Audit and Assurance Practice Exam

The distinction between permanent and current file audit documentation is primarily based on the time relevance and nature of the information contained within them. Permanent files are designed to hold information that is applicable over multiple years and is consistent throughout the life of the audit client. This can include foundational documents like organizational charts, articles of incorporation, contracts, and historical financial data that does not change annually.

This longevity allows auditors to reference historical information and maintain a contextual understanding of the client's operations and internal controls. As such, permanent files support ongoing audit activities, ensuring that the auditor has access to crucial information that remains relevant regardless of the specific audit period being conducted.

In contrast, current files will typically include information and documentation specific to the current audit period, such as working papers, specific transaction details, and findings from the current year's audit procedures. This delineation is essential in organizing the audit documentation and ensuring that relevant information is easily accessible.

Therefore, the inclusion of options pertaining to legal documents or financial projections does not correctly reflect the general definitions and purposes behind permanent and current audit files, further establishing the correctness of the selected answer.