Cost Audit Documentation, Audit Process and Execution: formula sheet

Key formulas

Scope of SCA 102 (para 3)

Auditor's responsibility to prepare audit documentation for audit of cost statements, records and other related documents

Other SCAs' documentation requirements do not limit SCA 102. Laws or regulations may add requirements.

Audit documentation (para 4.2)

Records (physical or electronic) incl. working papers, prepared by and for, or obtained and retained by, the cost auditor in connection with the audit

Includes both prepared and obtained records.

Audit working papers (para 4.6)

Documents recording all audit evidence obtained during the audit

Support the work done and give assurance the audit followed the relevant Cost Auditing Standards.

Audit file (para 4.3)

One or more folders or other storage media (physical or electronic) containing the records that comprise audit documentation for a specific assignment

One file set per assignment.

Assembly of file (paras 5.8 and 6.16)

Assemble documentation in an audit file; complete final assembly within a reasonable time after the audit; no deletion or discarding before the retention period ends

Documentation is assembled as the audit goes on; final assembly should be limited in extent.

Audit team (para 4.5)

All personnel performing an engagement, including any experts contracted by the firm for it

Experts are part of the team.

Para 5.1: What to record

Procedures performed + evidence obtained + conclusions reached

These three items must be recorded as part of the audit documentation.

Para 5.2: Sufficiency test

Another competent person, with no previous connection to the audit, can understand (a) to (e)

Includes a person doing peer review. Learn the five items: legal conformance, SCA conformance, results, evidence, significant matters and judgments.

Para 5.6: Timing

Prepare documentation on a timely basis

Para 6.14: documentation prepared after the work is likely to be less accurate.

Para 5.7: After report date

New or additional procedures or new conclusions after the report date → document the circumstances and procedures

Applies in exceptional circumstances.

Para 6.6: Evidence of conformance (examples)

Audit plan, signed appointment letter, minutes of discussions with client personnel, minutes of audit team discussions

Minutes should name team members present, particularly the audit partner when present.

Para 6.16: Assembly and retention

Assemble as the audit goes on; complete final file within a reasonable time; no deletion before the retention period ends

Final assembly should be limited work.

Factors affecting content and form (SCA 102, para 6.3)

Size and complexity | Computerisation of cost records | Assessed risks of material misstatement of cost | Methodology and tools used | Nature of audit procedure

Five factors, labelled (a) to (e). The text says 'such as', so the list is illustrative, not closed.

What to record for procedures (para 5.5)

Items or matters tested + who performed + who reviewed + dates + extent of review

Applies when documenting the nature, timing and extent of procedures.

Timing and assembly (paras 6.14, 6.16)

Prepare on time; assemble as the audit goes on; complete the final file within a reasonable time; no deletion before the retention period ends

Documentation prepared after the work is likely to be less accurate than that prepared during execution.

Alternative procedures (para 6.11)

Document how the alternative procedure achieves the aim of the requirement + the reasons for the departure

Applies only in exceptional circumstances.

Timely preparation (para 5.6)

Prepare audit documentation on a timely basis

Para 6.14: documentation prepared after the work is likely to be less accurate than documentation prepared during execution.

Assembly of the file (para 5.8)

Audit documentation → assembled in one audit file

Assembly is done as the audit goes on; the final assembly is completed within a reasonable time after the audit (para 6.16).

No deletion (para 6.16)

After final assembly: no deleting or discarding before the end of the retention period

Applies to documentation of any nature. Refers to para 5.9.

Post-report changes (paras 5.7, 6.15)

New procedures, new conclusions or later-known facts → document the circumstances and details, and review the changes like the original

Para 5.7 applies in exceptional circumstances after the report date.

Sufficiency (para 6.5)

Oral explanations ≠ substitute for documentation

Documentation must be sufficient and appropriate.

Effective date (para 7)

SCA 102 applies to audits on or after 11 September 2015

Date as in the standard.

Pre-planning checks

Proper appointment + ethics satisfied + terms of reference understood

SCA 101 para 5.1 (a), (b), (c). Do these before the planning phase. Para 6.3 adds two checks after acceptance: no impairment of arm's length position and no management integrity issue.

Audit plan content

Audit plan = nature + extent + timing of risk assessment, audit procedures and other activities

SCA 101 para 5.5. The plan is more detailed than the overall strategy (para 6.6). Specific further procedures depend on the outcome of risk assessment.

Planning nature

Planning = continuous and iterative, not a discrete phase

SCA 101 para 6.2. Risk assessment procedures are planned early.

Modifying the plan

Unexpected events / changed conditions / audit evidence → auditor may need to modify strategy and plan

SCA 101 para 6.8. The standard says 'may need to'; the decision is a matter of judgement.

Objective of the audit

Reasonable assurance that cost statements are free from material misstatement (fraud or error)

SCA 108 para 6.1. Achieved by sufficient appropriate audit evidence that reduces audit risk to an acceptably low level.

Evidence procedures

Observation, external confirmation, re-performance, analytical procedures; examples on cost records: analysis and review, reperformance, reconciliation

SCA 107. Para 6.5 gives analysis and review, reperformance and reconciliation as examples of procedures to test cost records, not a fixed list. Observation is limited to the point in time it takes place (para 6.11). Re-performance is independent execution of procedures or controls (para 6.14).

Quick revision

• Audit is an independent examination of financial, cost and other related information, conducted to express an opinion.
• Audit documentation means records, in physical or electronic form, including working papers prepared by, for or obtained and retained by the cost auditor.
• An audit file is one or more folders or storage media containing the records that make up the documentation for a specific assignment.
• SCA 102 covers the auditor's duty to prepare documentation for the audit of cost statements, records and related documents.
• Other standards' documentation requirements do not limit SCA 102, and laws may add further requirements.
• Record the characteristics of items tested, who performed and reviewed the work, relevant dates and extent of review.
• Form and content depend on auditee size and complexity, computerisation, assessed risks, methodology and tools, and the nature of the procedure.
• Documentation prepared during the work is likely to be more accurate than that prepared afterwards.
• Assemble documentation as the audit goes on; complete the final file within a reasonable time after the audit.
• After assembly, do not delete or discard documentation before the end of its retention period.
• Electronic documentation needs special care against accidental deletion or tampering.
• The engagement letter records the terms of the engagement, including the cost reporting framework.

Common mistakes

• Treating working papers and audit documentation as the same thing Fix: Working papers are a part of audit documentation. Documentation also covers records obtained and retained.
• Saying the audit file is a single physical folder Fix: The definition says one or more folders or other storage media, physical or electronic.
• Listing only the evidence collected and ignoring conclusions. Fix: Para 5.1 needs procedures, evidence and conclusions. Always state all three.
• Forgetting the 'no previous connection' test in para 5.2. Fix: Say it must let another competent person with no previous connection, including a peer reviewer, understand the work.
• Giving a fixed list of documents every audit must have. Fix: State that content and form depend on the para 6.3 factors. Give examples of working papers only as illustrations.
• Treating the para 6.3 factors as a closed list. Fix: The paragraph says 'such as'. Say the factors include these five and mention others only if the case supports them.
• Stating a fixed number of years for retention as if it were in SCA 102 paras 6.14 to 6.16. Fix: Say the file is kept until the end of its retention period, and avoid a number unless the question gives it.
• Thinking the auditor may tidy the file by removing superseded papers after assembly. Fix: Para 6.16 bars deleting or discarding documentation of any nature before the retention period ends.
• Treating planning as a one-time phase at the start. Fix: State that planning is continuous and iterative (SCA 101 para 6.2) and can be modified later.
• Jumping straight to planning without acceptance checks. Fix: Begin with proper appointment, ethics and terms of reference under para 5.1.

Exam tips

• Learn the definitions almost word for word. MCQs often swap one phrase, such as 'prepared' for 'obtained and retained'.
• For a short note on SCA 102 scope, give three points: coverage, no limit from other SCAs, and additional legal requirements.
• In case questions, label each item as documentation, working paper or audit file before you apply the rule.
• Quote the paragraph numbers (3, 4.2, 4.3, 4.6, 5.8, 6.16) only where you are sure. The numbers add credibility but the content earns marks.
• Memorise para 5.2 (a) to (e) as a five-item list. It is the most testable part.
• In case questions, spot the trigger: late preparation (5.6), post-report work (5.7), or an unrecorded judgment (5.2(e), 6.8).
• Quote para numbers where you are sure: 5.1, 5.2, 5.6, 5.7 are in the supplied text.
• Normal capacity for overhead absorption is the standard example of a significant matter. Use it.