Question

Discuss some of the important features of audit documentation and what are the risks of inadequate audit documentation.

Answer 1

Audit Documentation definition

It is the records or documentation of procedures that auditor has  performed while conducting an Audit. The audit proof which is acquired and furthermore the conclusion that has been made by them dependent on the proof i.e. obtained. These Audit documentation are also called as audit working paper or working paper.

Audit Documentation also contains:

- Audit Documentation contains the Checklist of Areas that is covered and Audit Plans as well

- Steps under gone to perform the Audit.

-Supporting, affirmations found in the midst of the Audit method to help Audit conclusions also.

-The conclusions to upon by the Auditor subject to Audit Conclusions as well.

Importance

1. Audit report is a helpful to develop the Audit which was done according to generally recognized accounting to principals

2. Audit Documentation is a proof for supporting the closures molded and imparted by the auditor in the Auditor's Report.

3. Audit Documentation Helps the audit to structure and plan for the Audit .

4. Audit Documentation can be used as a proof in Court of Law. Strong to the Auditors who are as of late associated with for reviewing before year's documentation.

5. Engages to review created by the Auditors and sets up duty of the auditors

6. Obliging in Quality Review of the Audits

Audit Risk of inadequate audit documents

-Audit Risk Model chooses the risk factor in Audit. It furthermore portrays how the risk factors can be supervised.

-Audit Risk Model depends upon the going with parts:

1. Control Risk : Control chance rises in light of peril of existing control frustrations or as a result of no controls being accessible to alleviate possibility. That might lead to incorrect financial statements.
2. Recognizable proof Risk : Detection chance is the danger that the auditor will no doubt be un able distinguish a material mistake in the spending synopsis incorrect assessment in the Auditor's Report.
3. Trademark Risk : Inherent Risk is a danger which may be a result of a screw up or prohibition caused other that failure of controls. This risk exists where trades are incredible in nature, a ton of judgment is required for account the trades.

The basic formula of Audit Risk:

Audit Risk= Control Risk * Detection Risk * Inherent Risk

The auditor needs to study the elements of all of the above threats to choose the level of auditing procedures to be done to outline a notion for the Auditor's Report. Higher the peril, more noteworthy would be the Audit test, in order to mitigate th shot and pass on it to the commendable risk level.