1162 Engagement leader review: minimum documentation requirements

Dec-2023

Subject to the minimum requirements being met, the extent of the engagement leader’s review, and evidence of it, is a matter of their judgment. The engagement leader considers whether the evidence in the audit file provides a proper account of their involvement in the direction and supervision of the engagement team and the review of their work, in particular, at key stages of the audit and when significant judgments were made. OAG Audit 3071 provides further guidance on engagement leader review responsibilities.

Planning phase and reporting/completion phase sign-offs/approvals

In signing off at the end of the planning phase and at the end of the reporting/completion phase, and reviewing significant matters and other working papers, the engagement leader confirms that they have:

• reviewed sufficient documentation in the audit file (electronic and hard copy) to have a basis for determining that the significant judgments made and conclusions reached are appropriate given the circumstances of the engagement; and

• held appropriate discussions with the entity, with the engagement team and, where applicable, the engagement quality reviewer.

These sign-offs further demonstrate that:

• audit objectives have been achieved;
• conclusions are consistent with both the work done and the outcome of that work;
• the engagement has been appropriately executed in accordance with professional standards;
• the engagement leader has taken responsibility for the direction, supervision, and review of the audit engagement;
• the overall quality of the audit is achieved;
• the evidence obtained is sufficient and appropriate to support the assurance report; and
• The audit report is appropriate and can be issued.

OAG Annual Audit 1021 provides guidance on audit objectives.

OAG Audit 1051 provides guidance on sufficient appropriate audit evidence.

OAG Audit 3071 provides guidance on the review of audit work and documentation.

OAG Annual Audit 4041 provides guidance on planning considerations and sign-offs.

OAG Direct Engagement 4080 provides guidance on examination approval for direct engagements.  

OAG Direct Engagement 8017 provides guidance on report content approval for direct engagements.

OAG Audit 1171 provides guidance on documentation completion and the final assembly of the audit file.

Sign-off requires the team manager, engagement leader and engagement quality reviewer to address the affirmations within the planning and completion sign-off procedures. Some of the affirmations include explicit references to procedures where the engagement leader's involvement is documented. These referenced procedures include documentation of the engagement leader's involvement in the work because their involvement in specific procedures is required by CAS 220, and these procedures serve to provide documentation of this involvement. Even though the engagement leader may not be required to review these procedures, it may be prudent to do so to further evidence their involvement in the audit documentation. The engagement leader uses their judgment on whether to mark those procedures, or any other procedures, as reviewed.

Significant matters

The engagement leader reviews all significant matters on a timely basis. Through evidencing their review the engagement leader is satisfied that

• all matters considered significant to the audit have been properly recorded as significant matters;
• there is a proper trail from identification of each significant matter, through evidence obtained, consultation performed as necessary, to the conclusion (i.e., the documentation of significant matters is sufficient for a reviewer or third party to be able to understand the issue, what audit procedures were performed and evidence obtained, what consultations took place, and how the final conclusion was reached); and
• the documentation of the consulted party’s agreement to that final conclusion is included, if applicable.

OAG Audit 1143 provides further guidance on documenting the review of significant matters.

Financial Statements

It is the responsibility of the engagement leader to review the final financial statements to determine that the auditor's report to be issued is appropriate in the circumstances.

See OAG Audit 9031 for guidance on the engagement leader's review of the financial statements and auditor's report.

Formal written communications

OAG Audit 2213 provides guidance on the engagement leader's review of formal written communications with management, those charged with governance and regulatory authorities before they are issued.

Engagement quality reviewer guidance

Engagement quality reviewers use the guidance in OAG Audit 3063 for the nature and extent of their review. It will help engagement leaders to be familiar with this guidance as it can both guide them on how to be prepared for the Engagement quality review, i.e., to understand better those areas that the engagement quality reviewer will review, and remind them of matters that they need to review first and potentially discuss with the engagement quality reviewer. See OAG Audit 1163 for further guidance on documenting the engagement quality review.

Engagement leader review versus involvement

There is a difference between evidence of an engagement leader’s review and evidence of their involvement in the engagement. Evidence of review is provided to comply with CAS 220, CAS 230 and CSAE 3001, and, therefore, a minimum level of documentation is necessary, as explained in the guidance above. However, the engagement leader’s involvement in the direction and supervision of the engagement team may be evidenced in different ways.

Engagement leaders are responsible for the direction and supervision of the engagement team, and review of their audit work and use professional judgment to decide where their involvement in specific areas is necessary and how they satisfy themselves with the documentation of their involvement. For example, when an engagement leader does not perform detailed review of the working papers but would like to evidence their involvement in the related decision  process or discussion of specific matters, they may do so by adding documentation in the working papers that they were involved in team discussions regarding the subject(s), and the combination of the documentation added and the edit history will provide evidence that they had viewed the work documented in the procedure without necessarily marking the related procedures as reviewed.