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Practice Note 26 - Guidance on Smaller Entity Audit Documentation
The Auditing Practices Board's Practice Note 26 
Guidance on Smaller Entity Audit Documentation has been with auditors since September 2007. Over half its 46 page content provides illustrative examples supporting an easily understood text. PN 26 is designed to assist auditors of the following:
- voluntary audits
- audits of small entities like charities
- audits of owner managed, simple, larger entities who have limited internal controls (para 3).
It is designed to provide guidance to address the uncertainty about the extent of documentation required to evidence the auditor's understanding of the entity. This should reduce additional audit costs. Pages 9-18 detail the requirements in ISA/ISQC (UK and Ireland) and provide suggested key matters to document in relation to the following subjects:
- general audit
- engagement acceptance and continuation
- planning the audit
- procedures performed in response to assessed risks
- review of the audit
- the auditor's report.
The appendix of illustrative examples is split into sections on understanding the entity, audit team planning meeting, controls documentation and risk assessment. It recognises for the type of entity being audited a lot of the documentation will form part of the permanent information to be reviewed and updated as required.
For example the audit team planning meeting identifies that 'due to the nature of the business there is a risk of cash and liquor stock theft'. It illustrates the additional work required in response to the risk. In the controls documentation section the risk is identified as being significant and suggests the control is tested. It then identifies where the errors could occur and suggests testing of this area. These risks are then transferred to the risk assessment documentation.
The PN and its illustrative examples will be a useful training tool for teams. It is simple and recognises and suggests an appropriate cost efficient audit documentation for the auditor. It can be found on the APB's website