(ii) PSAs and applicable legal and

CHAPTER 18
regulatory requirements, (iii) the business
environment in which the entity operates,
and (iv) auditing and financial reporting
AUDIT DOCUMENTATION issues relevant to the entity's industry.

NATURE OF AUDIT
PSA 230, Audit Documentation
DOCUMENTATION
establishes standards and provides
guidance regarding audit documentation in
Audit working papers are the records kept
the context of the audit of financial
by the auditor of the procedures applied, the
statements.
tests performed, the information obtained
and the pertinent conclusions reached in the
The standard on documentation requires
engagement. They represent the
that the auditor should prepare on a timely
documentation of audit evidences collected
basis, audit documentation that provides:
and evaluated.
(a) A sufficient and appropriate record of the
basis for the auditor's report; and
OBJECTIVES OF AUDIT
DOCUMENTATION
(b) Evidence that the audit was performed in
accordance with PSAs and applicable legal The primary objective of audit
and regulatory requirements. documentation is preparing sufficient and
appropriate, audit documentation on a
"Audit documentation" means the record timely basis to help enhance the quality of
of audit procedures performed, relevant the audit and to facilitate the effective
audit evidence obtained, and conclusions review and evaluation of the audit evidence
the auditor reached (terms such as "working obtained, and conclusions reached before
papers" or "work papers" are also the auditor's report is finalized.
sometimes used). Documentation prepared at the time the
work is performed is likely to be more
"Audit file" means one or more folders or accurate than documentation prepared
other storage media, in physical or subsequently.
electronic form, containing the records that
comprise the audit documentation for a
specific engagement. The other objectives of audit documentation
are:
"Experienced auditor" means an
individual (whether internal or external to a. Assisting the engagement team to plan
the firm) who has practical audit experience, and perform the audit.
and a reasonable understanding of b. Assisting members of the engagement
team responsible for supervision to direct
(i) audit processes, and supervise the audit work, and to
discharge their review responsibilities in
accordance with PSA 220.
 (b) When and by whom they were made
c. Enabling the engagement team to be and reviewed.
accountable for its work.
d. Retaining a record of matters of
continuing significance to future audits. TYPES OF WORKING PAPERS
e. Enabling the conduct of quality control
reviews and inspections in accordance with There are innumerable types of audit
PSQC 1. working papers since they contain a variety
f. Enabling the conduct of external of information gathered by the auditors.
inspections in accordance with applicable However, there are certain general
legal, regulatory or other requirements categories in which most working papers
may be grouped. These are:
FORM, CONTENT AND EXTENT OF
AUDIT DOCUMENTATION 1. Audit administrative working papers
2. Working trial balance and lead schedule
The auditor shall prepare audit 3. Supporting schedules and analysis
documentation that is sufficient to enable an 4. Adjusting and reclassifying entries
experienced auditor, having no previous 5. Audit memoranda and documentation of
connection with the audit, to understand: corroborating information

(a) The nature, timing, and extent of the 1. Audit Administrative Working Papers
audit procedures performed to comply with
the PSAs and applicable legal and These are working papers designed to aid
regulatory requirements; the auditors in the planning and
(b) The results of the audit procedures administration of engagements. These
performed, and the audit evidence. include audit plans and programs, internal
obtained and control questionnaires and flowcharts,
(c) Significant matters arising during the engagement letters, and time budgets.
audit, the conclusions reached thereon, and
significant professional judgments made in Audit program is a detailed list of
reaching those conclusions. procedures to be performed in an audit
engagement.

In circumstances other than those Purposes of Audit Program include:

mentioned in paragraph 13 of PSA 230
where the auditor finds it necessary to 1. It serves as a procedural guide during the
modify existing audit documentation or add course of the audit.
new audit documentation after the assembly 2. It serves as a basis in dividing the audit
of the final audit tile has been completed, work among staff members.
the auditor shall, regardless of the nature of
the modifications or additions, document: 3. It serves as a basis of reviewing progress
of audit work.
(a) The specific reasons for making them; 4. It enables the auditor to ensure that the
and program designed to substantiate amounts
appearing in the accounts and related notes 3. serves as the base for accumulating and
have covered all material aspects thereof. arranging account balances for financial
statement presentation.

Types of Audit Programs Lead or Top Schedule

1. Standard all-purpose audit program This is a working paper that shows the
lists standard practices applicable to almost grouping of related account balances. Each
every engagement line item on the trial balance is supported by
2 Tailor-made audit program a lead schedule, containing the detailed
lists the procedures to be followed on a accounts from the general ledger making up
specific audit engagement, indicating any the line item total. Each detailed account on
departure from normal practices and the lead schedule is, in turn, supported by
specifying the extent of the tests of appropriate supporting schedules
transactions. evidencing the audit work performed and
3. Modified standard form audit program the conclusions reached.
a preprinted program that outlines the usual
audit procedures common to most 3. Supporting Schedules and Analyses
businesses and provides space for an
auditor to indicate other specific procedures Supporting Schedules
applicable to the business under
examination. These are the detailed schedules prepared
by auditors in support of specific amounts
2. Working Trial Balance and Lead on the financial statements.
Schedules
Account Analysis
Working Trial Balance
This working paper shows the activity during
This is a list of the accounts in the client's the period in a particular statement of
general ledger with columns that, as a financial position account. It starts with the
minimum include unadjusted amounts beginning balance, shows the transactions
directly from the client's accounting records, (additions and reductions) that occurred
proposed adjusting entries, and adjusted during the period, and concludes with the
(audited) amounts. Often called the ending balance.
backbone of the working papers, the
working trial balance 4. Summary of Adjusting and
Reclassifying Entries
1. provides an overall index of the working
papers, Adjusting Entries are corrections of material
errors in the accounting records discovered
2. aids in controlling and reviewing the by the auditor. These entries must be
examination as it progresses. and approved by the client because
management has primary responsibility for
the fair presentation of the statement.
Reclassifying Entries are made in the
statements to present accounting Other files may also be maintained such
information properly, even when the general as:
ledger balances are correct
1. Tax Files
5. Audit Note or Memoranda and
Documentation of Corroborating These files contain information relevant to a
Information client's current and past income tax and
other business tax obligations. They serve
Audit Notes as basis for preparing current year's returns
and performing other tax-related services
This is the working paper used to note items such as amending prior year returns or
of work to be done that cannot be representing the client's tax assessment
completed by following the usual sequence case.
of audit procedures. This is also used to
record questions concerning the audit 2. Correspondence File
investigation.
This file contains all correspondence or
Outside Documentation letters to, from or in behalf of a client.

Much of the content of the working paper

consist of the outside documentation
gathered by auditors, such as confirmation
replies, and copies of client agreements.

Current Audit File

The current year working paper tile is
designed to support the assertion embodied
in the financial statements.

Permanent File
Working papers in permanent files contain
information of continuing interest to the
auditor.

These are intended to contain data of a

historical or continuing nature pertinent to
the current examination. These files provide
a convenient source of information about
the audit that is of continuing use from year
to year.