Audit working papers definition
/What are Audit Working Papers?
Audit working papers are used to document the information gathered during an audit. They provide evidence that sufficient information was obtained by an auditor to support his or her opinion regarding the underlying financial statements. Working papers also provide evidence that an audit was properly planned and supervised. They should contain sufficient information for an auditor who did not work on an audit to discern the reasons for the opinion given regarding a client's financial statements. The forms of documentation that may be contained within the working papers include the following:
Checklists of standard investigation items that were completed, and by whom
Copies of correspondence
Documentation of the assertions investigated and supporting evidence found
Extracts from the corporate minutes of the client
Flowcharts of a client's key transaction processes
Narrative discussions of issues found
Organization charts
Questionnaires for which the client provided answers
In addition, there may be extensive cross referencing between the documents contained within the working papers.
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Reasons for Audit Working Papers
There are multiple reasons why it makes sense to prepare audit working papers, which are as follows:
Evidence of work performed. Audit working papers serve as documentation of the procedures applied, tests conducted, and evidence gathered during the audit. They demonstrate that the audit was carried out in accordance with auditing standards.
Support for audit opinion. Audit working papers provide the factual basis for the auditor’s opinion expressed in the audit report. Without this support, the opinion could be questioned for lack of substantiation.
Facilitate supervision. Working papers allow senior auditors and partners to review the work performed by junior staff. This review process ensures accuracy, completeness, and adherence to audit plans and procedures.
Aid in future audits. Audit working papers serve as a reference for planning and conducting future audits by providing background on past issues and areas of concern. This continuity enhances efficiency and audit quality.
Assist in resolving disputes. If questions or legal challenges arise after the audit, working papers act as a defense for the auditor’s conclusions. They show that professional judgment was exercised based on documented evidence.
Ensure compliance with standards. Maintaining proper working papers helps auditors comply with professional, legal, and regulatory requirements. This compliance is crucial for maintaining the credibility and reliability of the audit process.
Coordinate team efforts. Audit working papers provide a means of communication among team members working on different areas of the audit. This coordination ensures consistency and avoids duplication of efforts.
Software for Audit Documentation
Several software providers sell off-the-shelf software that creates electronic versions of working papers, so that auditors are not as burdened by the volume of paperwork commonly found in a traditional audit. Instead, they can operate using laptops, without having to store substantial quantities of documents at client sites or in the office. A further advantage of using software for audit documentation is that audit managers can review the documentation from their computers, rather than having to travel to audit locations to conduct this task.
Who Prepares Audit Working Papers?
Audit working papers are prepared by the audit staff and audit seniors, and are reviewed by audit senior managers and partners. If a reviewer finds that any issues have not yet been addressed, then these issues are delegated to the on-site audit team for action. Reviewers sign and date each page examined. Once an audit has been concluded, the audit working papers are considered legal evidence, and so are appropriately indexed and filed. At a minimum, the working papers will likely be reviewed the next year by the assigned audit senior or manager, who will want to understand any issues found in the prior year, and also to determine if there are any ways to budget the audit staff's time more effectively.