Table of Contents
Purpose of Audit Working Papers
The following are the purposes of Audit working papers:
1. Working papers represent the volume of work performed by the auditor and his staff. Hence, they enable the easy drafting and preparation of a detailed audit report.
2. The various minute details and aspects of the audit report can be well substantiated based on the findings summarized in the report.
3. They become a valuable documentary evidence for the auditor on the occasions when he has to defend himself against the charges of negligence, etc. leveled against him.
4. They enable auditor to coordinate and organize the work of audit clerks.
5. They enable the auditor to advice his client regarding the improvement of the system of internal check and efficiency of the accounting system.
6. They serve as a guide to the auditor in subsequent examinations and help the auditor to plan for the succeeding year.
7. They serve as a means to give training to the audit clerks to summarize the work done by them.
Essentials of Good Working Papers
The essentials of good working papers are as follows:
1. Working papers should be complete in all respects. They should contain all necessary information so that they may be of maximum use.
2. They should be properly organized and arranged so that one may not experience any difficulty in locating a particular matter.
3. They must contain accurate information so that they will be relied upon.
4. They should contain the facts, which are of self-explanatory.
5. The facts given in working papers should be readily apparent to the reader.
6. The relevant details should always be kept in the working papers. All irrelevant information should be kept out of the space in order to enhance their utility for the purpose for which they are kept.
7. The audit working paper files should be properly preserved and filed. These files should be serially numbered and indexed so that they may be made available whenever they are needed.
8. Paper used for the preparation of working papers should be of better quality and uniform size.
9. Sufficient space should be left after each note so that any decision taken by an auditor may be written in that space.
Preservation of Audit working papers
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. 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.
Ownership of Audit working papers
The working papers are the matters documented by the auditor. So they are his property. Although, the client may claim them as a record of his business matters, the auditor cannot part with them as his conclusions are based on them and as they provide evidence of the audit work carried out according to the basic principles.
The legal observation in the case of Sockockinsky Vs Bright Grahame & Co. is that
“The working paper belongs to the auditor not to the client, as the auditor is an independent contractor and not the agent of the client”.
Similarly the Court of Appeal in the case of Chantrey Martin & Co. Vs Martin held that
“The working papers prepared by the auditor are the property of the auditor”.
Thus, the working papers are the property of the auditor. They are not a part of, nor substitute for, the client’s accounting records.