## **Learning Outcomes**

After studying this article, you will be able to explain the reasons for maintaining audit documentation, describe the required content of audit working papers, and distinguish clearly between current and permanent files. You will also understand their functions, use, and significance for ACCA exam success.

## **ACCA Foundations in Audit (FAU) Syllabus**

For ACCA Foundations in Audit (FAU), you are required to understand audit documentation for both technical and regulatory reasons. Focus particularly on:

- The reasons for maintaining audit documentation
- The purpose and typical contents of the current file
- The purpose and typical contents of the permanent file
- The requirements of International Standard on Auditing (ISA) 230 Audit Documentation
- The use of information technology in documenting audit work
- The quality management procedures over audit working papers

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. What is the main purpose of retaining audit working papers?
2. Name two types of information typically found in the permanent audit file.
3. Which file contains documents and evidence specific only to the current year’s audit?
4. State one reason why good audit documentation is essential for quality management.
5. True or false: Audit working papers are always the property of the client.

## **Introduction**

Audit documentation provides a written record of the work performed, evidence gathered, and conclusions reached during an audit. For every audit, auditors must keep comprehensive records that detail their planning, procedures, and findings. These records support the audit opinion and demonstrate compliance with professional standards. Proper documentation also aids quality management, supervision, and allows for review by partners and regulators.

> **Key Term: audit documentation**
> Documentation that records the audit procedures performed, evidence obtained, and conclusions reached on significant matters in the engagement.

## **PURPOSE OF AUDIT DOCUMENTATION**

Audit documentation fulfils several roles within the audit process:

- It serves as proof that the audit was performed in line with ISAs and firm policies.
- It supports the auditor’s opinion and demonstrates that sufficient appropriate evidence has been obtained.
- It aids ongoing supervision and review of audit work by senior auditors and partners.
- It allows for accountability and enables quality reviews by regulatory bodies or external inspectors.
- It provides a record for future audits and assists staff with less experience in understanding key matters.

In addition, working papers help organize audit work, facilitate communication within the audit team, and act as a defense in the event of legal claims or regulatory questions.

> **Key Term: working papers**
> The files comprising records of audit planning, performance, review, and conclusions, as well as supporting evidence for the auditor’s report.

## **TYPES OF AUDIT FILES**

Audit documentation is generally divided into two main files: the current file and the permanent file.

### Current Audit File

The current audit file contains all documents, evidence, and work completed relating specifically to the audit for the current period under review. It includes:

- Audit planning memorandum and risk assessments
- Detailed audit programmes for each area
- Schedules and analyses supporting current year figures
- Records of sample selections and results
- Conclusions, summaries and signed-off working papers
- Copies of relevant correspondence for this year
- Matters for attention, unresolved issues, and the draft audit report

The current file is assembled and updated each audit cycle. It is essential for forming the current year’s audit opinion.

> **Key Term: current audit file**
> Documentation relating solely to the current period’s audit, including planning, execution, and conclusions for this year’s engagement.

### Permanent Audit File

The permanent file holds information likely to be relevant to more than one audit period. It is designed to avoid repetition and provide background about the client entity. It typically includes:

- Statutory documents (company constitution, certificates, tax records)
- Organisation charts and list of directors, shareholders, officers
- System descriptions, flowcharts, and procedural manuals
- Sample minutes of board and key management meetings
- Long-term contracts and agreements
- Details of accounting policies and internal controls
- Lease agreements, property deeds, loan documents

The permanent file is updated only when changes occur. It gives context for new audit team members and aids continuity year-on-year.

> **Key Term: permanent audit file**
> The file containing audit documentation of continuing relevance and background information for use in several or all audit periods.

## **CONTENTS OF CURRENT AND PERMANENT FILES**

Below is a summary of typical contents for each file:

**Current File:**

- This year’s planning documents and risk assessment
- This year’s trial balance, lead and supporting schedules
- Evidence of audit sampling and results
- Completed audit programmes and checklists
- Record of adjustments, reclassifications, and differences
- Review notes, sign-offs, and conclusion summaries

**Permanent File:**

- Certificate of incorporation and constitutional documents
- Accounting systems documentation, system flowcharts, process maps
- List of key personnel, directors, shareholders
- Significant contracts, leases, or loan agreements with multi-year impact
- Minutes of historic meetings with ongoing relevance
- Prior audit opinions issued, prior management letters
- Taxation documents of ongoing effect
- Policies on depreciation, inventory, and other significant estimates

### **Worked Example 1.1**

**Question:**  
The audit team is planning the year-end audit of Alpha Ltd. Aria, a new trainee, asks which file should store the company’s long-term lease agreement and which file should contain this year’s bank reconciliation.

> **Answer:**
> The long-term lease agreement should be filed in the permanent audit file, as it is relevant for multiple years. The current year’s bank reconciliation belongs in the current audit file, since it relates only to this year’s audit evidence and testing.

### **Worked Example 1.2**

**Question:**  
You are asked to add the director’s service contracts and the results of the inventory count for the current year to the audit documentation. Which file should each item be placed in?

> **Answer:**
> The director’s service contracts belong in the permanent file, as they are not expected to change each year. The inventory count results are specific to this period and must be included in the current file.

## **QUALITY MANAGEMENT AND REVIEW OF WORKING PAPERS**

High-quality audit documentation is necessary for demonstrating professional diligence and ensuring the audit team adheres to standards. Good working papers should:

- Show what work was performed, by whom, and when
- Be clear, concise, and logically organized with proper referencing
- Provide an experienced auditor with a clear understanding of the audit process and judgments made
- Enable effective supervision, review, and partner sign-off

Firms should have policies in place for reviewing, approving, and retaining audit documentation. Electronic working papers must have appropriate security such as passwords, backup procedures, and restricted access to ensure confidentiality and safe custody.

> **Key Term: quality management**
> Policies and procedures designed to ensure audits are performed to a consistent standard, including supervision and review of audit working papers.

## **USE OF INFORMATION TECHNOLOGY IN DOCUMENTATION**

Many firms now use electronic files and specialist audit software to document audit work. Benefits include easier referencing, better audit trail, simultaneous team access, and improved security. However, IT documentation must be subject to the same quality and confidentiality controls as paper records.

## **CONFIDENTIALITY, OWNERSHIP, AND RETENTION**

Audit working papers are usually the property of the audit firm, not the client, but must be kept confidential. They should not be disclosed to third parties without client permission, except where required by law or regulation. Retention periods are set by professional guidelines, often at least six years.

> **Key Term: confidentiality**
> The obligation of auditors to keep client information secure and not disclose it without proper authority, except as required by law.

## **Summary**

Audit documentation, divided into current and permanent files, is essential for supporting the audit opinion, ensuring high quality, and enabling effective supervision and review. Well-organized files make future audits more efficient and act as a useful reference if queries or legal issues arise.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Describe the main purposes of audit documentation
- Distinguish between current and permanent audit files
- State typical contents of each audit file
- Explain the role of audit documentation in quality management and review
- Identify the importance of confidentiality, ownership, and retention of working papers
- Recognize how IT can be used in audit documentation

## **Key Terms and Concepts**

- audit documentation
- working papers
- current audit file
- permanent audit file
- quality management
- confidentiality

Audit documentation - Purpose and contents of current and permanent files