Audit Working Papers

Audit working papers are the documents which record all audit evidence obtained during financial statements auditing, internal management auditing, information systems auditing, and investigations. Audit working papers are used to support the audit work done in order to provide assurance that the audit was performed in accordance with the relevant auditing standards.

They show the audit was:

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• Properly planned;
• Carried out;
• There was adequate supervision;
• That the appropriate review was undertaken; & finally and most importantly;
• That the evidence is sufficient and appropriate to support the audit opinion.

Audit working papers are the property of the auditor. In order to keep professional ethic, it cannot discover to third party without consent of the client unless limited specified situations mentioned in ISA 230 Documentation and required by law, the examples are court order, for public interest and so on.

The forms of documentation may be flowchart, manual, narrative note, checklist or questionnaire.

• Proper features of working papers
• Reviewed by auditors with supervisors noted.
• Signed, dated and approved by relevant level of audit staff with sufficient cross reference.
• With evidence of effective audit planning, work done, sufficient and quality evidence.
• Outstanding matters are cleared in due course.

There are a number of companies who offer electronic working paper tools for accountants.

The leading providers include: Wolters Kluwer, CaseWare, Thomson, Data Prime Solutions, WorkPapers. Pro and Saltlake Infosolutions. Their products are TeamMate, CaseWare Working Papers, Engagement CS, Draftworx, WorkPapers and APEX Audit System respectively.

Audit Working Paper Format

The diversity of audit assignment prevents the establishment of a single system or design of working papers to be used. Therefore, a uniform working paper format may not be used but work papers for functional areas such as cash receipts should display conformity in various types of audits. Work papers may be in the form of paper, tapes, disks, diskettes, films, etc. There should be backup copies of electronically generated working papers. The backup copies should not be stored with the original copies.

Purpose of working papers

Working papers are the evidence of work done by the auditor, he should prepare working papers in order to provide evidence that audit was properly performed according to ISA standards. Working papers support auditor, in-case he is being sued in court by the client, for negligence of audit work.

Importance of working papers

• Working papers are instruments vital to the successful accomplishment of all audit assignments performed. The working papers provide documented evidence of an examination and evaluation and provide a connecting link between the work which is performed and the final audit report. Hence, their importance cannot be overly emphasized.
• To a major extent, every auditor is judged by his skill and ability in preparing working papers. When working papers are prepared in good form with proper attention to layout, design, and legibility, with complete headings, explanations of sources, and verification of work performed, they create a feeling of confidence in the ability of the staff member. Working papers should always convey an impression of system and order and conscientious attention to detail, coupled with a clear distinction between the important and the trivial.
• Another test of good working papers occurs when it is necessary for one staff member to leave a partially completed assignment and turn it over to another staff member. If the latter can proceed without confusion then the working papers have stood the critical test of being able to stand on their own.
• Every auditor will be expected to continuously strive for the highest standards of excellence in the preparation of working papers.

Purposes served by Auditing working papers

Audit working papers serve four major purposes:

• They constitute a permanent record of the objectives and scope of the audit, as well as the work performed during the audit. Work papers organize and coordinate all phases of the audit.
• B. They contain the back-up material in support of the audit findings, conclusions, opinions, and comments.
• They contain the basic material from which the audit report is prepared.
• They reflect the quality and reliability of the work performed by the auditor and substantiate and explain in detail the opinions and findings presented to University management.

Working papers have a number of additional uses both during and after the audit. These are to control audit progress by showing the auditor what audit procedures have been completed and what audit procedures have not been completed.

Working papers also provide:

• A basis for study of patterns and trends.
• Aid in the internal audit staff's professional development.
• Detailed supporting material for use in discussion with operating personnel.
• A source of evidence in litigation and in administrative actions.
• A basis for supervisory review and evaluation of audit performance.
• A permanent record for use in planning and carrying out future audits.
• Demonstrate that auditors have complied with the Standards for the Professional Practice of Internal Auditors.

Planning and Preparing Auditing working papers

• The preparation of audit working papers must be planned so that they will substantively fulfill the purposes mentioned in Section 1003. An audit program provides much help in the planning of working papers. The program reflects the objectives of the audit and the nature of the information required. Thus, many of the areas of inquiry are identified as well as the general types of working papers that will be needed to record the work performed in those areas. However, methods of operations are never precisely the same in two "like" organizational elements, nor are the circumstances under which the operations are carried out identical. For this reason, audits of similar organizations and activities should not be performed exactly alike nor should stereotyped working papers be prepared.
• Each section of the working papers must be planned to satisfy some requirement of the audit program. When the audit is completed, the working papers should contain data needed to fulfill all of the objectives of the audit.

Adequate planning of working papers requires the auditor to:

• Determine the nature and extent of the information that will be needed to comply with the audit objectives and to plan the format and preparation of working papers that will be needed to record this information.
• Index and file all work papers according to Audit Workpaper Checklist.
• Devise legends (symbols) and a method of cross-referencing.
• Where applicable, the standard tickmarks developed by Audit and Management Services should be used.

Thought should be given in preparation of working papers to their potential use as exhibits in an audit report.

Principles and Methods of Documentation

Working papers are the basis on which the entire audit rests. Since these papers are, in fact, the documentation of the audit, thoroughness in their preparation is essential.

Describing the Work Performed. By fully describing the work you have performed in your working papers, you are able to render a complete accounting of the scope and depth of your coverage. Each working paper should identify the following:

Scope.

Your conclusions usually result from selective tests. By clearly showing the scope of the work performed, you are able to support your conclusions and where probability sampling is used, support the projection of conclusions drawn from selective tests to the entire subject area under audit. In the examination of documents, the scope must identify the size of the sample, the universe from which the sample is drawn, the method of selection, and the basis for these decisions. When sampling methods are used, the sampling plan must be carefully explained.

Working Paper Format of Auditing Working Papers

• The diversity of audit assignment prevents the establishment of a single system or design of working papers to be used. Therefore, a uniform working paper format may not be used but work papers for functional areas such as cash receipts should display conformity in various types of audits.
• Workpapers may be in the form of paper, tapes, disks, diskettes, films, etc. There should be backup copies of electronically generated working papers. The backup copies should not be stored with the original copies.

Contents of Auditing working papers

• CONTRACT LETTER: The working papers contain the contract letter. This letter gives right to a person to a start work of audit. It states the terms and conditional of appointment of an auditor. The nature and amount of work is recorded. This letter becomes a part of audit working papers.
• AUDIT PROGRAMME: An audit programme is a detailed plane of action to be used for audit. It is a time table of staff duties. The books to be examined are stated in audit programme. Every audit work requires programme and then master audit programme is prepared to cover all activities.
• AUDIT NOTE BOOK: The audit notebook is a part of audit working papers. It may be bound book or loose-leaf card form. It contains useful information about the business enterprise. When audit report is drafted this book provides data for such report. The weak points like missing vouchers, queries not settle are stated in it
• COPIES OF DOCUMENTS: The copies of various documents are included in audit working papers.
• The partnership deed, article of association, memorandum of association, trust deed, lease contract and similar other papers are collected from the management. These papers are useful to determine the performance of business work.
• COPIES OF CRRESPONDENCE: The copies of correspondence become part of audit working papers. The auditor can write letter to other parties. The replies can be received from debtors and creditors. The audit staff must keep the exchange of letter between auditor and other people
• SCHEDULE OF DEBTORS: The client provides the schedule of debtors. This list is compared with the books of accounts. The auditors can confirm the balance from various debtors. He collects facts and figures by writing letters to the customers
• STOCK CERTIFICATE:  The stock certificate is received from the management. The auditor can watch the stock taking process. When the stock is lying in public warehouse, the certificate of warehouse keeper is accepted for audit
• COPIES OF PREVIOUS AUDIT: The auditor can collect copies of previous audit reports. These papers become part of audit working papers. The auditor can note the weakness stated in the old report. He can examine that same points are not repeated in the books under review.
• RESOLUTION COPIES: Auditor collects the copies of resolutions. These copies are part of working papers. These copiers are part of working papers. The decisions made by the directors and shareholders are implemented in preparing of books of accounts. The auditor can determine whether such decisions are implemented.
• DEPRECIATION: The audit working papers contains the particulars of depreciation. The rate of depreciation can be applied through out the life of an asset.
• The reasonable amount of depreciation can be charged every year. The auditor can determine the exact amount of depreciation.
• INVESTMENTS: The management can buy and sell shares and debentures of different companies. The investment can be exchanged through brokers. The register of investments shall the purpose to collect various particulars relating to investments
• MANAGEMENT CERTIFICATES: The management may provide certificates to the auditors. This certificate becomes a part audit working papers. The certificates may relate to inventory valuation and similar other matters.
• The auditor can rely these certificates in preparing audit report.
• DETAIL OF QUESTIONS: The auditor can ask the number of questions to the management. The details of question asked are recorded in the audit working papers. The questions not properly answered are included in the audit report. The queries settled may be dropped from the papers.
• OTHER PAPERS: The audit working papers may contain other papers. The auditor can collect information from experts like stock values, engineers, advocates and other consultants. These papers furnish valuable facts and figures about the financial information.

Ownership and Custody of Auditing working papers

Working papers are the property of the auditor, and some states have statutes that designate the auditor as the owner of the working papers. The auditor's rights of ownership, however, are subject to ethical limitations relating to the confidential relationship with clients. Certain of the auditor's working papers may sometimes serve as a useful reference source for his client, but the working papers should not be regarded as a part of, or a substitute for, the client's accounting records.

The auditor should adopt reasonable procedures for safe custody of his working papers and should retain them for a period sufficient to meet the needs of his practice and to satisfy any pertinent legal requirements of records retention.

Confidential Nature of Auditing working papers

Information obtained through audits should be treated as confidential not only as to outsiders but also as to employees of the entity audited who would not otherwise have access to the information. Further, the working papers include information concerning the scope of the examination and the extent of selective tests made, and this information should not be available to the staff of the audited entity. Therefore, audit working papers should be safeguarded at all times against the possibility of their being examined by unauthorized persons. Client or outside agency request to review Audit and Management Services work papers must be approved by an appropriate official.

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