CA Inter P5 · Chapter 6
Audit Documentation MCQs with Answers
9 multiple-choice questions on Audit Documentation for CA Inter P5 Auditing and Ethics. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
Under SA 230, audit documentation primarily provides:
- A) A substitute for the entity's own accounting records
- B) A document for the client to use in preparing the financial statements
- C) Evidence that management has complied with all laws
- D) Evidence of the auditor's basis for a conclusion about achieving the overall objectives, and evidence that the audit was planned and performed in accordance with the SAs and applicable legal requirements
Show answer & explanation
Answer: D) Evidence of the auditor's basis for a conclusion about achieving the overall objectives, and evidence that the audit was planned and performed in accordance with the SAs and applicable legal requirements
SA 230 states that audit documentation provides evidence of the basis for the auditor's conclusion and evidence that the audit was planned and performed in accordance with the SAs and legal and regulatory requirements. It also helps direct, supervise and review the work. It is not a substitute for the entity's records.
Question 2
The audit working papers prepared during the audit of Ananya Foods Ltd. are the property of:
- A) The Registrar of Companies
- B) The shareholders of the company
- C) The company
- D) The auditor
Show answer & explanation
Answer: D) The auditor
Working papers are the property of the auditor. The auditor may, at his discretion, make portions of them available to the entity, provided this does not undermine the independence or validity of the audit. The client has no right of ownership over them.
Question 3
The assembly of the final audit file after the date of the auditor's report is an administrative process. An appropriate time limit within which to complete it is ordinarily:
- A) Not more than 60 days after the date of the auditor's report
- B) Before the date of the auditor's report
- C) Not more than 7 days after the date of the auditor's report
- D) Any time before the next year's audit begins
Show answer & explanation
Answer: A) Not more than 60 days after the date of the auditor's report
SA 230 requires the auditor to assemble the audit documentation in an audit file and complete the administrative process on a timely basis after the date of the report. The application material to SA 230 indicates that an appropriate time limit is ordinarily not more than 60 days after the date of the auditor's report. Firms build this limit into their quality control (quality management) policies. No new audit procedures are performed and no new conclusions are drawn during assembly.
Question 4
After the assembly of the final audit file of Kesar Exports Ltd. is complete, an audit manager wants to remove a working paper. Under SA 230:
- A) The auditor shall not delete or discard documentation of any nature before the end of its retention period
- B) Working papers can be removed once the client has adopted the financial statements
- C) Only working papers relating to immaterial areas can be removed
- D) Working papers can be removed if the engagement partner approves
Show answer & explanation
Answer: A) The auditor shall not delete or discard documentation of any nature before the end of its retention period
SA 230 prohibits deleting or discarding audit documentation of any nature after assembly of the final file and before the end of the retention period. If modifications or additions are necessary, the auditor documents the specific reasons, when and by whom they were made and reviewed.
Question 5
SA 230 requires audit documentation to be sufficient to enable whom to understand the nature, timing and extent of procedures performed, the results and evidence obtained, and significant matters and conclusions?
- A) The client's board of directors
- B) An experienced auditor having no previous connection with the audit
- C) A new article assistant joining the firm
- D) Any member of the public
Show answer & explanation
Answer: B) An experienced auditor having no previous connection with the audit
SA 230 sets the 'experienced auditor' test: documentation should enable an experienced auditor, with no previous connection to the audit, to understand the work performed, the evidence obtained and the significant matters and conclusions. An experienced auditor understands audit processes, SAs, the business environment and relevant reporting issues.
Question 6
Which of the following would ordinarily be kept in the permanent audit file rather than the current file?
- A) The bank reconciliation working paper for the current year-end
- B) The current year's lead schedule for trade receivables
- C) Confirmation replies received for the current year
- D) Copies of the memorandum and articles of association and long-term contracts
Show answer & explanation
Answer: D) Copies of the memorandum and articles of association and long-term contracts
The permanent file contains information of continuing importance to future audits, such as constitutional documents, long-term agreements, organisation charts and accounting manuals. The current file holds working papers relating to the current year's audit, such as reconciliations, lead schedules and confirmations.
Question 7
After the auditor's report for Ved Polymers Ltd. was dated, the auditor learns of a fact that existed at that date and performs new audit procedures, reaching new conclusions. Under SA 230, the auditor shall document:
- A) Only the revised conclusion, replacing the earlier working papers
- B) Nothing, because documentation cannot be changed after the report is dated
- C) Only a note that the matter was discussed with management
- D) The circumstances encountered, the new or additional procedures performed, evidence obtained and conclusions, and when and by whom the changes were made and reviewed
Show answer & explanation
Answer: D) The circumstances encountered, the new or additional procedures performed, evidence obtained and conclusions, and when and by whom the changes were made and reviewed
SA 230 requires that in exceptional circumstances where the auditor performs new or additional procedures or reaches new conclusions after the report date, the auditor documents the circumstances, the procedures, evidence and conclusions and their effect on the report, and when and by whom the resulting changes were made and reviewed. Existing documentation is not replaced.
Question 8
Which of the following is ordinarily NOT required to be included in audit documentation under SA 230?
- A) How the auditor addressed information inconsistent with a final conclusion on a significant matter
- B) Identifying characteristics of the specific items tested
- C) Superseded drafts of working papers and notes reflecting incomplete or preliminary thinking
- D) Discussions of significant matters with management, including when and with whom
Show answer & explanation
Answer: C) Superseded drafts of working papers and notes reflecting incomplete or preliminary thinking
SA 230 states that the auditor need not include superseded drafts of working papers or financial statements, notes reflecting incomplete or preliminary thinking, previous copies of documents corrected for typographical errors, and duplicates. Significant discussions, identifying characteristics of items tested and treatment of inconsistent information must be documented.
Question 9
In documenting the nature, timing and extent of audit procedures performed, SA 230 requires the auditor to record:
- A) Only the name of the engagement partner who signed the report
- B) The fee charged for each area of the audit
- C) Who performed the work and the date it was completed, and who reviewed it and the date and extent of review
- D) The personal opinions of team members about management
Show answer & explanation
Answer: C) Who performed the work and the date it was completed, and who reviewed it and the date and extent of review
SA 230 requires documentation of who performed the audit work and the date it was completed, and who reviewed the work and the date and extent of that review, along with identifying characteristics of items tested. This enables accountability and evidences supervision and review.