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CA Intermediate · Auditing and Ethics · Audit Documentation

During the audit of Rao Steels Ltd, the auditor identified a significant matter: management's valuation of an unlisted investment appeared aggressive. After discussion with the CFO and an external valuer, the auditor concluded that the carrying value was acceptable. Which documentation best satisfies SA 230 for this matter?

The auditor should document the significant matter, the discussions with management and the valuer including when and with whom, the procedures performed, and the conclusion reached. SA 230 requires such records so an experienced auditor with no prior connection can understand the judgements made.

  1. AOnly the final conclusion that the valuation is acceptable
  2. BThe matter, the discussions held and with whom and when, the procedures performed, and the conclusion reachedCorrect
  3. COnly the valuer's report kept in the permanent file
  4. DAn oral note to the engagement partner, as discussions need not be recorded

Explanation

SA 230 requires documentation of significant matters arising during the audit, the conclusions reached and significant professional judgements. This includes discussions of significant matters with management and others, including the nature, when and with whom. A bare conclusion or a valuer's report alone does not show how the conclusion was reached, and oral discussion alone is insufficient.

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