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fam Chapter 13 22092005

fam Chapter 13 22092005

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financial audit manual
financial audit manual

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Published by: Humayoun Ahmad Farooqi on May 17, 2010
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06/29/2011

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13.DOCUMENTATION AND WORKINGPAPERS
13.1The Need for Documentation and Working Paper Files
13.1.1Auditors must have a strong commitment to high professional standards inthe collection and documentation of evidence to support the audit work.Audit supervisors must ensure that a high quality of documentation isalways maintained.13.1.2The auditor’s documentation, in the form of audit files, is referred to as the“Working Papers”. The audit files should be complete in themselves.Reference to external sources of evidence is not normally consideredsufficient. Therefore the auditor should keep extracts of the relevantexternal documentation in the working paper file. Working papers areusually maintained in three categories:a)Permanent file;
b)
Current file; andc)Briefing file.13.1.3Permanent files typically contain information that can be useful to theauditor for several assignments at the audit entity, whereas current filesusually contain the supporting documentation for a specific audit.13.1.4Each current file should be kept for a specified time after the completion of the audit, after which it should be archived in accordance with DAGPrecords management policies. The permanent file remains permanentlywithin DAGP but is updated each time an audit is conducted within the areato which it applies.13.1.5In addition, the auditor should maintain a briefing file for the section withinthe Annual Report covered by the particular audit. The briefing filecontains extracts from the other files to provide complete, but concise,support for all contents included in the Annual Report. This is used to provide support to the AG and other officials of DAGP when appearing before the PAC. All statements contained in the Annual Report should becross-referenced to the specific evidence that supports each statement,including background description, financial information, facts and statistics.
13.2The Purpose of Working Paper Files
13.2.1Working paper files are maintained to:a)Provide evidence to support all matters included in the audit report; b)Demonstrate adherence to auditing standards and procedures;c)Aid supervision of the work;d)Facilitate review of work performed; and
Audit Manual – Chapter 13
13-1
Ensure that ahigh quality of documentationis alwaysmaintained.Working papersshould becomplete inthemselvesMaintain abriefing file tosupport the AGand other officials of DAGPwhen appearingbefore the PAC.
 
e)Assist in planning the subsequent audit assignment (with backgroundinformation, key issues identified in previous audits, and matters for followup).
13.3The Quality of Working Paper Files
13.3.1Good working papers contribute to the efficiency and effectiveness of theoperations of DAGP. By contrast, poor working papers can:a)Reduce the likelihood of including all pertinent findings in the audit report; b)Lead to inaccurate/incomplete findings and erroneous conclusions in theaudit report;c)Hinder the review of the audit work and supervision of the audit;d)Compromise the audit as a whole; ande)Endanger DAGP’s reputation.13.3.2Every auditor has a professional responsibility to maintain high qualityworking papers. The working papers are the ultimate evidence of thequality of the auditor’s work.
Standards and Characteristics of Proper Working Papers
13.3.3Audit offices normally have a records management manual describing thestructure, use, review, maintenance, storage and disposal of working papers. The filing systems, filing codes, rules for access and safekeepingshould be defined and the auditor should comply with these standards.13.3.4There should be standards regarding the form and content of working paper files. The existence of standards helps to ensure uniformity in filingmaterial, which makes it easier for a new auditor on the assignment, or amore senior auditor conducting a review of the files, to access theinformation on file.13.3.5DAGP’s documentation standards require the auditor to ensure that all auditevidence, including the process used to obtain it and the conclusionsderived from it, are properly documented in audit working papers.13.3.6As well as evidence to support the audit report, the files should also includematerial on:a)The audit plan (including risk assessments and other rationale for auditscope decisions, and audit programmes); b)The management of the audit (including assignment of responsibilities,scheduling and budgeting of the work, minutes of team meetings, changesto audit programme, checklists, list of personnel interviewed, notes on allinterviews, meetings and physical inspections);c)Evidence of reviews of audit files and audit work;d)Audit work even if not included within the audit report (such as evidence of evaluations of internal controls);
Audit Manual – Chapter 13
13-2
Every auditor has a professionalresponsibility tomaintain quality working papers.
 
e)All correspondence relating to the audit; andf)Any other material that explains the decisions, activities and results relatingto the audit.13.3.7All follow up work should be cross referenced to the audit working papers.
Form and Content of Working Paper Files
13.3.8
Current File.
The Current working paper file should include:a)Information concerning the government programme(s), the industry,economic environment and legislative environment within which the entityoperates. b)Evidence of the planning process including audit programmes and anychanges thereto.c)Evidence of the auditor’s understanding of the accounting and internalcontrol systems and programme performance.d)Evidence of inherent and control risk assessments and any revisionsthereof.e)Analyses of transactions and balances.f)A record of the nature, timing and extent of audit procedures performed andthe results of such procedures.g)Evidence that the work performed by junior auditors was supervised andreviewed.h)An indication as to who performed the audit procedures and when theywere performed.i)Copies of communication with experts and other third parties. j)Copies of letters or notes concerning audit matters communicated to or discussed with the entity.k)Copies of the auditor’s report.13.3.9
 Permanent File.
 
The permanent audit file includes information that will beof continuing importance to the audit activity in the particular area of audit.This may include:a)Copies of relevant government legislation, regulations, guidelines and otherules affecting operations. b)Role of entity, Vision and Mission Statements, most recent corporate plan.c)Copies of the Estimates, kept up-to-date.d)Copies of long-term contracts/leases.e)Loan agreements, schedules of amortisation for debts and special assets.f)Extracts of minutes.g)Reports to management and management’s response.
Audit Manual – Chapter 13
13-3
The permanent audit fileincludesinformation that will be of continuingimportance.

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