Audit Working Papers: Meaning and Importance
Chapter Twenty-Five
Syllabus topic 3, "Audit Working Papers – Meaning, importance, Factors determining Form and Contents, Main Functions / Importance, Features, Contents of Permanent Audit File, Temporary Audit File, Ownership, Custody, Access of Other Parties to Audit Working Papers, Auditors Lien on Working Papers, Auditors Lien on Client’s Books."
Pages 65 to 66 of 98
In one line
Audit working papers are the records the auditor keeps of the procedures he performed, the evidence he obtained and the conclusions he reached.
The meaning
Working papers are the documentation of the audit. They include:
| Papers prepared by the auditor | Notes of the system, computations, analyses, extracts, checklists, the programme with its sign-offs |
| Papers obtained from the client | Schedules, reconciliations, copies of agreements and minutes |
| Papers obtained from third parties | Bank confirmations, debtor confirmations, legal opinions, valuers' reports |
And in whatever medium. Paper, spreadsheets, an audit software file: the form is irrelevant and the record is the point.
Why they exist: the seven functions
| Function | |
|---|---|
| 1 | They evidence that the audit was carried out in accordance with the required standards |
| 2 | They support the opinion. The conclusions in the report must be traceable to the evidence in the papers |
| 3 | They aid planning and performance of the current audit, and of the next |
| 4 | They allow supervision and review. A senior reviews an assistant's work through the papers |
| 5 | They fix responsibility, because each paper carries who prepared it and who reviewed it |
| 6 | They provide continuity where staff change during or between audits |
| 7 | They are the auditor's defence if his work is questioned in court, by a regulator or by his own Institute |
Function seven is the one to name last and emphasise. An auditor accused of negligence proves what he did from his working papers, and if they do not show it, he did not do it as far as anybody can tell.
The importance, stated as a rule
What is not documented is treated as not done.
That is severe and it is the working rule of the profession. An assistant who performed a procedure perfectly and recorded nothing has produced no audit evidence.
Two examples of what documentation must show
A cash count. Not "cash verified" but: the date and time, the denominations and totals counted, who was present, the balance per the cash book at that moment, the reconciling items, the difference if any, and its explanation.
A debtors circularisation. Not "debtors confirmed" but: the population and its total, the basis of selection, the sample and its total, the replies received and agreed, the replies disagreeing and their resolution, the non-replies and the alternative procedures applied to each, and the conclusion on the whole population.
The difference between the two versions is the difference between a working paper and a note to self.
Working papers and the audit programme
| The programme says what will be done | |
| The working paper records what was done and what was found | |
| The cross-reference between them ties the two together, and the review checks both |
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