who prepared the information, and the ground for adding it. In add-on, the hearer must place and document any add-ons to scrutinize certification as a consequence of these processs consistent with the old paragraph.

For the office of the house publishing the hearer ‘s study is responsible for guaranting that all audit certification sufficient to run into the demands of Audit Standard. Besides, the office must obtain, and reappraisal and retain, prior to the study release day of the month, the undermentioned certification related to the work performed by other hearers. At the terminal, the hearer may be required to keep certification in add-on to that required by the criterion.


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