4.2. General principles for documenting the audit
Unified requirements for the preparation of working audit documentation by audit organizations or auditors working independently as an individual entrepreneur are established by the federal rule (standard) of audit activity No. 2.
The audit organization and the individual auditor must document all information that is important in providing evidence supporting the audit opinion, as well as evidence that the audit was conducted in accordance with federal auditing standards (standards).
The term documentation means working documents and materials prepared by the auditor and for the auditor, or received and kept by the auditor in connection with the audit. Working papers can be presented in the form of data recorded on paper, film, in electronic form or in another form.
Working documents are used:
- when planning and conducting an audit;
- when performing current monitoring and verification of the work performed by the auditor;
- to fix the audit evidence obtained in order to confirm the opinion of the auditor.
The auditor should prepare working papers in a sufficiently complete and detailed form necessary to provide a common understanding of the audit.
The auditor should reflect in the working documents information on the planning of the audit work, the nature, timing and extent of the performed audit procedures, their results, as well as conclusions based on the audit evidence. The working documents should contain the justification by the auditor of all the important points on which it is necessary to express their professional judgment, together with the auditor's conclusions on them. In cases where the auditor has considered complex issues of principle or expressed professional judgments on any important matters for auditing, the working documents should include facts that were known to the auditor at the time of the formulation of the conclusions and the necessary arguments.
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The auditor has the right to determine the scope of documentation for each specific audit, guided by his professional opinion. The reflection in the documentation of each document or issue considered by the auditor during the audit is not necessary. However, the scope of the audit documentation should be such that in the event that it becomes necessary to transfer work to another auditor who does not have experience in this task, the new auditor would be able to exclusively on the basis of this documentation (without resorting to additional conversations or correspondence with the former auditor) to understand the work done and the reasonableness of the decisions and conclusions of the previous auditor.
The form and content of working papers are determined by such factors as:
- the nature of the audit task;
- requirements for the audit report;
- the nature and complexity of the entity's activities
- the nature and condition of the accounting and internal control systems of the audited entity;
- the need to instruct the auditor's employees, monitor them and check the work performed by them;
- the specific methods and techniques used in the audit process.
Working documents should be drafted and systematized in such a way as to respond to the circumstances of each specific audit and the needs of the auditor during this process. In order to improve the efficiency of preparation and verification of working documents, it is recommended to develop standard forms of documentation in the audit organization (for example, the standard structure of the audit file (folder) of working documents, forms, questionnaires, sample letters and addresses, etc.). This standardization of documentation facilitates the assignment of work to subordinates and simultaneously allows reliable monitoring of the results of their work.
To improve the effectiveness of the audit, it is allowed to use during the audit the charts, analytical and other documentation prepared by the audited person. In these cases, the auditor is obligated to ensure that such materials are properly prepared.
Working documents usually contain:
- information relating to the organizational and legal form and organizational structure of the entity being audited;
- extracts or copies of necessary legal documents, agreements and protocols;
- information about the industry, economic and legal environment in which the entity being audited carries out its activities;
- information reflecting the planning process, including audit programs and any changes to them;
- evidence of the auditor's understanding of accounting and internal control systems;
- evidence supporting the assessment of inherent risk, the level of risk of controls and any adjustments to these estimates;
- evidence supporting the fact of the auditor's analysis of the audited entity's work on internal audit and conclusions drawn by the auditor;
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- analysis of financial and economic operations and balances on accounts of accounting;
- analysis of the most important economic indicators and trends of their change;
- information about the nature, timing, scope of audit procedures and the results of their implementation;
- evidence that the work performed by the auditor's employees was carried out under the supervision of qualified specialists and was verified;
- information about who performed the audit procedures, indicating the time of their execution;
- details of the procedures applied to the financial statements of the units and/or subsidiaries that have been audited by another auditor;
- copies of messages sent to other auditors, experts and third parties and received from them;
- copies of letters and telegrams on audit issues brought to the notice of the audited person or discussed with them, including the terms of the audit agreement or identified significant weaknesses in the internal control system;
- written statements received from the audited entity;
- the conclusions made by the auditor on the most important audit issues, including mistakes and unusual circumstances that were identified by the auditor in the course of performing the audit procedures, and information on the actions taken in connection with this auditor;
- copies of financial (accounting) statements and an audit report.
In the case of audits for a number of years, some files of working documents (folders) can be categorized as permanent, updated as new information is received, but remaining still significant, unlike current audit files (folders), which contain information related mainly to the audit of a particular period.
The auditor should establish appropriate procedures to ensure the confidentiality, integrity working papers, as well as to store them for a sufficient period of time, based on the characteristics of the auditor activity, as well as legal and professional requirements, but not less than five years.
Working documents are the property of the auditor. Although some documents or extracts from them may be provided to the audited entity at the discretion of the auditor, they can not serve as a substitute for the accounting records of the audited entity.
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