Documentation and professional judgment

Audit documentation (ISA 230) is the record of the procedures performed, the evidence obtained and the conclusions reached. It is the evidence that the audit was planned and performed in accordance with the ISAs, and it is what reviewers, quality managers, inspectors and successor teams rely on. If it isn't documented, there is no evidence it was done.

The test. Documentation must be sufficient to let an experienced auditor with no previous connection to the audit understand: the nature, timing and extent of the procedures performed; the results and the evidence obtained; and the significant matters arising, the conclusions reached and the significant professional judgements made in reaching them.

In practice that means recording: - the identifying characteristics of the items tested (invoice numbers, a selection method and its parameters — not just "tested 25 items"); - who performed the work and when, and who reviewed it, when and to what extent; - discussions of significant matters with management and those charged with governance — what, when and with whom; - how any inconsistency between evidence and a final conclusion was resolved.

Documenting a judgement. A good memo on a significant judgement sets out: the issue and why it matters (with materiality context); the facts; the requirement in the framework; management's position and its key assumptions; the auditor's procedures and evidence — including evidence that contradicts management; the alternatives considered; the conclusion; and the reasons. Oral explanations alone don't support work that isn't documented, though they can clarify what is.

Documentation needn't include superseded drafts, notes reflecting incomplete thinking, or copies of all the entity's records.

Assembly and retention. The final audit file is assembled on a timely basis after the date of the auditor's report — ordinarily within 60 days. After that, nothing may be deleted or discarded before the end of the retention period, which is ordinarily at least five years from the report date. If documentation must be modified or added after assembly, the auditor records the specific reasons, when it was done and by whom, and who reviewed it — never backdating.

Documentation is also where professional scepticism becomes visible: a file that shows the auditor looked for and weighed contradictory evidence is the best defence of a judgement.