Chapter 10 - Documentation Flashcards
Define audit documentation (working papers).
The record of procedures performed, relevant evidence obtained and conclusions the auditor reached.
What does audit documentation provide?
(a) evidence for the auditor’s basis for a conclusion about the achievement of the overall objectives of the auditor
(b) evidence that the audit was planned and performed in accordance with ISAs and applicable legal and regulatory requirements
Give six reasons why assurance providers record their work.
assist the audit team to plan and perform the audit
assist relevant members of the team to direct and supervise work
enable the audit team to be accountable for its work (and to prove adherence to ISAs in a litigious situation)
retain a record of matters of continuing significance to future audits
enable an experienced auditor to carry out quality control reviews
enable an experienced auditor to conduct external inspections in accordance with applicable legal, regulatory or other requirements
What are twenty things that working papers should show?
the name of the client
the reporting date
the file reference of the working paper
the name of the preparer
the date of preparation
the subject of the working paper
the name of the reviewer
the date of the review
the objective of the work done
the source of information
how any sample was selected
the sample size determined
the work done
a key to any audit ticks or symbols
appropriate cross-referencing
the results obtained
analysis of errors
other significant observations
the conclusions drawn
the key points highlighted
What is the key difference between electronic working papers and automated working papers?
In contrast to automated working papers, electronic working papers do not involve any automatic calculations (although these can be made use of if desired).
Most audit firms nowadays – certainly all of the big firms – use electronic working papers.
What are three advantages of automated working papers?
The risk of errors is reduced.
The working papers are neater and easier to review.
The time saved is substantial as adjustments can be made easily to all working papers, including working papers summarising the key analytical information.
What do permanent audit files contain?
They contain any information of continuing importance to the audit. These may contain:
engagement letters
new client questionnaire
the memorandum and articles of association
other legal documents such as prospectuses, leases, sales agreements
details of the history of the client’s business
board minutes of continuing relevance
previous years’ signed accounts and analytical procedures
accounting systems notes, previous years’ control questionnaires
What do current audit files contain?
They contain any information of relevance to the current year’s audit and should be prepared on a timely basis. These may contain:
financial statements
accounts checklists
management accounts details
reconciliations of management accounts and financial statements
a summary of unadjusted errors
report to partner including details of significant events and errors
review notes
audit planning memorandum
time budgets and summaries
written representations from management
notes of board minutes
communications with third parties such as experts or other auditors
A lead schedule including details of the figures to be included in the accounts
Problems encountered and conclusions drawn
Audit plans
Risk assessments
Sampling plans
Analytical procedures
Details of tests of detail and tests of control
What is the minimum period, as required by ICAEW, for which audit working papers must be retained by the auditor?
ICAEW requires that all firms should have a document retention policy and that Registered Auditors should keep all audit working papers required by auditing standards for at least six years from the end of the accounting period to which they relate.
To whom do working papers belong? Where should they be stored?
Working papers are the property of the assurance providers
It is important that firms have good security procedures over their retained working papers. Paper documents must be kept securely, in locked premises. Electronic documents should be protected by electronic controls.
Can the client view the working papers?
Assurance providers must follow ethical guidance on the confidentiality of working papers. As working papers belong to the firm, the assurance providers are not required to show them to the client, only at the auditors’ discretion
Can the audit firm show the working papers to third parties?
Information should not be made available to third parties without the permission of the client (eg, when working papers might be shared with a third party is when a new firm is taking over an audit from the existing auditors)
OR
in particular circumstances where the auditor has a legal obligation to disclose information about his client without the client’s permission (eg, if the client is suspected of being involved in terrorist or money laundering activities).
To whom does the report belong?
The audit report becomes the property of the client once it has been issued
Are wokring papers a legal requirement for auditors to prepare?
No
No
