Session 11

[Vivienne]

You are the Partner in charge of Ellen PLC.The audit senior who conducted the audit presents you with the files on completion of the audit for the year ended 31/03/20X7.

Required:

a)For what purposes do auditors prepare and retain working papers.(10marks)

b)List the categories of items that will be included in a complete set of audit working papers.(4marks)

c)What is a Current and Permanent file and list their contents.(6marks)

[ratie]

You are the Partner in charge of Ellen PLC.The audit senior who conducted the audit presents you with the files on completion of the audit for the year ended 31/03/20X7.

Required:

a)For what purposes do auditors prepare and retain working papers.(10marks)

b)List the categories of items that will be included in a complete set of audit working papers.(4marks)

c)What is a Current and Permanent file and list their contents.(6marks)

a)Auditors prepare and retain working papers for the following reasons:-
-evidence obtained from working papers will be as the papers for the auditors opinion
-the auditor will obtain a assurance tha the evidence obtained is sufficient
-the audit will be carried out efficiently and effectively
-the working papers are kept so that matters of continous relevence will be used in the next audit
-If new auditors are to appointed the working papers of previous auditors will be used


I am running out of time so I will have to continue with the answer tommorrow.

Ratie

[Vivienne]

a) For an auditor to be able to maka an opinion on financial statements he should have sufficient evidence .this evidence is collected in the form of working papers

the auditor prepares working papers for the purposes of
i)show evidence of work carried out
audit clerks need to show evidence to their superiors that the audit was carried out
ii) sometimes evidence that work was carried out may need to be provided in a court of law.
iii)it also enables the evidence to be available in the final audit review stage so that it can be shown whether the accounts show a true and fair view.

Working papersare normally retained by the auditor for at least a period of 5 years from the completion of the audit.

auditors need to retain the working papers because the information may still be required for tax purposes.

working papers are also retained in order for auditors to refer to if they still audit the same client in the next audit

they could also be retained in case they are required to be produced in the court of law.


b)the working papers will include these categories

audit planning
details of client systems and records
schedules in support of the accounts


c) A current file is a file that contains matters that relate to the current years audit.
it will contain
i)a copy of accounts being audited
ii)an index to the file
ii)an audit program
iv)letters of representation

A permanent file usually contains documents which will be required for more than one audit
it contains
i)rules and regulations of the company eg memorandum and articles of association
ii)addresses of registered office of client
iii)list of books and other records and where they are kept.
iv)an outline history of the organisation.

[ratie]

You are the Partner in charge of Ellen PLC.The audit senior who conducted the audit presents you with the files on completion of the audit for the year ended 31/03/20X7.

Required:

a)For what purposes do auditors prepare and retain working papers.(10marks)

b)List the categories of items that will be included in a complete set of audit working papers.(4marks)

c)What is a Current and Permanent file and list their contents.(6marks)

a)ISA 230 (Audit Documentation) has set out ten standards which deal working papers and these state why auditors should prepare and retain working papers.These are as follows:
-The auditor should prepare on a timely basis audit documents that provide sufficient and appropriate record of the auditors' report and that the audit was carried out according to ISA's and applicable legal and regulatory requirements.
-The auditor should prepare audit documentation to enable an expeienced auditor having no previous connection with the audit to understand the nature,timing and extent of the audit procedures perfomed to comply with ISA's and regulatory requirements
-In documenting the nature,time and extent of audit procedures perfomed the auditor should record the identifying characteristics of the specific items or matters being tested.
-The auditor should document discussions of significant matters with management
-If auditors identified contradictions in audiotrs final conclusion regarding a significant issue the auditor should document how the auditor addressed thecontradiction in forming the final conclusion.
-The auditor should document has an alternative procedure performed to achieve the audit objectives.
- In documenting the nature,timing and extent of audit,the auditor should record who perfomed and reviewed the auditor and the date the work was perfomed and reviewed
-The standard also requires the auditor to complete assembling of the audit file on time after the date of auditors' report.
- The standard also states that after assembling of audit file is complete the auditor should not delete audit documentation until after the retention period.

b)Items that will be included in a complete set of working papers are:
-the name of the client
-period covered by the audit
-subject matter
-file reference
-initials of member of staff who prepared the working papers
- initials of member of staff who reviewed the working paper
c)A current file contains information which will be of continous importance and a permanent file is the one which has information which is permanent about the client and this includes the articles association

I am ready to be corrected.

ratie

[sash_lar]

a) During the audit assignment of Ellen PLC information was acquired by way of interviews, risk analysis and reviews of the controls in place. All these would be documented within the auditor’s working papers.
Working papers essential is a file that includes:
Interviews notes
Organizational charts
Documentations of control
Risk analysis
All documents acquired during the audit – schedules, letters etc.
It would also include the auditor’s analysis
Therefore working papers provides evidence of work done and the procedures followed. It provides the basis on which an audit senior can evaluate work performed.
Working papers should be so documented that whatever conclusion drawn, the audit senior would be able to drawn that same conclusion. Therefore it should include sufficient evidence.
Working papers are retained to provide the basis on which conclusions were drawn. It was also verifies the work performed by the auditor and the senior auditor. It documents evidence that may be required in a litigation case brought against the firm be conclusion drawn. It provides the basis on which follow-up can be done.

b) Audit working paper
Audit Plan
Audit procedure
Audit analysis
Audit Report

c) Current working file
This entails documents and information that has been acquired during the audit process of areas. These would include:
Interview Notes
Analysis
Letter of representation and confirmation
Schedules

Permanent working file
This entails the overall information of the audit client such as:
Organisational charts
Name, position and signatures of specific employee
Risk analysis of the client
Copies of documents such as engagement letters
Audit plan
Rules and regulations

[Annie]

You are the Partner in charge of Ellen PLC.The audit senior who conducted the audit presents you with the files on completion of the audit for the year ended 31/03/20X7.

Required:

a)For what purposes do auditors prepare and retain working papers.(10marks)

b)List the categories of items that will be included in a complete set of audit working papers.(4marks)

c)What is a Current and Permanent file and list their contents.(6marks)

Answer
a) The auditor has to have sufficient evidence to support his opinion expressed on the financial statements. The evidence gathered in the course of his audit procedures or his working papers which contains all the details should be retained by the auditor, because at any point of time he might be questioned for his opinion and he should have the evidence to justify his opinion. The working papers empower him to give the explaination. This is one main reason, the other reasons are these working papers help him plan for the next audit (if he gets the audit engagement for the next financial year). This working papers may also act like a guide to a new team of auditors who would be assigned this task in the same firm.
The audit documentation would also facilitate the auditor in discovering whether the audit plan was complet and organised, reference pint is availabel for review during the audit and after the completion of the audit.
It also facilitates the auditor in supervising the work of his subordinates and review their audit work.
The working papers helps the auditor to discuss the matters with the management befor the issue of the audit report or commencing a plan.

The working papers may help the auditor in placing his defence in the court of law in case he is sued for negligence.

b) Audit documentation may be recorded on paper or an electronic or other media. It should include:
the planning and preparation of audit objectives
audit programme
audit steps performed and audit evidence gathered
any report issued as a result of teh audit work
This will include audit programmes, analyses, issues memorandum, summaries of significant matters, letters of confirmation and representation, checklists and correspondence concerning significant matters.

c) A permanent file is also calles as an audit file and it generally contains
legal papers and documents
certified copies of MOA, AOA and other deeds (like leases, agreements, contracts)
Extracts of various material agreemnts
Extracts of minutes from the minutes books

organisation chart - holding and subsidiary details
managemnt set up - list of directors, executeives etc
relevant details about personnels
Accounts department and the books maintained

Information about internal control system
Evaluation of the internal control system
List of books and registeres maintained

Approved financial statemnets
Tax returns and tax proceedings
copy of auditors report to shareholders / appointing auditors

The current file Papers are related with accounts being audited and is generally for immediate purpose.

Assistanst on specific tasks of audit
date of work commenced and completion
review of their work
internal control questionnaire and managments reply
audit programmes performed
working papers of the assitants and remarks
previous years auditors report
working trial balance
Adjustmnet entires
audit notes
Lists of statements checklists, scehedules confirmations etc
queries and their replies
draft final accounts
draft auditors report



Annie