Audit Working Papers: Detailed Definition
Definition
Audit working papers are the files and documents that auditors collect and create throughout the audit process. These papers contain comprehensive details such as:
- Evidence and information gathered
- Planning information
- Assessments of the client’s accounting and internal control systems
- Details of the work carried out and by whom
- Financial information and summaries
- Evidence that the work has been appropriately reviewed
- Conclusions reached
Audit working papers serve as a critical record for forming an audit opinion and are an indispensable reference for future audits.
Key Components
- Information of Continuing Importance: Organizational plans of the company being audited.
- Planning Information: Audit planning strategies, risk assessments, and audit programs.
- Internal Control Systems: Evaluations and assessments of the client’s internal control systems.
- Work Carried Out: Specific tasks performed during the audit process and the responsible individuals.
- Financial Information: Financial statements, accounting records, and insights.
- Review Evidence: Documentation showing that audit processes and results were reviewed, typically by senior staff.
- Audit Conclusions: Detailed conclusions and opinions formed based on the collected evidence and analyses.
Examples
Example 1: Planning Information
An auditor might document their risk assessments for various financial statement elements. For instance, detailing why the revenue recognition process poses a significant audit risk and outlining specific audit tests to address this risk.
Example 2: Detailed Work Performed
Papers might include a working paper where an auditor examines inventory counts, documenting the procedures applied, any discrepancies noted, and how these were resolved or investigated further.
Example 3: Review Evidence
Audit working papers may contain sign-offs from a supervising auditor, indicating that they have reviewed the junior auditor’s work on fixed asset testing and agree with their conclusions.
Frequently Asked Questions (FAQs)
Q1: Why are audit working papers important? A1: Audit working papers provide documented evidence supporting the auditor’s conclusions, ensure consistency and compliance with auditing standards, and facilitate future audits by providing a reference point.
Q2: Can audit working papers be shared? A2: Audit working papers are generally confidential and are shared only with those who have an appropriate need to know, such as regulatory bodies or specified external auditors in mergers and acquisitions.
Q3: How long should audit working papers be retained? A3: Retention periods for audit working papers vary by jurisdiction but typically range from five to seven years after the audit is completed.
Q4: Who owns the audit working papers? A4: Generally, the audit firm that conducts the audit owns the working papers, not the client company.
Related Terms
Internal Control Systems
These are the policies, procedures, and mechanisms implemented by an organization to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.
Compliance Audit
A compliance audit is the review of an organization’s adherence to regulatory guidelines, internal policies, and procedures.
Audit Evidence
Audit evidence refers to the information collected during an audit to support the conclusions drawn by the auditor. It includes documents, records, observation of assets, inquiries, and analytical procedures.
Online Resources
Suggested Books for Further Studies
- “Auditing and Assurance Services” by Alvin A. Arens, Randal J. Elder, and Mark S. Beasley
- Comprehensive guide covering the principles and practice of auditing.
- “Principles of Auditing & Other Assurance Services” by Ray Whittington and Kurt Pany
- Details the auditing process end-to-end with real-world examples.
- “Audit and Assurance Essentials: For Professional Accountancy Exams” by Katharine Bagshaw
- Focused around audit evidences, working papers, and assurance services with exam scenarios.
Accounting Basics: “Audit Working Papers” Fundamentals Quiz
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