8 Types of Audit Evidence Flashcards
Workpapers summarize your audit actions, such as planning the audit. For example, to support your conclusion that cash is correctly stated on the balance sheet, you may prepare a schedule showing all bank reconciliations affirming that they reconcile without discrepancy to the balance sheet. The Committee on Budgetary Control will vote on the annual report on the Control of the financial activities of the European Investment Bank (EIB) for 2018, on 7 May. The Committee will also vote on the 2018 report on the protection of the EU’s financial interests, combating fraud.
The trading profit and loss statement and balance sheet and other financial reports can then be produced using the ledger accounts listed on the same balance. 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.
Working papers specifically designed to help the auditors in the planning and administration of the engagement, such as audit plans, internal control questionnaires and flowcharts, time budgets, and engagement memorandum. 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. The auditor and his audit team members prepare the audit working papers while performing the audit.
Before signing the audit engagement letter, the auditor requires to obtain some information about the client, do the client’s due diligence, and assess whether they should reject or accept the engagement. In this case, if the engagement is readily signed, that means assessment is already done and accepted. Audit working papers refer to the documents that prepare by or use by auditors as part of their works. Those documents include the summary of the client’s nature of the business, business process flow, audit program, documents or information obtained from the client as well as audit testing documents.
Additionally, she is a university professor of undergraduate- and graduate-level accounting classes. Part of your job as a staff associate in an auditing firm is to document your findings in working papers (also known as workpapers) and schedules.
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However, a living document may evolve through successive updates, be expanded as needed, and serve a different purpose over time. Living documents are changed through revisions that may or may not reference previous iterative changes.
A current audit file contains information regarding audit conducted for the current period. Audit working papers also include the words or excel files that auditors used to documents the client’s key internal control over financial reporting, nature of the business, as well as audit test’s working paper. The PCAOB establishes auditing and related professional practice standards for registered public accounting firms to follow in the preparation and issuance of audit reports. 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.
To prove that audit is being carried out in accordance with required auditing standards, auditors have to prove before peer reviewers. Maire Loughran is a self-employed certified public accountant (CPA) who has prepared compilation, review, and audit reports for fifteen years.
Working papers are documents developed by auditors that summarize their work, including evidence, tests, and conclusions related to the audit objectives. A critical part of any audit engagement is the documentation prepared by the auditors to support their final report. In this lesson, we’ll discuss the importance of working papers, as well as share some working paper best practices. The auditor might prepare their own workings papers for their recordings, testings, and reporting.
Credit memoranda, receiving reports, and copies of sales invoices are created internally and are not validated by a third party before being examined by the internal auditor. A trial balance is a list of all the general ledger accounts (both revenue and capital) contained in the ledger of a business. This list will contain the name of each nominal ledger account and the value of that nominal ledger balance. Each nominal ledger account will hold either a debit balance or a credit balance. The debit balance values will be listed in the debit column of the trial balance and the credit value balance will be listed in the credit column.
This is a strong secondary form of evidence that the accounts receivable outstanding at the end of the reporting period being audited were in existence at that time. Documents created by the organization and requested from the organization by the internal auditor. They enable the auditor to advice his client regarding the improvement of the system of internal check and efficiency of the accounting system. Papers that document the evidence gathered by auditors to show the work they have done, the methods and procedures they have followed, and the conclusions they have developed in an audit of financial statements or other type of engagement.
The documents are to be preserved for sufficient length of time in order to satisfy the needs of auditor and professional requirements of record retention. The auditor has to maintain the confidentiality of the affairs of the client. Procedures performed by the auditor to detect material misstatements in account balances, classes of transactions, and disclosures. The risk that the auditors may unknowingly fail to appropriately modify their opinion on financial statements that are materially misstated.
Types of Working Papers
- The PCAOB establishes auditing and related professional practice standards for registered public accounting firms to follow in the preparation and issuance of audit reports.
- A current audit file contains information regarding audit conducted for the current period.
- Audit working papers also include the words or excel files that auditors used to documents the client’s key internal control over financial reporting, nature of the business, as well as audit test’s working paper.
The total on the lead schedule should agree with the final balance in the financial statements. A lead schedule (also called a lead sheet) is a document that serves as a summary and index of the make-up of financial statement line items and related note disclosures.
While there are many different types of working papers, three of the most common are interview summaries, worksheets, and reperformance documents. Each of these working papers document a different type of audit evidence and test, but all should include some basic information. The source of the data/information, explanation of the test or analysis conducted, name of the auditor conducting the test, date the test was done, results, and conclusions should always be included in each working paper. Reperformance working papers are typically copies of financial statements with handwritten reperformance calculations. To ensure that financial statements – not just the basic income statement and balance sheet, but also supporting schedules – are accurate, auditors may make a copy of those statements and then recalculate the totals.
Select a sample of major vendors and send negative confirmations to validate that they actually provided goods or services. They are not a part of, nor substitute for, the client’s accounting records. Working papers are to be retained in the safe custody of an auditor. The client’s staff or third parties should not have access to working papers.
Working papers support the final audit report by providing summaries of evidence and conclusions used to make the recommendations and form the opinions issued in the final report. While the finished product of an audit engagement is a well-written and clear audit report, working papers are the most important documents in an audit.
Also, the auditor might also obtain the papers that prepare by audit clients as well as from the third party. In general, audit working papers are obtained or prepared by audit staff or audit assistant. These documents are then reviewed by another auditor that has more experience as well as an authority such as audit managers or audit partners. The documents that auditors use to documents client nature of the business, perform client due diligence, as well as assessment, are the example of audit working papers. For example, the auditor has an engagement with a company to audit the financial statements.
Audit working papers are sometimes referred to audit documents that they are very imported part of audit works. These documents are evidence that supports auditors to make their conclusion on the financial statements. The reliability of documentary evidence depends to a large extent on its origin and the route it follows before being examined by the internal auditor.
A recent fact-finding mission to Czech Republic, following up on reports of possible irregularities regarding the management and distribution of EU cohesion and agricultural funds, will also be discussed. 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. 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.
They show their work on the copy of the financial statement and then save that as a working paper. Auditor required, as per standard, to make sure that all are sufficient and appropriate audit documents are obtained and they could prove this to the relevant parties by documenting, recording, and keeping audit working papers. Documents sent directly from a third party to the internal auditor are less reliable than documents created by the organization. If customers do not return confirmations to the auditor, the auditor may go to considerable lengths to obtain the confirmations, given the high quality of this form of evidence. If there is no way to obtain a confirmation, then the auditor’s next step is to investigate subsequent cash receipts, to see if customers have paid for those invoices that were not confirmed.
Which of the following applications of GAS would be most effective in addressing the auditor’s concern? List all purchases over $10,000 to determine whether they were properly approved. Take a random sample of all expenditures under $10,000 to determine whether they were properly approved c. Select a sample of major vendors and examine supporting documentation for goods or services received d.
What are some common types of working papers?
Work papers. Work papers are the collection of documents assembled by an auditor while examining the financial records of a client. Work papers provide the evidence upon which an auditor’s opinion regarding a client’s financial records is based.
Content of Working Papers
Working papers are connecting link between the client’s records and audited financial statements. 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.
What is the purpose of working papers?
While there are many different types of working papers, three of the most common are interview summaries, worksheets, and reperformance documents. Each of these working papers document a different type of audit evidence and test, but all should include some basic information.
Working papers also may be in the form of data stored on tapes, films, or other media. A lead schedule shows the general ledger (GL) accounts that are included in each financial statement line item and note disclosure. There would normally be one lead schedule for each financial statement line item or group of related line items.
The rate of document drift depends on the structure of the original document, or original intent of such document, or guidelines for modifying such document. An internal auditor is concerned that fraud, in the form of payments to fictitious vendors, may exist. Company purchasers, responsible for purchases of specific product lines, have been granted the authority to approve expenditures up to $10,000.
It is called a “lead schedule” because traditionally it was the front page in the relevant section of a file, cross referenced to supporting working papers and documentation filed behind it. Audit standards require that auditors ”document sufficient, reliable, relevant, and useful information to support the engagement results and conclusions.” This is done by developing comprehensive working papers for each audit engagement.