Audit Documentation

and
Developing Working Papers

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 Session Overview
 Purpose and Preparation of Working Papers.

 Characteristics of Working Papers.

 Organization of Working Papers.

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 Learning Objective

Given instructions, worksheet, structured

pro-forma, after the session, participants will
be able to explain how working papers are
organized, prepared, and reviewed, as
evaluated by the instructor.

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 What is Working Paper?
 Material that auditors prepare or obtain and
retain in connection with the performance of
the audit.

 May be in the form of data stored on paper,

film, electronic media, or other media.

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 Standards
 ISA 230 states:
“Preparing sufficient and appropriate audit
documentation on a timely basis helps to enhance the
quality of the audit and facilitates the effective review
and evaluation of the audit evidence obtained and
conclusions reached before the auditor’s report is
finalised. Documentation prepared at the time the work
is performed is likely to be more accurate than
documentation prepared subsequently”.

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 Purpose of Working Paper

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 Purpose of Working Papers
They constitute a permanent record of the
objectives and scope of the audit, as well as the
work performed during the audit.
They contain the back-up material in support of the
audit findings, conclusions, opinions, and
comments.

They contain the basic material from which the

audit report is prepared.

They reflect the quality and reliability of the work

7 performed by the auditor
 Function of Working Paper

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 Helpful in making genuine audit report

Uses as evidence

Direction to auditing procedure

Check the weakness of internal control

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 Contents of Working Paper

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 Each Audit Working Paper must headed with
the following information:
 The name of the client.
 The period covered by the audit.
 The subject matter.
 The file reference.
 The initials (signature) of the member of
staff who prepared the working paper, and
the date on which it was prepared.

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 Permanent file
 This file contains documents which relate to matters
likely to affect the operations of the entity in future.

 These matters should be of such continuing

importance.

 It is important for auditor to reviews such a file to take

into account.

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 Contents of permanent file
 Brief history of the client’s business
 Engagement letters
 New client questionnaire
 The memorandum and articles
 Other legal documents such as prospectus, leases, sales
agreement
 Board minutes of continuing relevance
 Previous years’ signed accounts, analytical review and
management letters
 Accounting system notes (internal control and audit
instructions), previous years’ control questionnaire
 Organization chart

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 Current file
 This contains information of relevance to the current
years’ audit.
 Financial statements
 Accounts checklist
 Management accounts details
 Reconciliation of management and financial accounts
 A summary of unadjusted errors
 Report to partner including details of significant events
and errors

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 Contents of current file
 Lead schedule including details of the figures to be
included in the accounts
 Problems encountered and conclusions drawn
 Audit programs
 Risk assessments
 Sampling plans
 Analytical review
 Details of substantive tests and tests of controls

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 Procedures for keeping/recording audit working papers

 Record as much details.

 Record the work as the audit progresses.
 Facts known at the time
 Information received and explanation given by
management
 Agreement reached with management and auditors own
conclusions
 Working papers should be concise, comprehensive and
should not require any oral explanation.

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 Characteristics of Working Paper
Several broad characteristics that working
papers should have:
 Completeness and Accuracy.
 Clarity and Conciseness.
 Ease of Preparation.
 Legibility and Neatness.
 Relevance.

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 (Exercise- # 1)

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 Structure of Good Working Papers

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 A well structured Working paper should have the
following properties:
 Audit Planning
 Planning Document
 Planning analysis
 Materiality Calculations
 Responsibility Matrix
 Risk Assessment Documents including Fraud Risk
Assessment.

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 Contd.
 Assessment on Other Areas (planning and work done)
 Subsequent Events
 Going Concern
 Compliance with Laws and Regulations
 Related Parties
 Internal Audit Function
 Involvement of Specialists
 Others, as required
 Discussions
 Correspondence (including emails)
Entity Management
Third Parties
Copy of requirement list submitted and status
21 Other correspondence
 What Should Not be Included
 Superseded drafts of working papers and financial
statements
 Notes that reflect incomplete or preliminary thinking
 Previous copies of documents corrected for errors
 Duplicate documents

Oral explanations by the auditor: on their own do not represent

adequate support for the work, the auditor performed or the
conclusion the auditor reached, but may be used to explain or
clarify information contained in the audit documentation.

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 Summary

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  Working papers are a record of work that is
done on an audit.

 They include the administrative materials

maintained by the supervisor and/or auditor-in-
charge.

 They may take the form of documents, interview

notes, analyses, tapes, films, electronic records,
and other materials.

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Specific Audit Documentation requirements in ISAs

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 Thank You

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