Definition: Audit working papers refer to the document in which the auditor writes facts, data, analysis of accounts while performing an audit of the enterprise. It is a written record that an auditor keeps relating to:
- Evidence found during the process of audit
- Methods and procedures that an auditor follows
- Conclusion drawn
It covers all the data that the auditor thinks and believes is relevant to carrying out the audit process adequately while supporting the audit report.
At the time of carrying out an audit, the auditor uses several methods and procedures to gather and analyse audit evidence. Its aim is to reach a certain conclusion.
In addition, audit working papers comprise all those documents that the auditor keeps and are useful to substantiate:
- Different tasks performed
- Methods and procedures adopted
- Conclusion reached
Preservation of Audit Working Papers
It is vital, as the documents gathered and prepared by the auditor are of ongoing significance. And the auditor can use them for future audits. As well as the auditor can use them as a defence against any allegations regarding professional negligence.
Hence, the auditor needs to file and preserve them for a sufficient term. This not just fulfils the needs of the auditor’s practice. But, also satisfies future legal requirements.
Purpose of Audit Working Papers
Basically, the audit working papers serve the following purposes:
- State the degree to which financial statements follow accounting principles and standards with.
- Acts as evidence, if there is any charge of negligence.
- Acts as proof that the audit was planned. As well as it is performed as per SA and all the applicable legal requirements.
- Assists the engagement team to plan and perform audits.
- Help the auditor in organizing and coordinating the work of all the audit staff.
- Helps in instant preparation of audit report.
- Helps the auditor in understanding the allocation of work and to which extent it is complete.
- Assist in measuring the efficiency of the audit staff.
- Tool for giving training to the audit trainee.
- Keeps control of the ongoing audit work.
- Helps auditor in forming an opinion on the financial statement.
- Keeps record of matters of ongoing significance to future audits.
Example of Audit Working Papers
According to Standards on Auditing (SA-230), an example of audit working papers:
- Audit Programmes
- Issues memoranda
- Summaries of significant matters
- Letters of confirmation and representation
- Correspondence (including e-mail) concerning significant matters
The auditor may include copies of the record of the enterprise as part of audit documentation.
Apart from that, the auditor may also include copies of records of the enterprise.
The auditor need not include these in audit documentation:
- Superseded drafts of the working paper and financial statements,
- Notes reflecting incomplete or preliminary thinking
- Old copies of documents corrected for any typos or other errors and duplicates of documents.
These are very confidential documents, as they carry important details about the audit conducted. This may cover organizational structure, management procedure, accounting policies and so on of the auditee. This information is of great importance for the competitors. Leakage of this information may result in its misuse.
Hence, the person who possesses working papers has to ensure its safe custody. Also, the assistant should not hand over it to an outside party unless the law demands or the client permits it.
Guidelines for Preparation
- It should be prepared timely. It has to be prepared at the time of performing the audit.
- The auditor should prepare audit working papers that allows an experienced auditor, with no prior connection with the audit, to understand:
- Nature, timing and extent (NTE) of the audit procedure performed to adhere to the statutory requirements concerning SA’s.
- Results of the audit procedure conducted and audit evidence collected.
- Relevant matters that come to light when the audit is under process, conclusions drawn and all those professional judgements made to arrive at conclusion.
- When documenting the NTE of the audit procedure performed, the auditor should maintain a record:
- Specific features of certain items or matters tested.
- The person who carried out the audit when such work took place.
- The person who reviewed the work of audit and the date and extent of such review.
- Discussion of the auditor with management and Those Charged With Governance (TCWG) on significant matters should be documented. This will include the nature of the significant matters discussed and the time and the executives with whom the discussions took place.
- If the auditor notices any information that is not consistent with the final conclusion of the auditor on a significant matter. The auditor is required to document the method used to address the inconsistency.
- Further, if in exceptional cases, the auditor finds it necessary to deviate from the requirement in applicable SA. Then, the auditor needs to document the way in which the alternative audit procedures carried out achieved the objective of that requirement. This must also include the reasons for such departure.
A word from Business Jargons
Therefore, audit working papers encompass a document containing all matters picked out that need judgement, along with the auditor’s conclusion.