Professional Documents
Culture Documents
Glossary of Terms
Audit Documentation/ Working Papers/ Work Papersmeans the record of audit procedures performed, relevant audit evidence obtained, and conclusions the auditor reached. Audit File- means one or more folders or other storage media, in physical or electronic form, containing the records that comprise the audit documentation for a specific engagement. Experienced auditor- means an individual who has practical audit experience, and a reasonable understanding of audit processes, PSAs and applicable legal and regulatory requirements, the business environments of its client and auditing and financial reporting issues relevant to the entity s industry.
Other objective of audit documentation: (PSA 230 Para. 2) a. Assisting the engagement team to plan and perform the audit b. Assisting the members of the team responsible for supervision to direct and supervise the audit works and to discharge the review in accordance with PSA 220 (Redrafted). c. Enabling the team to be accountable for its work. d. Retaining a record of matters of continuing significance of future audits. e. Enabling the conduct of quality control reviews and inspections in accordance with PSQC 1 (Redrafted) f. Enabling the conduct of external inspections in accordance with applicable legal, regulatory or other requirements
PSA 230 para A4 The auditor need not include in audit documentation superseded drafts of working papers and financial statements, notes that reflect incomplete or preliminary thinking, previous copies of documents corrected for typographical or other errors, and duplicates of documents. PSA 230 PARA A5 Oral explanations by the auditor, on their own, do not represent adequate support for the work the auditor performed or conclusions the auditor reached, but may be used to explain or clarify information contained in the audit documentation.
Audit documentation provides evidence that the audit complies with the PSAs. However, it is neither necessary nor practicable for the auditor to document every matter considered, or professional judgment made, in an audit. For example: The existence of an adequately documented audit plan demonstrates that the auditor has planned the audit. The existence of a signed engagement letter in the audit file demonstrates that the auditor has agreed the terms of the audit engagement with management or, where appropriate, those charged with governance.
An auditor s report containing an appropriately qualified opinion demonstrates that the auditor has complied with the requirement to express a qualified opinion under the circumstances specified in the PSAs. In relation to requirements that apply generally throughout the audit, there may be a number of ways in which compliance with them may be demonstrated within the audit file: > No single way in which the auditor s professional skepticism is documented. But the audit documentation may nevertheless provide evidence of the auditor s exercise of professional skepticism in accordance with the PSAs. Such evidence may include specific procedures performed to corroborate management s responses to the auditor s inquiries. >Similarly, that the engagement partner has taken responsibility for the direction, supervision and performance of the audit in compliance with the PSAs may be evidenced in a number of ways within the audit documentation. This may include documentation of the engagement partner s timely involvement in aspects of the audit, such as participation in the team discussions required by PSA 315 (Redrafted).3
The auditor shall prepare audit documentation that is sufficient to enable an experienced auditor, having no previous connection with the audit, to understand: (PSA 230 para. 8) (a) The nature, timing and extent of the audit procedures performed to comply with the PSAs and applicable legal and regulatory requirements. (b) The results of the audit procedures preformed, and the audit evidence obtained (c) Significant matters arising during the audit, the conclusions reached and the professional judgement made in reaching those conclusions.
In documenting the nature, timing and extent of audit procedures performed, the auditor shall record: (PSA 230 para 9)
(a) The identifying characteristics of the specific items or matters tested (b) Who performed the audit and the date such work was completed (c) Who reviewed the audit work performed and the date and extent of such review
Identifying will vary with the nature of the audit procedure, the item tested. For example: (PSA 230 para. A12)
For a detailed test of entity-generated purchase orders, the auditor may identify the documents selected for testing by their dates and unique purchase order numbers. For a procedure requiring selection or review of all items over a specific amount from a given population, the auditor may record the scope of the procedure and identify the population. For a procedure requiring systematic sampling from a population of documents, the auditor may identify the documents selected by recording their source, the starting point and the sampling interval. For a procedure requiring inquiries of specific entity personnel, the auditor may record the dates of the inquiries and the names and job designations of the entity personnel. For an observation procedure, the auditor may record the process of matter being observed, the relevant individuals, their respective responsibilities, and where and when the observation was carried out.
PSA 230 para 10 The auditor shall document discussions of significant matters with management, those charged with governance, and others, including the nature of the significant matters discussed and when and with whom the discussions took place.
PSA 230 para 14 The auditor shall assemble the audit documentation in an audit file and complete the administrative process of assembling the final audit file on a timely basis after the date of the auditor s report. (Ref: Para. A21-A22)
>>> appropriate time is not more than 60 days after the date of the auditor s report. >>>the completion of the audit file does not involve performance of new audit procedures which are not administrative in nature. However changes that are administrative in nature may be made.
PSA 230 para 15 After the assembly of the final audit file has been completed, the auditor shall not delete or discard audit documentation of any nature before the end of its retention period. >>The retention period for audit engagements ordinarily is no shorter than five years from the date of the auditor s report, or, if later, the date of the group auditor s report.
2. Tailor- made audit program -List the procedures to be followed on a specific audit engagement, indicating any departure from normal practices and specifying the extent of the tests of transactions. 3. Modified standard form audit program -a preprinted program that outlines the usual audit procedures common to most businesses with a space for an auditor to indicate other specific procedures applicable to the business under examination.
Working Trial Balance in 2 sections - 8 column worksheet divided into 2 sections segregating the balances sheet accounts from the income statement accounts with each section being balances separately Working Trial Balance in4 sections - 8 column worksheet where the balance sheet section is divided into 2 parts, one for assets and the other for equities while the income statement section is divided into profit and loss credits section and the profit or loss debits section.
Working Trial Balance in Multiple Sections -8 column worksheet where the trial balance sectionalized into significant groupings of distinct elements of financial position and results of operations.
Lead or Top Schedule - This is a working paper that shows the grouping of related account balances. - It supports each line on the trial balance, containing the detailed accounts from the general ledger making up the line item total.
1. 2. 3. 4. 5.
Audit plan and programs Working trial balance Adjusting and reclassifying journal entries Lead and supporting schedules General information, such as
a. Abstract or copies of minutes of the board of director s meetings b. Abstracts of contracts or agreements not included in the permanent files c. Notes on discussions with the client d. Notes about impressions of the form of the client s office and plant
Permanent Files
- Working papers in permanent files contain information of continuing interest to the auditor. - These are intended to contain data of historical or continuing nature pertinent to the current examination. - These files provide a convenient source on information about the audits that is of continuing use from year to year.
Working papers in general should provide: Evidence of compliance with the standards of auditing Sufficient data to demonstrate that the financial statements or other information being reported on by the auditor were in agreement or reconciled being with the client s records Clear indication of the work perfromed. This may require:
1. Writing a memorandum 2. Initializing the appropriate steps in audit programs 3. Making notations called tick marks directly on the working papers and explaining the notations
Indication as to how the auditor resolved any exception or unsual matter disclosed by his examination. Appropriate connections of the auditor on significant aspects of the engagement.
Ownership and custody of working paper The Philippines Accountancy Act of 2004, Section 29 All working papers, schedules and memoranda made by a certified public accountant in public practice and his staff in the course of an examination, including those prepared and submitted by the client, incident to or in the course of an examination, by such certified public accountant, except reports submitted by a certified public accountant to a client shall be treated confidential and privilege and remain the property of such certified public accountant in the absence of a written agreement between the certified public accountant and the client, to the contrary, unless such documents are required to be produced through subpoena issued by any court, tribunal, or government regulatory or administrative body.
Rules to be observed in relation to CPAs observance of confidentiality of information: Disclosing outside the firm or employing organization confidential information acquired as a result of professional and business relationships without proper and specific authority or unless there is legal or professional right o duty to disclose. Using confidential information acquired as a result of professional and business relationships to their advantage or the advantage of third parties.
A professional accountant should maintain confidentiality even in a social environment. Must be careful of inadvertent disclosure, particularly in circumstances involving long association with business associate or a close or immediate family member. A professional accountant should also maintain confidentiality of information disclosed by a prospective client or employer. A professional accountant should also consider the need to maintain confidentiality of information within the firm or employing organinization.
A professional accountant should take all reasonable steps to ensure that staff under his control and persons from whom advice and assistance is obtained respect the professional accountant s duty of confidentiality. The need to comply w/ the principle of confidentiality continues even after the end of relationships between a professional accountant and a client or employer.
Circumstances where professional accountants are or may be required to disclosed confidential information or when such disclosure may be appropriate: