Such documentation forms the largest part of the audit file.
In this case, the audit plan and its program should be more detailed so that they can be used as a kind of instructions for assistants on the issues assigned to them. Evidence (testimony) obtained by assistants should be documented so that the auditor can later draw unambiguous, clear conclusions.
Depending on the content, duration of use, the time span covered and a number of other parameters, the auditor’s working papers can be divided into several types (Fig. 1).
The classification of auditor’s working documents developed by the author does not claim absolute completeness and immutability, as it can be changed and supplemented depending on the selected parameters and details of grouping documents. This is just an attempt in the most general terms to systematize the auditor’s working papers based on the most significant features of their classification.
Fig. 1. Classification of auditor’s working papers.
The division of the auditor’s working documents by term of use and use into long-term and short-term use, in our opinion, meets the requirement of uniformity of classification in relation to the selected feature. However, foreign practice and literature present working documents as long-term and current, which is not entirely consistent with the classification.
Based on the experience of the auditors of the German company KRMG, long-term documents (acts) are a systematic collection of documents that are relevant for a long period and serve to quickly obtain information about the main activities of the enterprise. Long-term documents, for example, include a long-term audit agreement (valid for more than one year), copies of the founding documents of the client company and its main agreements on business activities, data on management and personnel of the company, accounting systems and internal control, documents on long-term audit planning, etc.
In the practice of US auditors, these documents are called continuous.
According to the auditors of the German firm KRMG, current working documents are a systematic collection of documents relating to the annual report, which is checked if they are not included in long-term acts. US auditors believe that current documents consist of two categories of documents (audit administrative documents and audit information documents). In our opinion, this division of current documents is not entirely correct, as these same categories can be distinguished in the composition of long-term documents.
Based on our chosen feature of the classification (term of maintenance and use), the so-called current documents, we called short-term documents. These include, for example, a one-year audit contract, the current audit plan and program, the approved composition of the audit team, working papers on the audit of individual balance sheet items for the reporting period, audit risk assessment, copies of financial statements for the audited period, copies of primary documents and accounting records, results of surveys, testing, questionnaires, inquiries and other performed audit procedures.
The auditor’s working papers are closely related to the receipt and presentation of audit evidence (testimonies), as the former document the latter. Based on this, having an idea of the methods and sources of audit evidence, we can classify the working documents on the basis of our choice: received from third parties (interested in the auditor’s request to the bank); received from the client company (originals or copies of primary documents, accounting records, reports); compiled by the auditor (documented personal observations, test results, analytical review).
The auditor’s working papers are quite diverse in the nature of the information contained in them:
those that contain information of a legal nature directly related to the activities of the client company (copies of the memorandum of association, charter, contracts of the enterprise with customers and suppliers); about the management and staff of the enterprise (number of staff, composition of the management staff, especially about the director, his deputies, chief accountant, manager, their education, practical experience, functional responsibilities); about the structure and organization of the client enterprise (location and composition of divisions, organization of activity and prospects of development); about economic bases of activity of the enterprise (structure of technical potential, economic sphere of activity, let out production, on assortment and volume, position of the enterprise in the market, sale of production, competitors, etc.); about the internal control system. The need for such documents is explained by the fact that before planning and conducting an audit, the auditor must assess the internal control system, its effectiveness and reliability, and therefore the degree of confidence in it and the possibility of using internal audit data in their work. This conclusion of the auditor, as well as the weaknesses of the internal control system, the results of relevant tests should be documented; about the accounting system of the client company, the accounting policy used by the company, its consistency, the feasibility of its client, compliance with established accounting procedures, tasks assigned to accounting, its structure, the level of automation (computerization) of accounting, shortcomings and errors in the accounting system, identified during previous audits); audit organizational and functional working documents, which allow at the appropriate level, in compliance with the requirements for the audit, to organize, plan the audit, maintain the necessary contacts with the client (contract, audit order, appointment of a group of auditors to audit, audit plan and program, written interviews of the auditor with the management of the client company, declaration of completeness of information); audit risk assessment documents. Prior to the audit and planning, its auditor must assess the audit risk i need help writing an lab report for free – the company’s own risk, control risk and risk of non-detection. Moreover, the overall audit risk should be at an acceptably low level so that the audit is considered to have been conducted at the appropriate level. Such a definition of the overall audit risk and its components should be documented; all adjustments made during the inspection should also be recorded; audit documents on the audit of individual items and indicators of the annual report, compiled or received by the auditor after the end of the reporting period being audited, during the direct audit of certain assets and liabilities of the enterprise. Such documentation forms the largest part of the audit file. These are, for example, copies of the primary documentation of the client company or accounting records with the auditor’s notes on the audit; responses to inquiries from third parties; test results for specific types of assets and liabilities; description and results of other audit services; auditor’s correspondence (written appeals of the auditor to the management of the enterprise with a request to provide him with this or that information; letters indicating the deficiencies identified by the auditor during the audit, such as internal control systems, accounting, inventory, and recommendations for their elimination; notification of significant errors in the financial statements and requirements for its adjustment); the final audit report is an integral part of the audit documentation, as it contains the auditor’s information on whether it confirms the financial statements of the client. In this regard, there is no doubt about its documentation; proposals and recommendations for consideration by the auditor, in addition to the evaluation of financial statements, and especially if there is an agreement to provide audit services (related to the auditor’s work); the auditor expresses to the company’s management his wishes, suggestions and recommendations for further work of the client company, its development strategy, improvement of accounting systems and internal control, as well as a number of other issues.
During the audit, the auditor performs many different audit procedures that help solve the tasks facing him. Based on this, the working documents for their purpose, ie the purpose of compilation, can be divided into the following:
survey, which provides a general description of the client company or a general overview of the submitted financial statements; informative, giving accurate information about business transactions, events that have occurred, the state of affairs, etc.; verification, indicating the verification of the state of assets and liabilities reflected in the reporting, completeness, actual availability, their belonging to all criteria for reporting; confirmatory – responses to inquiries from third parties that confirm or do not confirm the information provided by the client company, or the auditor’s conclusions; settlement, containing certain calculations of the auditor, which confirm the data of the financial statements (the auditor’s own calculations to verify the correctness of the accountant’s determination of the total amounts, turnovers and balances); comparatives drawn up by the auditor to compare, for example, the indicators of the reporting period being audited and those preceding it, in order to identify trends in the enterprise or to compare the performance of the client company and other companies in this industry; analytical, compiled as a result of the auditor’s application of the method of analytical review, for example, determining the overall financial condition of the enterprise, its solvency, profitability, liquidity and other indicators.
The problem of standardization is important working documents. They can be classified as standardized (forms of contracts, letters to the client) and documents of any form (drawn up at the discretion of the auditor).
The use of standardized working papers can affect the efficiency of their compilation and analysis.