The Form, Contents and Features of Working Papers
Chapter Twenty-Six
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 67 to 68 of 98
The factors determining form and contents
| Factor | What it changes | |
|---|---|---|
| 1 | The nature of the engagement | A statutory audit, a tax audit and an investigation document differently |
| 2 | The form of the auditor's report | A report with additional statutory statements needs papers supporting each |
| 3 | The nature and complexity of the client's business | A construction contract needs more explanation than a trading account |
| 4 | The nature and condition of the client's records | Poor records need more of the auditor's own analysis |
| 5 | The assessed internal control | Strong control means system notes and compliance test results; weak control means substantive schedules |
| 6 | The need to direct, supervise and review | More assistants means fuller papers, because they are the medium of review |
| 7 | The methodology and technology used | A firm's standard formats, its software, its referencing system |
| 8 | Materiality and risk | The higher the risk, the fuller the documentation of the judgment |
The features of a good working paper
| Feature | ||
|---|---|---|
| 1 | Complete | It answers the procedure it was written for, with no loose end |
| 2 | Clear and self-explanatory | Understandable without asking the person who wrote it |
| 3 | Properly headed | Client, period, subject, preparer, reviewer, dates |
| 4 | Referenced | Its own index reference, and cross-references in and out |
| 5 | Shows the source of every figure | Where it came from, so it can be traced |
| 6 | Shows the work done, by audit ticks with a key explaining them | A tick nobody can decode is not evidence |
| 7 | States a conclusion | The procedure was performed and the result was satisfactory, or it was not and here is what follows |
| 8 | Signed and dated by the preparer and the reviewer | Which fixes responsibility |
| 9 | Neat, legible and durable | It may be read years later |
| 10 | Free of unresolved queries | Every query is answered and its answer recorded, or it is carried to the completion memorandum |
Feature seven is the one most often missing. A schedule of figures with no sentence at the bottom saying what the auditor concluded is a workpaper that stops before the audit does.
The heading, which every paper carries
| Field | |
|---|---|
| Name of the client | |
| Period covered | The financial year |
| Subject | Debtors circularisation; stock count attendance; cut-off testing |
| Reference | Its place in the file's index |
| Prepared by and date | |
| Reviewed by and date |
Six fields, and a paper missing the last two cannot show that anybody checked it.
The audit tick, and why it needs a key
An audit tick is a mark meaning that a stated procedure was performed on that item. A tick with no key is meaningless, so every paper carries a legend:
| Tick | Means |
|---|---|
| A | Cast and cross-cast |
| B | Agreed to the invoice |
| C | Agreed to the sales ledger |
| D | Traced to the bank statement |
| E | Confirmed by the debtor |
The rest of this chapter
Module one is free. The rest of this chapter comes with the B.Com. (Accountancy) Semester 3 notes.
You are reading a chapter from a later module. Everything in module one of every subject stays free, and so does the syllabus.
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Free either way: the syllabus, and module one of every subject.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.