AUDIT WORKING

PAPERS-CUSTODY OF
OWNERSHIP
Dr. A. HELDA MARY
AUDIT WORKING PAPERS:
Audit working papers are the outcome of the documentation process.
Working papers are the record of various audit procedures performed,
audit evidence obtained, allocation of work between audit team members
etc. Audit working papers are the documents and evidence that an auditor
collects and retains with himself during the audit.
Audit Working Papers:
Audit working papers support the work that the auditor performs for providing
assurance that he conducts the audit in accordance with all the applicable standards
on auditing (SA’s).
They constitute all the audit evidence that an auditor obtains. Also, it contains
various procedures that he applies to indicate that the audit is performed by him.
The auditor and his audit team members prepare the audit working papers while
performing the audit. Working papers are connecting link between the client’s
records and audited financial statements.
 Working papers provide entity’s historical records as well as matters which should be taken care
and given due importance while performing future audit’s of such entity. Audit working papers help
auditor in audit planning and collecting evidence of the audit work performed on which his opinion
is based. Working papers helps auditor in allocating the time required for performing various audit
procedures. The working paper helps auditor to maintain a record of various matters discussed with
management while conducting an audit.
Also, the working papers help audit team members to understand entity’s business, points which
they need to check on a priority basis, queries and actions against them in previous audits. Working
papers helps auditor in future cases to protect himself if the client files a suit against auditor for
auditor’s negligence while conducting the audit.
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
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.
Working papers provide information on the following matters:
Information about audit team members and work allocated to them. Information
regarding unallocated work
Whether he follows all the applicable standards on auditing (SA’s) or not
He properly plans the audit or not
Whether there was proper supervision over the work performed. Enabling the audit
team members to be responsible for the work performed by them
An auditor undertakes an appropriate review or not
Whether the evidence is relevant, sufficient and appropriate to support the opinion
of the auditor
We can divide the working papers into two parts:
Permanent audit file
Current audit file
A permanent audit file contains information which is of continuous
interest and is relevant in future audits. Information like articles of
association, loan agreements, leases, documents related to internal
control of the entity, record of accounting policies followed by the entity
on a continuous basis, significant observations of previous audits etc.
Ownership and Custody of Working Papers:
Working papers are those papers that contain essential facts about accounts so that
the auditor may not have again to go over the accounts of his clients in case he
wants to refer to them later on during the course of his audit. The working papers
are the matters documented by the auditor, and some states have statutes that assign
the auditor as the holder of the working papers. The auditor’s privileges of
ownership, however, are subject to moral limitations relating to the classified
relationships with clients. Ensure safe custody and secrecy of his working papers.
Working papers belong to the auditor. The auditor’s ownership rights, however, are subject to constraints

imposed by the auditor’s own profession. Rule 301 of the AICPA’S Code of Professional Conduct stipulates that

a CPA shall not disclose any confidential information obtained during the course of professional engagement,

without the consent of the client, except for certain circumstances as stated in the rule.

Custody of the working papers rests with the auditor and he or she is responsible for their safekeeping. Working

papers include in the permanent file are retained indefinitely. Current working papers should be retained for as

long as they are useful to the auditor in servicing a client or are needed to satisfy legal requirements for record

retention. The statute of limitations rarely extends beyond 6 years.

Working papers are the property of the auditor and he might, at his judgment, make portions of or

extracts from his working papers to his client. Certain of the auditor’s working papers might

sometimes serve as a helpful orientation source for his customer, but the working papers should not

be regarded as a division of, or an alternative form, the client’s accounting records. Although the

client might assert them as a record of his business matters, the auditor cannot division with them as

his conclusions are based on them and as they present confirmation of the audit work carried out

according to the essential principles. The auditor should accept sensible actions for the safe

supervision of his working papers and should maintain them for a time enough to meet the needs of

his observations and to persuade any pertinent legal requirements of records preservation.
Functions and Nature of Working Papers

Working papers serve mainly to—Provide the principal support for the auditor's

report, including his representation regarding observance of the standards of field

work, which is implicit in the reference in his report to generally accepted auditing

standards.Aid the auditor in the conduct and supervision of the audit.

Working papers are records kept by the auditor of the procedures applied, the tests

performed, the information obtained, and the pertinent conclusions reached in the

engagement. Examples of working papers are audit programs, analyses, memoranda,

letters of confirmation and representation, abstracts of company documents, and

schedules or commentaries prepared or obtained by the auditor. Working papers also

may be in the form of data stored on tapes, films, or other media.

Factors affecting the auditor's judgment about the quantity, type, and content of the

working papers for a particular engagement include (a) the nature of the engagement,

(b) the nature of the auditor's report, (c) the nature of the financial statements,

schedules, or other information on which the auditor is reporting, (d) the nature and

condition of the client's records, (e) the assessed level of control risk, and (f) the

needs in the particular circumstances for supervision and review of the work.
Content of Working Papers:

The quantity, type, and content of working papers vary with the circumstances (see

paragraph .04), but they should be sufficient to show that the accounting records

agree or reconcile with the financial statements or other information reported on and

that the applicable standards of field work have been observed. Working papers

ordinarily should include documentation showing that—

The work has been adequately planned and supervised, indicating observance of the first

standard of field work.

A sufficient understanding of internal control has been obtained to plan the audit and to

determine the nature, timing, and extent of tests to be performed.

The audit evidence obtained, the auditing procedures applied, and the testing performed have

provided sufficient competent evidential matter to afford a reasonable basis for an opinion,

indicating observance of the third standard of field work.

Ownership and Custody of Working Papers

Working papers are the property of the auditor, and some states have

statutes that designate the auditor as the owner of the working papers.

The auditor's rights of ownership, however, are subject to ethical

limitations relating to the confidential relationship with clients.

Certain of the auditor's working papers may sometimes serve as a useful reference

source for his client, but the working papers should not be regarded as a part of, or a

substitute for, the client's accounting records.

The auditor should adopt reasonable procedures for safe custody of his working

papers and should retain them for a period sufficient to meet the needs of his

practice and to satisfy any pertinent legal requirements of records retention.

THANK YOU