CS Professional · Compliance Management, Audit and Due Diligence · Audit Process and Documentation

While planning the audit of Narmada Textiles Ltd, which has an uncomplicated business, the audit senior prepares extensive notes on every aspect of the entity's operations. The manager says not all of it needs to be recorded. Under SA 315, which part of the understanding must the auditor document?

The auditor must document the key elements of understanding on which the assessment of the risks of material misstatement was based. SA 315 says it is not necessary to record the entire understanding of the entity, particularly where the business and processes are uncomplicated.

AOnly the entity's published annual report contents
BThe entirety of the understanding, without exception
COnly matters discussed with the internal audit function
DThe key elements of understanding on which the auditor based the assessment of the risks of material misstatementCorrect

Explanation

SA 315 says that for uncomplicated entities documentation may be simple and brief, and it is not necessary to document the entirety of the understanding. Key elements documented are those on which the risk assessment was based. Requiring everything to be recorded contradicts this.

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