TaxTMI 
TaxTMI 
Maintenance, archival and submission of Audit File to National Financial Reporting Authority (NFRA)
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....rchival of audit files as per Standards on Auditing (SAs) and Standard on Quality Control (SQC 1). Requirements of Professional Standards 2. The Standards on Auditing (SAs) [Standard on Auditing (SA) 230, Audit Documentation & Standard on Auditing (SA) 500 Audit Evidence] including the Standard on Quality Control (SQC 1) define and provide guidance as to what constitutes an audit file and its evidentiary value in respect of the audit process undertaken by an auditor in support of his audit opinion/report. Accordingly, audit firms are required to design policy, procedures and controls around maintaining the sanctity of audit files, ensuring their completeness and timely archival, including controls around authorised access to archived files. Components and attributes of an Audit file 3. Paragraph 6 (b) of SA 230 defines an Audit File as "One or more folders or other storage media, in physical or electronic form, containing the records that comprise the audit documentation for a specific engagement". Paragraphs 2, 3 and 5 of SA 230 describe the nature and purposes of audit documentation, and the objectives of the auditor to prepare documentation as: (a) sufficient and app....
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....gements, the retention period ordinarily is no shorter than seven years from the date of the auditor's report, or, if later, the date of the group auditor's report (also refer paragraph A23 of SA230). 9. Paragraph 85 of SQC 1 deals with ownership of engagement documentation and states that unless otherwise specified by law or regulation, engagement documentation is the property of the firm. 10. Paragraph 77 of SQC 1 requires the firm establish policies and procedures designed to maintain the confidentiality, safe custody, integrity, accessibility and retrievability of engagement documentation. Paragraph 79 of SQC 1 goes on to caution that integrity, accessibility or retrievability of the underlying data may be compromised if the documentation could be altered, added to or deleted without the firm's knowledge, or if it could be permanently lost or damaged, irrespective of whether engagement documentation is in paper, electronic or other media. 11. In this regard, it is also relevant to refer to paragraph 81 of SQC 1, which provides for retention of all original paper documentation if some such documentation is to be included in engagement files by converting it ....
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....ate unsearchable PDFs for sending to NFRA, or any alterations or additions to original audit documentation (in physical or electronic form) in respect of an audit engagement, are violative of the requirements in the SAs and SQC 1. 15. Practices which obscure original content also cause avoidable compliance burdens and regulatory scrutiny on the auditors. Format conversions, from original electronic form to paper form, lead to loss of metadata (timestamps, authorship, edits, history of changes) which affects authenticity and the integrity of the data, and loss of embedded documents. This also obscures evidence of work done by the auditors, loss of formulae and links to establish basis for values and relationships between data, loss of interactive elements of spreadsheets which is crucial for understanding the context and interpretation of the data, amongst loss of other add-on features, thereby impeding evidence of work actually done by the auditor. Retention of Audit files 16. Audit files constitute audit evidence. In certain instances, it has been observed that auditors have taken recourse to the suggested seven year period provided in the SQC 1 as the final period upto w....
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....reserved and maintained in that form only, unless the conversion to any other form can be done without loss of evidentiary value (paragraphs 14 and 15 above). Any modification or addition or alteration to the original workpapers is violative of the requirements in the SAs and SQC 1. If the audit files have been requisitioned by NFRA, audit firms are required to retain the audit files even if the indicated retention period of seven years gets over between the requisition of audit files and completion of proceedings by NFRA. 22. Audit firms may note that any original audit documentation or parts of the original audit documentation which has been subjected to some format conversion before sending the file to NFRA or when printing some electronic form of work papers (e.g. MS-Excel Worksheets) for inclusion in the audit files maintained in paper form, do not fulfil relevant requirements of SAs and SQC 1 and cannot constitute valid audit evidence since they do not ensure authenticity, nature and timing of the audit procedures performed by the auditor. 23. Audit firms are required to note that audit files requisitioned by NFRA are required to be submitted to NFRA in complete form an....