ACCA Advanced Audit and Assurance (AAA) Practice Exam

What is required under ISA 230 about audit documentation?

1. Documentation must be completed at the end of the audit

2. Documentation should be prepared on a timely basis

3. Auditors need to keep documentation indefinitely

4. Documentation should only include financial statements

The correct answer is: Documentation should be prepared on a timely basis

Under ISA 230, which governs audit documentation, it is specified that documentation should be prepared on a timely basis. This requirement emphasizes the importance of maintaining records that are accurate and reflect the audit procedures performed, findings, and conclusions reached as they occur in real-time throughout the audit process. Timely documentation aids in ensuring that the work performed is adequately reflected in the records and that the rationale for judgments made during the audit is clearly stated and easily retrievable. This focus on preparing documentation in a timely manner supports the overall audit quality and transparency, as timely notes are less likely to rely on memory and thus offer a more reliable account of the auditor's work. Additionally, timely documentation facilitates better communication and coordination among audit team members, which is crucial for the effectiveness of the audit. The other options do not align with the requirements set forth in ISA 230. For example, while auditors are encouraged to complete documentation promptly, it is not mandated that all documents must be finalized at the end of the audit. Moreover, there are specific retention periods for audit documentation, but indefinite retention is not a requirement as regulations typically allow for a set timeframe. Lastly, audit documentation encompasses more than just the financial statements; it includes all relevant evidence to substantiate the audit opinion