Classification of Working Paper

Permanent Working Current Working

Paper File Paper File

 Contains information of  contains evidence gathered and

continuing significance to the conclusions reached relevant to
auditor in performing audits the audit of a particular year
 Example of Example of Current
Permanent File File
 Copies of articles of
incorporation and by laws  Working trial balance

 Major contracts  Audit program

 Engagement letter  Detailed schedules

 Organizational charts  Audit planning memorandum

 Analyses of long term accounts  Audit queries and disposition

 major accounting policies  Extracts of meetings

 List of directors and details of  Internal control questionaires

service contracts with them  Copy of financial statements
 The organization’s name and  Lead schedules
history
 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.
 It may serve as reference source for the client
 But SHOULD NOT be considered as PART or as SUBSTITUTE for the
CLIENT’S RECORD

Confidentiality of Working Papers

 Working Papers CAN NOT be SHOWN to THIRD PARTIES WITHOUT the
CLIENT’S PERMISSION except for the following circumstances:
- when required by law or when working papers are subpoenaed by court
- when there is a professional right to disclose information
 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.

Purpose of Retention
 To provide evidence for the work done where necessary
 To enable the auditor to follow up his recommendation to the client
 To retain information that is likely to be used for future work
Guidelines for the GENERAL
preparation of REQUIREMENTS OR
Working Papers TECHNIQUES USED
 Completeness and  Headings
Accuracy
 Initials/Date
 Clarity and Understanding
 Indexing
 Pertinence
 Cross-indexing/ Cross referencing
 Logical Arrangement
 Tickmarks
 Legibility and Neatness
 W/P Numbering
 Content
 Memos toFuture Auditors
Sample Working Paper Template
 AUDITING ACCOUNTING ESTIMATES
ACCOUNTING ESTIMATES
Approximation of the amounts of an item in the absence of a precise
means of measurement
Examples:
- Allowance for uncollectible accounts - Loss contingencies
- Accrued Revenues - Deferred Taxes
- Warranty claims - Depreciation & amortization
- Percentage of completion income

*Risk of Material misstatement is greater than when accounting

estimates are involved.
Auditor’s Responsibility in obtaining sufficient appropriate evidence as
to whether Accounting estimate is:
- is properly accounted for & disclosed
- is reasonable in the circumstances

Approaches used by Auditors

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

2. Make an independent estimates
3. Review subsequent events which confirm the estimate made.