Audit Working Papers

Updated on March 29, 2024
Article byKosha Mehta
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

What Are Audit Working Papers?

Audit working papers are the documents prepared by auditors during an audit engagement. These papers contain the evidence obtained and the procedures followed by the auditors in performing their work. Its purpose is to record the audit process and provide a basis for the auditor’s conclusions and opinions.

Audit Working Papers

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Audit working papers are very important as they serve as a reference for future audits and help auditors ensure they conduct their work according to professional standards and regulatory requirements. However, due to such sensitive information, these papers are confidential.

Key Takeaways

  • Audit working papers record the audit process and findings, including risk assessments, testing procedures, and audit conclusions.
  • They are important because they provide a comprehensive record of the audit process, support the auditor’s conclusions and opinions, facilitate future audits and reviews, and help identify areas for improvement.
  • Auditors must follow established procedures and maintain detailed, organized, clear working papers to ensure accuracy, completeness, and clarity.
  • Audit working papers are typically the property of the audit firm that prepared them, but clients have the right to access them and may request a copy for their records.

Audit Working Papers Explained

The working papers typically include the auditor’s planning documents, test results, analytical procedures, and other supporting documentation. They are essential for maintaining the audit process’s quality and integrity and providing a detailed trail of the auditor’s work. The working papers are confidential and are not intended for distribution outside the audit team or the client’s management.

Audit working papers are the records maintained by auditors during an audit engagement. These papers are used to document the evidence obtained and the procedures followed by the auditors during the audit process. In addition, the working papers provide a basis for the auditor’s opinions and conclusions and serve as evidence of the auditor’s work.

Audit working papers typically include the auditor’s planning documents, test results, analytical procedures, and other supporting documentation. These papers are organized and maintained systematically to facilitate review by supervisors and other audit team members. The working papers also support the auditor’s findings and opinions during discussions with the client’s management and external stakeholders.

Audit working papers are essential for maintaining the quality and integrity of the audit process. They provide a detailed trail of the auditor’s work, which can be used to demonstrate compliance with professional standards and regulatory requirements. The working papers are confidential and are not intended for distribution outside the audit team or the client’s management.

Audit working papers are an important component of the audit process. They serve as a record of the auditor’s work, provide a basis for the auditor’s opinions and conclusions, and are essential for maintaining the quality and integrity of the audit process.

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Contents

Planning documents include the audit plan, risk assessment, and audit program.

#1 – Evidence Of Testing

These documents provide evidence of the auditor’s testing of the client’s systems, processes, and controls. This may include documents such as sample selections, testing results, and audit procedures.

#2 – Analytical Procedures

These documents demonstrate the auditor’s use of analytical procedures in the audit process. This may include documents such as trend analysis, ratio analysis, and benchmarking.

#3 – Communications

These documents record communications between the auditor, the client’s management, and other stakeholders. This may include documents such as email correspondence, meeting minutes, and notes from telephone conversations.

#4 – Workpapers Review

These documents record the audit working papers reviewed by the audit team’s supervisors or quality control reviewers. This may include documents such as review notes, comments, and sign-offs.

#5 – Other Supporting Documentation

These documents support the auditor’s findings and conclusions. This may include financial statements, tax returns, and legal contracts.

Types

#1 – Permanent Files

These audit working papers retained from year to year contain information relevant to multiple audits. Examples of permanent files may include the client’s articles of incorporation, bylaws, and internal control documentation.

#2 – Current Files

These audit working papers prepared for a specific audit engagement contain information relevant only to that engagement. Examples of current files may include the auditor’s planning documents, testing results, and analytical procedures.

#3 – Supporting Schedules

These detailed schedules provide backup to the auditor’s work. Examples of supporting schedules may include the trial balance, accounts payable listing, and fixed asset register.

#4 – Audit Programs

The documents outline the procedures to be performed by the auditor during the audit engagement. Audit programs may be prepared by the auditor or obtained from a third-party source.

#5 – Reconciliation Files

It demonstrates the auditor’s reconciliation of financial information to underlying support. Examples of reconciliation files may include bank reconciliations, accounts receivable confirmations, and inventory count sheets.

Examples

Let us have a look at the examples to understand the concept better

Example #1

Suppose that the government of a country has engaged the auditor general to conduct an audit of their financial statements for the fiscal year ending June 30, 2022. As part of the audit process, the auditor prepares several types of working papers:

  • Audit plan: The auditor develops an audit plan that outlines the audit’s objectives, scope, and methodology. The plan also describes the key risks and challenges the auditor will likely encounter during the audit.
  • Risk assessment: The auditor performs a risk assessment to identify areas of the financial statements most susceptible to material misstatement. The auditor may consider risks such as fraud, errors, and compliance with laws and regulations.
  • Audit procedures: The auditor develops detailed audit procedures to test the financial statements and assess the effectiveness of the government’s internal controls. These procedures may include reviewing documentation, testing transactions, and interviewing personnel.
  • Testing results: The auditor documents the results of the testing procedures in the working papers. These may include working papers such as schedules, checklists, and summary memos that explain the procedures performed and the results obtained.
  • Audit findings: The auditor documents any audit findings in the working papers. These findings may include any material misstatements identified in the financial statements, weaknesses in the government’s internal controls, or noncompliance with laws and regulations.
  • Audit conclusion: The auditor summarizes the results of the audit in the working papers and concludes the fairness of the financial statements. The conclusion may be unqualified, qualified, or adverse, depending on the nature and extent of the issues identified in the audit.

Example #2

Let’s say that ABC Corporation has engaged an audit firm to audit its financial statements. During the audit, the auditor prepares several types of audit working papers:

  • Permanent files: The auditor creates permanent files for ABC Corporation that contain relevant information about the company, such as its articles of incorporation, bylaws, and internal control documentation. These files will be updated yearly as new audit engagements are performed for the company.
  • Current files: The auditor prepares current files for the current year’s audit engagement. These files include the audit plan, risk assessment, audit program, testing results, analytical procedures, and other supporting documentation.
  • Supporting schedules: The auditor prepares detailed schedules to support the financial information presented in the company’s financial statements. For example, the auditor may prepare a schedule of accounts payable to reconcile to the general ledger and to support the balance sheet presentation of accounts payable.
  • Audit programs: The auditor uses audit programs to outline the procedures performed during the audit engagement. For example, the auditor may use an audit program to test the completeness and accuracy of accounts receivable by sending confirmations to the company’s customers.
  • Reconciliation files: The auditor prepares reconciliation files to demonstrate the reconciliation of financial information to underlying support. For example, the auditor may prepare a bank reconciliation to reconcile the company’s

Advantages And Disadvantages

#1 – Advantages

  • Provides a comprehensive record of the audit process and findings
  • Facilitates communication and coordination among audit team members
  • Supports the auditor’s conclusions and opinions
  • Facilitate future audits and reviews
  • Helps identify areas for improvement

#2 – Disadvantages

  • Time-consuming to prepare and maintain
  • Requires specialized knowledge and training to create
  • Can be misinterpreted or misunderstood
  • It may contain errors or omissions
  • Can be subject to legal challenges or discovery
  • Confidentiality may be compromised.

Frequently Asked Questions (FAQs)

Who owns audit working papers?

Audit working papers are the property of the auditor or the audit firm that prepared them. However, clients can access them and request a copy for their records.

How to prepare audit working papers?

To prepare audit working papers, auditors must follow established procedures, including planning the audit, identifying risks, performing testing, and documenting their findings. In addition, working papers should be organized, clear, and detailed enough to support the audit conclusions.

Who is the custodian authority for audit working papers?

The custodian authority for audit working papers is typically the audit firm that prepared them. They are responsible for maintaining the working papers and ensuring they are accurate and complete. Clients also have the right to access the working papers and may request a copy for their records.

What are the importance of audit working papers?

Audit working papers are important because they provide a comprehensive record of the audit process and findings, support the auditor’s conclusions and opinions, facilitate future audits and reviews, and help identify areas for improvement in the audited organization’s processes and controls.

This has been a guide to what are Audit Working Papers. We explain its examples, contents, types, advantages, and disadvantages. You can learn more about accounting from the following articles –