Get my free accounting and auditing digest with the latest content. The preparer should sign off on each workpaper (so it’s clear who created it). If the person creating the work paper can’t state the purpose, then maybe there is none.
The various functions of audit working papers include justifying an auditor’s conclusions, affirming the efficacy of the audit, organizational quality control, and assuring due process in the audit service. Examples of audit working papers include issues memoranda, audit programs, checklists, correspondence, confirmation, and representation letters. The difference between the three aforementioned working papers is observed in the type and specificity of audit information they detail. Another document that is often useful during an audit is a trial balance statement. However, it doesn’t qualify as an audit working paper because it doesn’t cite data sources or evidence supporting the recorded data.
Who Prepares Audit Working Papers?
Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues. 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. This course is most beneficial to professionals new to audit workpapers who may be at the staff or entry level in organization but also for a seasoned professional with limited exposure to this subject. 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. Working papers are the property of the auditor, and some states have statutes that designate the auditor as the owner of the working papers.
It’s possible that the staff person is trying to copy prior year work that (also) had no purpose. I am the author of The Little Book of Local Government Fraud Prevention, Preparation of Financial Statements & Compilation Engagements, The Why and How of Auditing, and Audit Risk Assessment Made Easy. To reverse client-prepared journal entry 63 that was made to accrue the September 10, 2018, Carter Hardware invoice for $10,233.
Audit working papers are concise and precise informational material documenting only the necessary details of the audit service. As a result, numerous copies of a firm’s financial records are unnecessary in an audit working paper. Nonetheless, the auditor has to document every auditory aspect considered during the operation. Audit working papers must be prepared in a timely fashion, following all the standard audit regulations.
The main purpose of audit working papers is to provide information obtained by an auditor during the audit process. They are used by auditors to review and affirm the findings and conclusions of an audit process. According to audit standards, working papers should have reliable, relevant, useful, and adequate documented information. Details such as the auditor’s name and the date of the tests are usually included on working papers for efficiency. However, they are not obligatory for working papers with respect to audit standards. The legal significance of audit working papers is that they indicate and corroborate the data sources, tests, results, and conclusions of an audit process.
The auditor’s rights of ownership, however, are subject to ethical limitations relating to the confidential relationship with clients. Several software providers sell off-the-shelf software that creates electronic versions of working papers, so that auditors are not as burdened by the volume of paperwork commonly found in a traditional audit. Then the audit program should be updated to include the step—or maybe the work paper isn’t needed at all. Fn 3 However, there is no intention to imply that the auditor would be precluded from supporting his report by other means in addition to working papers.
Functions and Nature of Working Papers
A working paper is an auditor-developed document that illustrates the evidence, tests, and conclusions of an auditing process based on the audit objectives. A comprehensive working paper should constitute sources of the data, test analysis/examination, and conclusions. Other necessary to include information are; the auditor’s name, test results, and date of the tests. Audit working papers are documents developed by auditors to assist them in the execution of an audit.
- Fn 1 This section amends section 230, Due Professional Care in the Performance of Work, paragraph .04, by deleting the second sentence of that paragraph.
- The audit program should drive the audit process—not the prior year workpapers.
- For the last thirty years, he has primarily audited governments, nonprofits, and small businesses.
- Audit working papers must be prepared in a timely fashion, following all the standard audit regulations.
- For the last thirty years, I have primarily audited governments, nonprofits, and small businesses.
They are all essential in auditing an organization’s operational and financial transactions. Audit working papers are prepared by the audit staff and audit seniors, and are reviewed by audit senior managers and partners. If a reviewer finds that any issues have not yet been addressed, then these issues are delegated to the on-site audit team for action. Once an audit has been concluded, the audit working papers are considered legal evidence, and so are appropriately indexed and filed. A good audit working paper includes test analysis/examination, data sources, and conclusions. The auditor’s name, test results, and dates on which the tests were conducted should also be included.
Audit Working Papers, Types and Examples.
Audit program steps should be signed off as the work is performed (not at the end of the audit–just before review). The audit program should drive the audit process—not the prior year workpapers. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses. He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements.
- Audit working papers are prepared by the audit staff and audit seniors, and are reviewed by audit senior managers and partners.
- In addition, there may be extensive cross referencing between the documents contained within the working papers.
- Examples of working papers are audit programs, analyses, memoranda, letters of confirmation and representation, abstracts of company documents, and schedules or commentaries prepared or obtained by the auditor.
- Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs.
Another experienced auditor with no prior connection to the audit process should be able to determine the audit considerations, procedures, and evidence with ease. Significant discussions between the auditor and various stakeholders in an organization being audited should also be captured in the audit working paper. Audit working papers have a retention period within which they cannot be discarded or deleted. Pursuant to the Securities and Exchange Commission (SEC) stipulations, audit working papers must be retained for up to seven years from when the audit exercise concludes or the review date.
What is an Audit Working Paper?
While trial balance statements may be essential during an audit, they do not qualify as audit working papers because they do not meet the minimum requirements of providing evidence and data sources. A working paper is a document developed by an auditor illustrating the audit process, with evidence of their work, sources, tests, and conclusions. The working paper definition implies that the document should meet the audit objectives. Every working paper must comprise certain elements, including data sources, test analyses, and conclusions. The auditor’s name, test dates, and test results are also necessary information on working papers. Audit working papers are documents prepared and organized by auditors to help them discharge their duties effectively in the course of auditing an organization’s books.
Working papers are records kept by the auditor of the procedures applied, the tests performed, the information obtained, and the pertinent conclusions reached in the engagement. Examples of working papers are audit programs, analyses, memoranda, letters of confirmation and representation, abstracts of company documents, and schedules or commentaries prepared or obtained by the auditor. Working papers also may be in the form of data stored on tapes, films, or other media. In addition to serving as the primary support for a public accounting firm’s audit opinion, audit workpapers accomplish several other purposes. Additionally, users will be able to describe the audit documentation requirements included in other AU Sections. The most commonly used types of audit working papers are interview summaries, reperformance, and worksheets.
The documents may be produced as supporting evidence of a duly conducted audit in case of litigation. Audit standards require working papers to document relevant, reliable, sufficient, and useful information. Additional information, such as the auditor’s name and test dates, included on working papers are common practice, though not necessarily audit standard requirements.
Purpose of Work Paper – To provide a detail of accounts receivable that agrees with the trial balance; all amounts greater than $20,000 agreed to subsequent receipt. The forms of documentation may be flowchart, manual, narrative note, checklist, or questionnaire. In addition, there may be extensive cross referencing between the documents contained within the working papers. For the last thirty years, I have primarily audited governments, nonprofits, and small businesses.