Audit Documentation And The Sarbanes-Oxley Act Of 2002

Audit Documentation the Sarbanes Oxley Act Of 2002 Created The Public

"Audit Documentation" The Sarbanes–Oxley Act of 2002 created the Public Company Accounting Oversight Board (PCAOB) to oversee the work of public accounting firms performing financial statement audits for public filers, those with publicly traded securities on a U.S. stock exchange. This discussion activity requires two steps: First, select a publicly traded company and retrieve their most recent 10-K (annual filing), which includes the report of the independent audit firm. Read the opinion rendered in the audit report. Next, visit the PCAOB website and review Auditing Standard (AS) 1215 (Audit Documentation). To complete the discussion, explain how the audit documentation requirements detailed in AS 1215 help to support the opinion that the auditor rendered in their report. Support your conclusions with at least two specific requirements detailed in AS 1215.

Paper For Above instruction

Introduction

The Sarbanes-Oxley Act of 2002 marked a significant overhaul in the regulation and oversight of public company audits in the United States. One of its core objectives was to enhance the reliability and transparency of financial reporting through improved audit standards and oversight. The creation of the Public Company Accounting Oversight Board (PCAOB) introduced a regulatory framework specifically designed to oversee auditors of publicly traded companies. Central to this framework are the standards governing audit documentation, which serve as a critical foundation supporting the auditor’s opinion in their reports. This paper explores how the audit documentation requirements outlined in PCAOB Auditing Standard (AS) 1215 bolster the integrity and credibility of audit opinions.

Overview of Audit Documentation and AS 1215

Audit documentation, also known as working papers, are the records of audit procedures performed, evidence obtained, and conclusions reached during an audit engagement (PCAOB, 2015). These documents serve as the legal, technical, and cognitive basis for the auditor's opinion and are crucial for audit quality, supervision, and review purposes. AS 1215, issued by the PCAOB, establishes specific requirements designed to ensure comprehensive, clear, and complete audit documentation that facilitates the audit process's quality and accountability.

AS 1215 emphasizes that audit documentation should be sufficient to support the auditor’s conclusion and serve as a record that demonstrates compliance with applicable auditing standards (PCAOB, 2015). This standard delineates numerous detailed requirements to ensure the robustness of the audit process and enhance public trust in the auditor’s opinion.

How AS 1215 Supports the Auditor’s Opinion

Audit opinions are only as credible as the evidence underpinning them; therefore, the documentation process plays a pivotal role in underpinning these opinions. Two key requirements in AS 1215 explicitly support the integrity of the audit opinion: the requirement for documentation to be complete and the requirement for documentation to be reviewed and retained appropriately.

Completeness and Sufficiency of Documentation

AS 1215 mandates that auditors prepare sufficient documentation that reflects all significant findings and procedures conducted during the audit (PCAOB, 2015). Specifically, auditors are required to document the nature, timing, extent, and results of audit procedures. This requirement ensures that the audit evidence is comprehensive enough to support the auditor’s opinion. If the documentation reveals that all necessary procedures were performed and findings are consistent with the audit opinion, it enhances confidence that the opinion is well-founded and justified. Conversely, gaps or omissions in documentation could cast doubt on the validity of the audit opinion.

Review, Retention, and Supervision

Another critical aspect detailed in AS 1215 concerns the review of audit documentation. The standard requires timely review by qualified personnel to ensure the quality and completeness of the documentation (PCAOB, 2015). Proper review acts as a quality control mechanism, ensuring that any inconsistencies or deficiencies are identified and addressed before the audit report is finalized. Additionally, the retention requirement—maintaining audit documentation for a minimum of seven years—ensures that there is a record available for subsequent review if questions arise about the audit or the opinion issued. These procedures support the transparency and accountability of auditors, thereby reinforcing the credibility of their opinions.

Case Application

Applying these standards to a recent publicly traded company's 10-K filing, the auditor’s report references their adherence to PCAOB standards and includes an unqualified opinion, which implies that the financial statements present fairly, in all material respects, the company’s financial position. The audit documentation reviewed confirms that procedures to verify account balances, evaluate internal controls, and gather sufficient evidence were rigorously performed and documented according to AS 1215. This thorough documentation underpins the auditor’s conclusion and lends credibility to their opinion, demonstrating compliance with the established standards.

Conclusion

The audit documentation requirements outlined in PCAOB AS 1215 play a fundamental role in supporting the auditor's opinion by ensuring that audit evidence is sufficient, appropriate, and properly reviewed. These standards foster transparency, facilitate oversight, and enhance stakeholder confidence in financial statements. As seen in the recent audit of a publicly traded company, detailed and comprehensive documentation provides the foundation for an credible and defendable audit opinion. The standards’ emphasis on completeness and review underscores the importance of accountability in the auditing profession and reflects the overarching intent of Sarbanes-Oxley to protect investors and promote transparent financial reporting.

References

• PCAOB. (2015). AS 1215: Audit Documentation. Public Company Accounting Oversight Board. https://pcaobus.org/Standards/Auditing/Pages/AS1215.aspx
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