Working papers should be sufficiently complete and detailed so as to provide an overall understanding of the audit. They should contain information on planning the audit, the nature, timing and extent of the audit procedures performed and the results and conclusions from the procedures. Working papers should be sufficient to allow an ‘experienced auditor, having no previous connection with the audit’ to be able to
understand: •the nature, timing and extent of the audit procedures performed to comply with the ISAs (UK) and applicable legal and regulatory requirements; •the results of the audit procedures performed, and the audit evidence obtained; and To subscribe to this content, simply call 0800 231 5199 We can create a package that’s catered to your individual needs. Or book a demo to see this product in action. This article is about audit working papers. Auditors should prepare and organise their working papers in a manner that helps the auditor carry out an appropriate audit service. The auditor should avoid preparing or accumulating unnecessary working papers, and should therefore avoid making extensive copies of the client’s accounting records. It is worth noting at this stage that it is neither necessary nor practicable for the auditor to document every matter considered during the audit. Audit documentation needs to be understood for both Audit and Assurance (AA) and Advanced Audit and Assurance (AAA). The auditing standardsISA 230, Audit Documentation states that the objective (1) of the auditor is to prepare documentation that provides:
The auditor should prepare the audit documentation on a timely basis and in such a way so as to enable an experienced auditor, having no previous connection with the audit, to understand:
In documenting the nature, timing, and extent of audit procedures performed, the auditor should record the identifying characteristics of the specific items or matters being tested. The auditor should document discussions of significant matters with management and others on a timely basis. If the auditor has identified information that contradicts or is inconsistent with the auditor’s final conclusion regarding a significant matter, the auditor should document how the auditor addressed the contradictions or inconsistency in forming the final conclusion. Where, in exceptional circumstances, the auditor judges it necessary to depart from a basic principle or an essential procedure that is relevant in the circumstances of the audit, the auditor should document how the alternative audit procedures performed achieve the objective of the audit, and, unless otherwise clear, the reasons for the departure. In documenting the nature, timing, and extent of audit procedures performed, the auditor must record:
The auditor should complete the assembly of the final audit file on a timely basis after the date of the auditor’s report. After the assembly of the final audit file has been completed, the auditor should not delete or discard audit documentation before the end of its retention period. When the auditor finds it necessary to modify existing audit documentation or add new audit documentation after the assembly of the final file has been completed, the auditor should, regardless of the nature of the modifications or additions, document:
When exceptional circumstances arise after the date of the auditor’s report that require the auditor to perform new or additional audit procedures, or that lead the auditor to reach new conclusions, the auditor should document:
The requirements of the ISA guide the auditor to produce audit documentation that is of an acceptable standard. Understanding and applying the requirements will protect the auditor from unwelcome and unnecessary litigation. Importance of working papersWorking papers are important because they:
Avoiding unnecessary papersBefore deciding to prepare a particular audit working paper, the auditor should be satisfied that it is:
ContentTypically each audit working paper must be headed with the following information:
Papers prepared by clientCertain working papers required by the auditor may have already been prepared by client staff. The auditor should make arrangements, whenever possible, for copies of these to be made available to the audit team. If client staff prepare working papers which are to be retained by the auditor, the auditor should agree the form of the working papers with client staff at an early stage in the audit, and include this information in the audit timetable. When arranging for working papers to be prepared, the auditor should take care to ensure that the working papers will give all the information required. All such working papers should normally be clearly identified as having been prepared by the client. The member of audit staff directly responsible for an audit area in which working papers prepared by client staff are included should sign those papers – this will show that they have been checked and that they can be reviewed by the manager and the partner, and by subsequent reviewers. The signature of the audit team member indicates that the working paper (prepared by client staff) has been ‘audited’. Some characteristics of a good working paperOn the basis of the discussion above, a good working paper should meet the requirements of ISA 230 by displaying the following characteristics:
The reviewer of audit working papers should ensure that every paper has these characteristics. If any relevant characteristic is judged absent, then this should result in an audit review point (ie a comment by the reviewer directing the original preparer to rectify the fault on the working paper). ConclusionWorking papers provide evidence that an effective, efficient, and economic audit has been carried out. They should therefore be prepared with care and skill. They should be sufficiently detailed and complete so that an auditor with no previous experience of that audit can understand the working papers in terms of the work completed, the conclusions reached, and the reasoning behind these conclusions. Notes
What are the factors that affect the form and content of audit working papers?A2 The form, content and extent of audit documentation depend on factors such as:. The size and complexity of the entity.. The nature of the audit procedures to be performed.. The identified risks of material misstatement.. The significance of the audit evidence obtained.. The nature and extent of exceptions identified.. What are some of the factors that affect an audit?Several determinants, both internal and external, can affect audit quality, including auditor professional knowledge and skills; skepticism; standards compliance; working conditions; audit duration and quality control.
What are the factors affecting to the auditor to send a new engagement letter for the period?However, the following factors may make it appropriate to send a new letter: Any indication that the client misunderstands the objective and scope of the audit. Any revised or special terms of the engagement. A recent change of senior management or those charged with governance.
What are the factors that may influence the auditor's Judgement on the sufficiency and appropriateness audit evidence?The auditor's judgment as to what is sufficient appropriate audit evidence is influence by such factors: Auditor's assessment of the nature and the level of inherent risk at the both FS level and the account balance or class of transactions level.
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