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Chapter 14

PSA 230 (Redrafted), “Audit Documentation”

establishes standards and provides guidance regarding

audit documentation in the context of the audit of FS.

The standard on documentation requires that the auditor

should prepare on a timely basis, audit documentation
that provides:
(a) A sufficient and appropriate record of the basis for
the auditor’s report;
(b) Evidence that the audit was performed in accordance
with PSAs and applicable legal and regulatory
“Audit documentation” means the record of audit procedures performed,
relevant audit evidence obtained, and conclusions the auditor reached (terms
such as “working papers” or “work papers” are also sometimes used.

“Audit file” means one or more folders or other storage media, in physical or
electronic form, containing the records that comprise the audit documentation
for a specific engagement.

“Experienced auditor” means an individual (whether internal or external to the

firm) who has practical audit experience, and a reasonable understanding of:

(i) audit processes,

(ii) PSAs and applicable legal and regulatory requirements,
(iii) the business environment in which the entity operates, and
(iv) auditing and financial reporting issues relevant to the entity’s industry.
Audit working papers are records kept by the auditor of the
procedures applied, the tests performed, the information
obtained and the pertinent conclusions reached in the

The primary objective of audit documentation is preparing

sufficient and appropriate audit documentation on a timely basis
to help enhance the quality of the audit and to facilitate the
effective review and evaluation of the audit evidence obtained
and conclusions reached before the auditor’s report is finalized.
Types of Working Papers

1. Audit administrative working papers

2. Working trial balance and lead schedule

3. Supporting schedules and analysis

4. Adjusting and reclassifying entries

5. Audit memoranda and documentation of corroborating information

1. Audit Administrative Working Papers
These are working papers designed to aid the auditors in the planning
and administration of engagements. These include audit plans and
programs, internal control questionnaires and flowcharts,
engagement letters, and time budgets.

Audit program is a detailed list of procedures to be performed in an

audit engagement.
Types of Audit Programs:
1. Standard all-purpose audit program
- lists standard practices applicable to almost every engagement

2. Tailor-made audit program

- lists the procedures to be followed on a specific on a specific audit engagement,
indicating any departure from normal practices and specifying the extent of the tests of
3. Modified standard from audit program
- a preprinted program that outlines the usual audit procedures common to most businesses
and provides space for an auditor to indicate other specific procedures applicable to the
business under examination.
2. Working Trial Balance and Lead Schedules
WORKING TRIAL BALANCE is a list of the accounts in the client’s general
ledger with columns that, as a minimum include unadjusted amounts
directly from the client’s accounting records, proposed adjusting entries, and
adjusted (audited) amounts.
Types of WTB:
a. Working Trial Balance in One Section
-Ten-column worksheet with headings provided.

b. Working Trial Balance in Two Sections

-Eight-column worksheet divided into two sections segregating the balance sheet accounts from
the earnings statement accounts, each section being balanced separately.

c. Working Trial Balance in Four Sections

-Eight-column worksheet where the BS section is divided into two parts, one for assets and the
other for equities while the earnings statement section is divided into profit and loss credits
section and profit and loss debits section.

d. Working Trial Balance in Multiple Section

-Eight-column worksheet where the trial balance is sectionalized into significant groupings of
distinct elements of financial position and results of operations.

LEAD SCHEDULE or TOP SCHEDULE is a working paper that shows the grouping
of related account balances.
3. Supporting Schedules and Analyses
SUPPORTING SCHEDULES are detailed schedules prepared by auditors in
support of specific amounts on the FS.
ACCOUNT ANALYSIS shows the activity during the period in a particular BS
Account. It starts with the beginning balance, shows the transactions
(additions and reductions) that occurred during the period, and concludes
with the ending balance.

4. Summary of Adjusting and Reclassifying Entries

ADJUSTING ENTRIES are corrections of material errors in the accounting
records discovered by the auditor. These entries must be approved by the
client because management has the primary responsibility for the fair
presentation of the statement.

RECLASSIFYING ENTRIES are made in the statements to present

accounting information properly, even when the general ledger balances
are correct.
5. Audit Notes or Memoranda and
Documentation of Corroborating Information
AUDIT NOTES is the working paper used to note items of work to be done
that cannot be completed by following the usual sequence of audit procedures.

Much of the content of the working paper consist of the outside documentation
gathered by the auditors, such as confirmation replies, and copies of client
Main Divisions of Audit Working Papers
Working papers in permanent files contain
information of continuing interest to the auditor.
These are intended to contain data of a historical or
CURRENT AUDIT FILE continuing nature pertinent to the current examination.
The current year working file is designed This contains the ff:
to support the assertion embodied in 1. Corporate charter
the FS. This contains the ff: 2. Analysis of business and industry
3. Copies of contracts
1. Original and draft of the report 4. Chart of Accounts
(FS, draft of auditor’s report, draft 5. Flowcharts and notes on the
of ITR) accounting systems and related controls
2. Audit plan and programs 6. Continuing analyses of fixed assets.
3. Working trial balance 7. Organization charts and excerpts from
4. Adjusting and reclassifying job manuals
8. Terms of capital stock and bond issues
journal entries
9. Result of analytical procedures from
5. Lead and supporting schedules previous year’s audit
6. General information such as 10. Excerpts from minutes of meetings
copies of minutes of meetings, 11. Labor-management agreement
agreements not included in 12. Information concerning related parties
permanent files, etc. 13. Description of complex business
14. Copies of pension plans, stock option
plans, and employee bonus plans
The Philippine Accountancy Act of 2004,
Section 29
provides that “All working papers, schedules and
memoranda made by a certified public accountant in
public practice and his staff in the course of an
examination, including those prepared and submitted by
the client, incident to or in the course of an examination,
by such CPA, excerpt reports submitted by a CPA to a
client shall be treated confidential and privileged and
remain the property of such CPA in the absence of a
written agreement between the CPA and the client, to
the contrary, unless such documents are required to be
produced through subpoena issued by any court,
tribunal, or government regulatory or administrative
Activity: Watch a video on “Audit Working Papers” – (8:53)