AUDIT DOCUMENTATION/WORKING PAPERS

The sufficient appropriate evidence required by the professional standards must be clearly documented in the
auditor's working papers. Working papers are records kept by the auditor that documents the audit procedures
applied, information obtained and conclusions reached.

(so as an auditor ginagamit natin yung audit documentation or working papers to document the information gathered
during an audit, nandun nakapaloob yung principal record of auditing procedures applied, evidence obtained, and
conclusions reached by the auditor in the engagement)

NEXT

Functions of the working papers

Working papers are prepared primarily to:

1. Support the auditor's opinion on financial statements;

2. Support the auditor's representation as to compliance with PSA; and

3. Assist the auditor in the planning, performance, review and supervision of the engagement.

(mahirap nga naman kung bigay lang ng bigay si auditor ng opinion without substantial evidence. In this regard, it is also
important that the auditor takes into consideration the audit assertions to give an opinion based on their professional
judgment with substantial evidence. Documents like the audit working paper provide a record of evidence and audit
findings that helps in the drafting of a final audit report with clear recommendations) SO YUN PO PARANG MAIN
FUNCTION NI WORKING PAPERS,

Secondarily, working papers also assist the auditor in:

1. planning future audits;

2. providing information useful in rendering other services (MAS or tax consultancy); and

3. providing adequate defense in case of litigation.

MANAGEMENT ADVISORY SERVICE

(so ayun maaari ding magamit ang working papers as a reliable guide for planning future audit assignments also to
support and evidence of the findings of the audit which is essential for establishing a future plan of action)

NEXT

(It is neither necessary nor practicable to document every matter the auditor considers during the audit)

Form, content, and extent of documentation

The form, content, and extent of documentation depend upon factors such as:

1. The size and complexity of the entity;

2. The nature of the audit procedures to be performed (that is, a test of controls or substantive procedure);

3. The identified risks of material misstatement;

4. The significance of the audit evidence obtained;

5. The nature and extent of exceptions and deviation specified; and

6. The audit methodology, technique, and tools used.

(so sa pag aapply po natin sa mga factors na ito na dedertemine natin kung yung nature and extent ng ating audit
documentation ay sapat or adequate)

NEXT

Although audit documentation depends upon the auditor's judgment, the following important items would normally
require audit documentation:

1. Discussions of significant matters with management and others in a timely manner.

2. In exceptional circumstances, when the auditor judges it necessary to depart from a basic principle or an essential
procedure that is relevant in the circumstances of the audit, the auditor should document how the alternative audit
procedures performed achieve the objective of the audit, and, unless otherwise clear, the reasons for the departure.

3. In documenting the nature, timing and extent of audit procedures performed, the auditor should record:

(a) Who performed the audit work and the date such work was completed, and

(b) Who reviewed the audit work performed and the date and extent of such review

#2 (dito sa pangalawa may mga pagkakataon kasi kung saan yung auditors judges necessary to depart from basic
principle or an essential procedure that is relevant in the circumstances of the audit, sa ganung pangyayari dapat
ipaliwanag ni auditor or i document nya how the alternative audit procedures performed achieve the objective of the
audit, and, unless otherwise clear, the reasons for the departure or dun sa hindi nya pagsunod sa basic principle)

#3(inaalam natin ito para if ever may madetect tayong material mistatements alam natin kung sino yung nag performed
at nag review ng audit work at kung kailan)

NEXT

Classification of working papers

In a continuing engagement, working papers are typically classified into permanent file or current working paper file

Permanent file contains information of continuing significance to the auditor in performing recurring audits. This file
would most likely include:

• copies of the articles of incorporation and by-laws,

• major contracts,

• engagement letters,

• organizational charts,

• analyses of long-term accounts such as plant assets, long-term liabilities and stockholders' accounts, and

• internal control analysis.

Current file contains evidence gathered and conclusions reached relevant to the audit of a particular year. This file
would normally include:

• a copy of the financial statements,

• audit program,

• working trial balance,

• lead schedules,

• detailed schedules, and

• correspondence with other parties such as lawyers, customers, banks, and management.

(so itong mga audit file na to ay collection of audit working papers in a folder or other storage media. Yung ibang mga
audit firms gumagamit sila physical audit files, while others may keep them electronically)

( There are several differences between permanent and current audit files. These differences are apparent from the
definition of both files as above. Kapag sinabing permanent audit files it contain long-term information about the client.
In contrast, current audit files include the latest information that is usually short-term. The information contained in
current audit files usually changes from one period to another.

Current audit files contain information that relates to a specific audit engagement. Therefore, they will include
information, such as current year adjustments, working papers, significant audit findings, audit evidence, etc. Permanent
files do not relate to a specific period or engagement. Therefore, its content will usually include engagement letters,
client questionnaires, memorandum and articles, long-term contracts, shareholder agreements, board meeting minutes,
etc.)

NEXT

Ownership of working papers

Working papers are the property of the auditor and the client has no right to the working papers prepared by the
auditor. Working papers may sometimes serve as a reference source for the client (at the discretion of the auditor)
but they should not be considered as part or as a substitute for the client's record.

(so malinaw naman na sinasabi na ang working papers ay property ni auditor pero kahit kinikilala natin ito na property ni
auditor ito ay subject to ethical limitations relating to the confidential relationship with clients)

NEXT

SO YUN NGA LIKE WHAT I SAID EARLIER

Confidentiality of working papers

Although the working papers are the personal property of the auditor, these working papers cannot be shown to third
parties without the client's permission. However, in some instances the duty of confidentiality is overridden by the
statute of law. For example, the auditor can disclose confidential information to third parties even without the client's
consent under the following circumstances:

• When disclosure is required by law or when the working papers are subpoenaed by a court, or

• When there is a professional right to disclose information such as when the auditor uses the working papers to
defend himself when sued by the client for negligence

(Nirerequire kasi ng The Code of Ethics for Professional Accountants ang mga CPA na respetuhin ang confidentiality ng
mga information na na obtained during the course of performing professional services)

NEXT

Retention of working papers

Working papers should be retained by the auditor for a period of time sufficient to meet the needs of his practice and
to satisfy any pertinent legal requirements of record retention.
(based on my research the retention period for audit engagements ordinarily is no shorter than five years from the date
of the auditor's report)

NEXT

Guidelines for the preparation of working papers

KATULAD NETO YUNG PAG GUMAGAWA TAYO NG LETTER MADALAS MAY FORMAT AND GUIDELINES TAYONG
SINUSUNOD

Working papers should be properly organized to facilitate their review. The following techniques may be used by the
auditor when preparing working papers.

• Heading

Each working paper must be properly identified with such information as the name of the client, type of working
paper, a description of its content, and the date or period covered by the examination.

• Indexing

Indexing refers to the use of lettering or numbering system (for example "A" for Cash lead schedule) Each working
paper must be indexed to aid in cross-referencing essential information

• Cross-indexing/ cross referencing

is important to provide a trail useful to supervisors in reviewing the working papers.

• Tick marks

Working papers must include symbols that describe the audit procedures performed.

FOR US TO CLEARLY VISUALIZE PAANO ISTURA NG WORKING PAPERS MERON TAYONG EXAMPLE

NEXT SLIDE PO

SO AYAN MAKIKITA NATIN SA TAAS UNG HEADLINES, AND SOME OF THE GUIDELINES I’VE MENTION EARLIER

SO NEXT SLIDE

So ayan mag momove on na tayo sa working papers dito na tayo sa

ATTENDANCE AT PHYSICAL INVENTORY COUNT

If inventory is material to the financial statements, the auditor is required under PSA 501 to attend at physical
inventory counting, and to test the accuracy of the entity's final inventory records. Attendance at physical inventory
counting involves:

• Inspecting the inventory to ascertain its existence and

• evaluate its condition, and performing test counts;

(Therefore yung attendance po na iyon enables the auditor to inspect the inventory, para ma observe din ni auditor yung
compliance with the operation of management's procedures for recording and controlling the results of the count and to
provide audit evidence as to the reliability of management's procedures.)
Physical Count Conducted Before or After Yearend

In some instances, the physical inventory count is conducted at a date other than the date of the financial statements.
When this occurs, the auditor should perform additional audit procedures to obtain audit evidence about whether
changes in inventory during the intervening periods are properly recorded.

(These procedures would normally involve testing the effectiveness of the design, implementation and maintenance of
controls designed to ensure that all inventory transactions are captured and recorded accurately)

NEXT

Attendance at Physical Count is Impracticable

There may be cases when attendance at physical inventory count may be impracticable. This may be due to factors
such as the nature and location of the inventory. If attendance at physical inventory counting is impracticable, the
auditor should perform alternative audit procedures to obtain sufficient appropriate audit evidence regarding the
existence and condition of inventory

(halimbawa neto is yung inventory warehouse na pupuntahan dapat ni auditor ay kasalukuyang may nagaganap na
digmaan or may bagyo that may pose threats to the safey ni auditor kaya it is impracticable na makasama sya sa physical
counting of inventory)

(kung hindi man sya makakapunta dapat may alternative audit procedures parin For example, inspection of
documentation of the subsequent sale of specific inventory items purchased prior to the physical inventory counting,
may provide sufficient appropriate audit evidence about the existence and condition of inventory.)

Inventory held by a third party

If inventory is under the custody and control of a third party and the auditor believes it is material to the financial
statements, the auditor should obtain sufficient appropriate audit evidence regarding the existence and condition of
that inventory by obtaining confirmation from the third party and/or inspecting documentation regarding inventory
held by third parties, such as, delivery receipts or receiving reports.

(so ayon best example neto is yung consignment of inventory kung saan nasa kostodiya ng inventory nakay third party)

NEXT

AUDITING ACCOUNTING ESTIMATES

As defined by PSA 540, 'accounting estimate' means an approximation of the amounts of an in the absence of a
precise means of measurement. Accounting estimates are often made in conditions of uncertainty regarding the
outcome of events that have occurred or are likely to occur and involve the use of judgment. Examples include:

• Allowance for credit losses,

• Warranty obligation,

• Inventory obsolescence,

• Depreciation and amortization,

• Loss contingencies

(so yan po yung ilan sa mga halimbawa ng accounting estimate, responsibleang management for making accounting
estimates included in the FS, ang responsibility ni auditor ay mag obtain ng sufficient appropriate evidence kung yung
accounting estimates ba ay properly accounted for and disclosed at reasonable in circumstances)
The auditor should obtain an understanding of the procedures and methods, including the accounting and internal
control systems, used by management in making the accounting estimates. The auditor can obtain satisfaction about
the reasonableness of the accounting estimates through:

1. Review and test the process used by management to develop the estimate.

2. Make an independent estimate

3. Review subsequent events which confirm the estimate made.