Document ID: chunk:federal_register_of_legislation:F2016C00028:reg:26:p41
Version: federal_register_of_legislation:F2016C00028
Segment Type: reg
Provision Reference: reg 26 (pt 41/47)
Character Range: 126410–129511

See ASA 330 for further guidance.

Documentation (Ref: Para. 32)

A152.      The manner in which the requirements of paragraph 32 are documented is for the auditor to determine using professional judgement.  For example, in audits of small entities the documentation may be incorporated in the auditor's documentation of the overall strategy and audit plan.[24]  Similarly, for example, the results of the risk assessment may be documented separately, or may be documented as part of the auditor's documentation of further procedures.[25]   The form and extent of the documentation is influenced by the nature, size and complexity of the entity and its internal control, availability of information from the entity and the audit methodology and technology used in the course of the audit.

A153.      For entities that have uncomplicated businesses and processes relevant to financial reporting, the documentation may be simple in form and relatively brief.  It is not necessary to document the entirety of the auditor's understanding of the entity and matters related to it.  Key elements of understanding documented by the auditor include those on which the auditor based the assessment of the risks of material misstatement.

A154.      The extent of documentation may also reflect the experience and capabilities of the members of the audit engagement team.  Provided the requirements of ASA 230 are always met, an audit undertaken by an engagement team comprising less experienced individuals may require more detailed documentation to assist them to obtain an appropriate understanding of the entity than one that includes experienced individuals.

A155.      For recurring audits, certain documentation may be carried forward, updated as necessary to reflect changes in the entity's business or processes.

Appendix 1

(Ref: Para. 4(c), 14‑24 and A77‑A121 )

Internal Control Components

      1. This appendix further explains the components of internal control, as set out in paragraphs 4(c), 14-24 and A77-A121 as they relate to a financial report audit.

Control Environment

2.                   The control environment encompasses the following elements:

(a)                Communication and enforcement of integrity and ethical values.  The effectiveness of controls cannot rise above the integrity and ethical values of the people who create, administer, and monitor them.  Integrity and ethical behaviour are the product of the entity's ethical and behavioural standards, how they are communicated, and how they are reinforced in practice.  The enforcement of integrity and ethical values includes, for example, management actions to eliminate or mitigate incentives or temptations that might prompt personnel to engage in dishonest, illegal, or unethical acts.  The communication of entity policies on integrity and ethical values may include the communication of behavioural standards to personnel through policy statements and codes of conduct and by example.

(b)                Commitment to competence.  Competence is the knowledge and skills necessary to accomplish tasks that