What is Audit Documentation?

Audit documentation is the record of procedures performed, evidence obtained, and conclusions reached as part of an audit.

Why Audit Documentation is Needed

The proper preparation of audit documentation is critical for several reasons, including the following:

It can be used as a defense if the auditor is ever accused of negligence.
It is easier for a reviewer to examine.
It represents a better level of quality control over an audit.
It shows auditors in later years how the audit was conducted.
It can be used as a training tool for junior auditors.

Types of Audit Documentation

The types of audit documentation that should be assembled include the following:

Physical analyses conducted. Auditors routinely conduct a physical examination of the more expensive assets listed in a client’s accounting records, to verify that they exist. This most commonly applies to fixed assets and inventory.
Confirmation letters. Auditors use third parties to confirm that assets and liabilities exist, and document their statements with confirmation letters. This can include all types of confirmations, including bank, loan, and consigned inventory confirmations.
Representation letters. This is a form letter written by a company's external auditors, which is signed by senior company management. It attests to the accuracy of the financial statements that the company has submitted to the auditors for their analysis.
Records of oral interviews. This is documentation of any discussions with the client regarding business procedures, transactions, and so forth.
Documentation of analytical procedures. Auditors summarize the results of their analytical procedures, including the nature of the procedures conducted and their findings and conclusions.
Documentation of substantive procedures. Auditors summarize the results of their substantive procedures, including the observation of a physical inventory, examining specific control points for efficacy, and confirming cash balances with banks.

In the interests of keeping the audit documentation down to a manageable length, it is not necessary to include corrected copies, duplicates, notes regarding preliminary conclusions, and superseded drafts.