Auditing Standards Board issues Audit Documentation exposure draft.

The Auditing Standards Board has released for exposure a proposed auditing standard entitled Audit Documentation. Comments are due May 15.

The proposed statement on auditing standards would, if approved, replace SAS No. 96, Audit Documentation. The ASB believes this exposure draft will improve audit practice and is responsive to the issues that have been raised by regulators and others who use and rely on audited financial statements of non-issuers. The standard would not apply to an audit of a public company since those auditing standards are promulgated by the Public Company Accounting Oversight Board.

The proposed SAS will be significantly more specific than SAS No. 96. It requires the auditor to consider, when preparing audit documentation, the needs of an "experienced auditor." having no previous connection with the audit, to understand the procedures performed, the evidence obtained and specific conclusions reached. It also provides enhanced guidance on matters that should be documented, including guidance on documentation that should be retained, and requires the auditor to document audit evidence that is identified as being contradictory or inconsistent with the final conclusions, and how the auditor addressed the contradiction or inconsistency. In addition, the auditor would be required to assemble the audit documentation to form the final audit engagement file within 60 days following the delivery of the auditor's report to the entity. After this date, the proposed SAS requires the auditor not to delete or discard existing audit documentation, and to appropriately document any subsequent editions or changes. The proposed SAS also specifies a minimum file retention period that is ordinarily not expected to be shorter than five years from the date of the auditor's report.

In addition to the proposed audit documentation SAS, the exposure draft includes proposed amendments to SAS No. 1, Codification of Auditing Standards and Procedures (AICPA, Professional Standards, vol. 1, AU sec. 530.01 and .05, "Dating of the Independent Auditor's Report"). The proposed amendment requires that the auditor's report not be dated earlier than the date on which the auditor has obtained sufficient competent audit evidence to support the opinion on the financial statements. It also proposes an amendment to SAS No. 95. Generally Accepted Auditing Standards (AICPA, Professional Standards, vol. 1, AU sec. 150.05). This amendment adds a requirement for the auditor to document his or her justification for a departure from the SASs in the working papers.

Copies of the exposure draft are available from the AICPA's Web site at: www.aicpa.org/members/div/auditstd/drafts.htm