The Hindu Business Line : Audit documentation norms to be revamped

The move to revamp the "audit documentation" principles and procedures comes nearly two decades after the existing accounting and assurance standard (AAS) on "documentation" was issued in July 1985, informed sources said.

The Auditing and Assurance Standards Board (AASB) of the Institute of Chartered of India (ICAI) has now issued an exposure draft of the AAS on "Audit Documentation".

The proposed AAS seeks to bring in "greater rigour and consistency" in audit documentation, sources added. Audit documentation is the record of audit procedures performed, relevant audit evidence obtained and conclusions the auditor reached. The audit documentation for a specific audit engagement is assembled in an audit file.

The AASB's exposure draft is on the lines of the exposure draft on audit documentation that has been issued by the International Federation of Accountants (IFAC).

Sources highlighted that the AASB has taken a proactive approach and issued the exposure draft simultaneously with the exposure draft of IFAC. Besides bringing about greater rigour in documentation, sources said that the new AAS would also help in convergence with international standards on this matter.

The new AAS seeks to adopt "experienced auditor" as a point of reference in the preparation of audit documentation. An "experienced auditor" means an individual (whether internal or external to the firm) who has a reasonable understanding of audit processes and of auditing and financial reporting issues relevant to the industry in which the entity operates.

"The auditor would be required to prepare audit documentation in such a manner that enables an experienced auditor, having no previous connection with the audit, to understand the audit procedures performed, the audit evidence obtained and the conclusions reached on significant matters," sources said.

Another new feature of the proposed AAS is that a time frame is being specified for assembling of audit file. "As against the 60-days norm followed internationally, our AAS proposes that the date on which the assembling of the audit file is finally completed should ordinarily be not more than 90 days after the date of the auditor's report. We are suggesting more time in our standard to factor in requirements that are peculiar to our country such as tax audit etc," sources said.