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Audit Working Papers (M’10, N’11, M’07, and N’12)

Theme

If you haven’t documented, you haven’t performed

SA 230 “Audit Documentation (N’08)

Utility: 

· Document the Nature, Timing and Extent of Audit Procedures (NTE) performed

· Responsibility since audit staff sign the checklists

· Allows senior to review audit work by juniors

· Evidence in the court of law when a charge of negligence is brought against the auditor.

· Enable the conduct of quality control reviews and inspections in accordance with SQC 1.

Ownership:

Working papers are the property of the auditor and he may, at his discretion, make portions of or extracts from his working papers to his client.

Custody

Ensure safe custody and confidentiality of his working papers.

Retention

Long enough to meet any legal or professional requirements of record retention. No time limit in SA-230

SQC 1 – Firms should establish policies/procedures for retaining engagement documentation.

Time >7 years from the date of the auditor's report. 

Ownership and Custody of Working Papers (N’10)

SA 230 on Audit Documentation

(SQC) 1, “Quality Control for Firms that Perform Audits and Reviews of Historical Financial Information, and Other Assurance and Related Services Engagements”

Working papers = Auditor’s property and he is entitled to retain them

He may, at his discretion, make portions of or extracts from his working papers available to his client.

Chantery Martin & Co. v. Martin

Part I of the Second Schedule to the Chartered Accountants Act, 1949:

"A Chartered Accountant in practice shall be deemed to be guilty of professional misconduct, if he discloses information acquired in the course of his professional engagement to any person other than his client, without the consent of his client or otherwise than as required by any law for the time being in force."

Case Study

Should branch auditor of a company comply with the request of the principal auditor of the company to give photocopy of the working papers pertaining to the branch audit?  Explain.

SA 230 “Audit Documentation”

Working papers = Auditor’s property

Maintain custody and confidentiality and allow access only if you feel appropriate

Not required to provide the clients or other auditors’ access to his working papers.

Main auditor of the company does not have right of access to the working papers of the branch auditor.

In the case of a company, the main auditor has, to consider the report of the branch auditor and has a right to seek clarification  and to visit the branch but cannot ask for the copy of working paper and therefore, the branch auditor is under no compulsion to give photocopies of his working paper to the principal auditor.

Permanent Audit file (N’05)

· Legal and organisational structure

· Memorandum and Articles (MoA and AoA)

· Important legal documents, agreements and minutes

· Evaluation of the internal controls flowcharts etc

· Audited financial statements for previous years

· Ratio Analysis

· Management letters issued by the auditor

· Communication with the retiring auditor (if)

· Significant accounting policies

· Significant audit observations of previous years

Current Audit file

· Correspondence relating to acceptance of annual reappointment

· Minutes of Board Meetings and General Meetings

· Nature, Timing and Extent of Audit Procedures (NTE) performed

· Review Notes of work done by juniors

· Management representation

· Conclusions reached by the auditor concerning significant aspects

When you took admission in college, your master data, photo, PAN card, details of you found copying during board exams (if) Vs Your semester-wise attendance % and report cards of exams

Audit Note Book (N’01, M’08)

Contains record of matters observed during audit and constitutes audit working papers.

Audit note book = available for reference later on

Audit note book = Current file. 

Provides a valuable help to the auditor in tracing up the flow of work when the concerned assistant is away or the work is stopped temporarily. 

Recording queries that were raised in the course of the work and their state of disposal

In respect of disposed queries, explanation obtained and evidence seen would be recorded in the said book, while queries remaining un-disposed of would be noted for follow up

Theme

Just like your current doctor’s medical file containing your case history, prescriptions, and X-Ray reports

Profile

CA Anurag Singal secured All India Ranks 25 and 22 in CA inter and Final. He has authored the book “Auditing Mantras’ for CA IPCC. http://www.auditingmantras.com/ He can be mailed at anurag@auditingmantras.com

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