Beruflich Dokumente
Kultur Dokumente
I. Review Questions
7. Client personnel may prepare working papers to reduce the time spent by the
auditor on the engagement. When client personnel prepare working papers, the
auditor should give the client personnel detailed instructions. Working papers
prepared by the client should be identified as PBC (prepared by client) and
should involve no decision making. The auditor should test completed working
papers against underlying documentation.
10. The prior year’s audit working papers are a useful guide to staff assistants
because the audit procedures performed in the prior year usually are similar to
those of the current year. By referring to last year’s working papers, the
assistant can see how the procedures were documented and is given a possible
format for organizing the current year’s working paper. In addition, exceptions
noted in last year’s working papers may alert the assistant to possible problems
in the current year. Finally, the prior year’s working papers contain information
substantiating the beginning balances for the current year.
11. The more common types of audit working papers and their principal purposes
may be summarized as follows:
(1) Audit administrative working papers – aid the auditors in planning and
administration of the audit, and include such items as the audit programs,
questionnaires and flowcharts, decision aids, time budgets, and
engagement letters.
(2) Working trial balance – represents the backbone of the auditors’ working
papers, for it contains the balances of the ledger accounts, the adjustments
and reclassifications deemed necessary by the auditors, and the adjusted
amounts that appear in the financial statements. It also contains references
to all supporting schedules and analyses, thus serving to control the other
types of working papers.
(3) Lead schedules – working papers that serve to combine similar general
ledger accounts, the total of which appears on the working trial balance.
(4) Adjusting journal entries – material misstatements in the accounts
disclosed by the auditors’ investigation are corrected by means of adjusting
journal entries. These appear on the auditors’ working trial balance, and in
addition, a list of such entries is turned over to the client at the conclusion
of the audit with the request that they be approved and entered in the
accounting records.
(5) Reclassification entries – entries necessary to properly reflect financial
results but not representing misstatements in the financial records of the
client.
(6) Supporting schedules – although the term schedule is at times applied to
various types of working papers, the preferred usage is to designate a
Audit Working Papers 14-3
listing of the details or elements comprising the balance in an account at a
specified date. Preparation of such a listing is often an essential step in
determining the nature of an account.
(7) Analyses – consist of working papers showing the changes which occurred
in an account during a given period. By analyzing an account, the auditors
determine its nature and contents.
(8) Reconciliations – working papers that prove the relationship between two
amounts obtained from different sources.
(9) Computational working papers – used to verify such data as interest
expense, income taxes, and earnings per share.
(10) Corroborating documents – working papers that provide support for
specific representations made in the financial statements, such as letters of
representations from clients, lawyers’ letters, audit confirmations, and
copies of the contracts.
12. Audit working papers are the property of the auditor; however, they must not
violate the confidential relationship between client and auditors by making the
papers available to outsiders or even to the client’s employees without specific
permission from the client.
13. Refer to page 535, 1st and 2nd paragraphs of the textbook.
1. d 9. b 17. d 25. b
2. d 10. b 18. c 26. d
3. c 11. a 19. c 27. d
4. a 12. d 20. d 28. c
5. d 13. d 21. b 29. d
6. c 14. b 22. d 30. c
7. c 15. d 23. a 31. d
8. d 16. d 24. b 32. d
Case 1. a. (1) The functions of audit working papers are to aid the CPA in the
conduct of his work and to provide support for his opinion and his
compliance with auditing standards.
(2) Working papers are the CPA’s records of the procedures performed,
and conclusions reached in the audit.
14-4 Solutions Manual - Principles of Auditing and Other Assurance
Services
b. The factors that affect the CPA’s judgment of the type and content of the
working papers for a particular engagement include:
1. The nature of the auditor’s report.
2. The nature of the client’s business.
3. The nature of the financial statements, schedules or other information
upon which the CPA is reporting and the materiality of the items
included therein.
4. The nature and condition of the client’s records and internal controls.
5. The needs for supervision and review of work performed by assistants.
Case 2. In general, the working paper is not set up in a logical manner to show what
the auditor wants to accomplish. The primary objective of the working paper is
to verify the ending balance in notes receivable and interest receivable. A
secondary objective is to account for all interest income, cash received and cash
disbursed for new notes, collateral as security, and other information about the
notes for disclosure purposes.
Audit Working Papers 14-5
a. b.
DEFICIENCY IMPROVEMENT
1. Tick mark explanation “tested” Should have separate tick marks
does not indicate specifically meaning:
what was done. Agreed to confirmation
Footed
Traced to cash receipts journal
Recomputed, etc.
2. Explanation of some tick marks is Explain all tick marks on the same
not given. page of the working paper.
3. Classification of long-term Recompute portions of notes which are
portion indicates no verification. long-term.
4. Paid-to-date row is confusing. Column should say “date paid to” and
this should be confirmed.
5. Due dates are missing for C.C. Include due dates on working paper
Co., P. Pablo and Tetra Co. for these notes.
c. SPREADSHEET SOLUTION
The purpose of using an Excel spreadsheet in this problem is to give the
student some experience in preparing a simple working paper using an
Excel spreadsheet. It should be explained to students that this type of
working paper may or may not be prepared in actual practice, and that often
templates are used to prepare more time-consuming working papers. Also,
whether or not tick marks are computerized is a matter to be decided. The
advantage is that the completed audit work can then be stored and reviewed
electronically, a direction many firms are going. On the other hand, it may
be more efficient to indicate audit work manually as it is performed, and a
contrast in the color of the tick marks through use of a colored pencil may
be desirable.
f f f f, cf f f f f, cf
14-8 Solutions Manual - Principles of Auditing and Other Assurance Services
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