It is essential that all audit work is documented - the working papers are the tangible evidence of the work done in support of the audit opinion.

The ISA identifies the reasons for preparing audit working as follow:

a) The reporting partner needs to be able to satisfy himself that work delegated by him has been properly performed. The reporting partner can generally only do this by having available to him detailed working papers prepared by the audit staff who performed the work.

b) Working papers provide for future reference, details of problems encountered, together with evidence of work performed and conclusions drawn there from in arriving at the audit opinion.

c) The preparation of working papers encourages the auditor to adopt a methodical approach.

The exact form that working papers should take cannot be prescribed each firm will have its own disciplines. Whatever form the papers take, however, they must achieve the main objectives set out above.

Contents of working papers

The ISA 230 No.3 stresses that audit working papers should always be sufficiently complete and detailed to enable an experienced auditor with no previous connection with the audit to ascertain from them what work was performed and to support the conclusions reached. It also emphasizes the special care needed to record difficult questions of principle or of judgment. The auditor should record all relevant information known to him at the time, the conclusions to be reached based on that information and the views of the management.

Although the guideline does not attempt to define precisely the form of working papers it does indicate what might physically be contained therein as follows:

a) Information which will be of continuing importance to the audit (e.g. Memorandum and Articles of Association);

b) Audit planning information;

c) The auditor's assessment of the enterprise's accounting system and, if appropriate, his review and evaluation of its internal controls;

d) Details of the audit work carried out, notes of errors or exceptions found and action taken thereon, together with the conclusions, drawn by the audit staff who performed the various sections of the work;

e) Evidence that the work of the audit staff has been properly reviewed;

f) Records of relevant balances and other financial information including analysis and summaries supporting the financial statements;

g) A summary of significant points affecting the financial statements and the audit report, showing how these points were dealt with.

Working papers are conventionally subdivided into current and permanent files for convenience and control. The characteristic of current working papers is that they relate specifically to the audit of a particular set of accounts whereas permanent papers comprise matters of continuing importance affecting the client. Hence items (a) and (c) above are typically retained on the permanent file.