Recording refers to documentation in the form of working papers prepared or obtained by the auditor and retained by him in connection with the performance of his audit. Audit working papers should always be sufficiently complete and detailed to enable an experienced auditor having no previous connection with the audit to ascertain the work that was performed supports the conclusions reached.
The auditor should record all relevant information known to him at the time, the conclusions reached based on that information and the views of management.
Why the need for preparing good working papers?
- The reporting partner needs to satisfy himself that work delegated by him has been properly performed. This is only possible by reviewing detailed working papers prepared by the audit staff who performed the work. This also aids in supervision and review of work done by audit assistants.
- Working papers provide details of problems encountered together with evidence of work performed and conclusions drawn there from in arriving at the conclusions reached. These details can also serve as a good reference point for future audits.
- Preparation of working papers encourages the auditor to adopt a methodical approach to his work.
- Working papers assist in the planning and performance of audits in future financial periods.
- If sued for negligence working papers act as evidence of work done.
- They are used for training of audit staff. Working papers contain audit programs and specimen schedules, which audit assistants can refer to when conducting an audit.
Auditing guidelines do not define precisely the form of working papers but it indicates what might typically be contained therein;
- Information of continuing importance to the audit such as letter of engagement, memorandum of association e.t.c.
- Planned audit approach as contained in the planning memorandum.
- Auditor’s assessment of the client’s accounting system, his review and evaluation of internal controls.
- Details of audit work carried out, notes of errors or exceptions noted and action taken together with conclusions drawn by the audit staff.
- Evidence that the work of staff has been properly reviewed.
- Record of relevant balances and other financial information that is subject of the audit.
- Analysis of significant ratios and trends
- Copies of communications with other auditors, experts and other third parties
- Letters of representations received from management.
Working papers are subdivided into the current audit file (CAF) and the permanent audit file (PAF).