Case 3.4 Answer
Meng Tian and Xueying Tang
AC 741
Prof. Jay Thibodeau
Feb 19, 2014
Case 2.7
1. According to Paragraph 2 of PCAOB Auditing Standard No. 3, audit documentation is “the written record of the basis for the auditor's conclusions that provides the support for the auditor's representations, whether those representations are contained in the auditor's report or otherwise.” This means that audit documentation is a written documentation that can be used as evidence for the audit conclusion when an auditor reviews the quality of his or her work. It is important for an auditor to retain audit documentation for a specific period of time because audit documentation represents the written evidence that the auditor has completed his/her work in conformity with basic auditing principles.
2. Standing on our opinion, Section 103 of SARBOX does not go far enough and is not adequate related audit documentation requirements. The word “shall” is used in each rule requirement of the Section 103 of SARBOX. “Shall” indicates that auditors are not forced to obey all rules. However, PCAOB Auditing Standards use the word “must” in each audit documentation requirement. “Must” means that auditors are forced to comply with all rules. In addition, Section 103 of SARBOX gives broader requirements of audit documentation than PCAOB Auditing Standards. For example, Section 103 of SARBOX suggests that each registered public accounting firm should prepare, and maintain for a period of not less than 7 years, audit work papers, and other information related to any audit report, in sufficient detail to support the conclusions reached in such report. Section 103 does not specifically indicate what type of audit work papers and other information should be retained. Auditors could depend on their judgments to decide which documentation is related to audit report. However, PCAOB Auditing Standards list what audit documentation should be kept under different circumstances. For example, Paragraph 10
AC 741
Prof. Jay Thibodeau
Feb 19, 2014
Case 2.7
1. According to Paragraph 2 of PCAOB Auditing Standard No. 3, audit documentation is “the written record of the basis for the auditor's conclusions that provides the support for the auditor's representations, whether those representations are contained in the auditor's report or otherwise.” This means that audit documentation is a written documentation that can be used as evidence for the audit conclusion when an auditor reviews the quality of his or her work. It is important for an auditor to retain audit documentation for a specific period of time because audit documentation represents the written evidence that the auditor has completed his/her work in conformity with basic auditing principles.
2. Standing on our opinion, Section 103 of SARBOX does not go far enough and is not adequate related audit documentation requirements. The word “shall” is used in each rule requirement of the Section 103 of SARBOX. “Shall” indicates that auditors are not forced to obey all rules. However, PCAOB Auditing Standards use the word “must” in each audit documentation requirement. “Must” means that auditors are forced to comply with all rules. In addition, Section 103 of SARBOX gives broader requirements of audit documentation than PCAOB Auditing Standards. For example, Section 103 of SARBOX suggests that each registered public accounting firm should prepare, and maintain for a period of not less than 7 years, audit work papers, and other information related to any audit report, in sufficient detail to support the conclusions reached in such report. Section 103 does not specifically indicate what type of audit work papers and other information should be retained. Auditors could depend on their judgments to decide which documentation is related to audit report. However, PCAOB Auditing Standards list what audit documentation should be kept under different circumstances. For example, Paragraph 10