Learning Objectives LO1 Outline six general audit techniques for gathering evidence. LO2 Identify the procedures and sources of information auditors can use to obtain evidence for understanding an auditee’s business and industry, assessing risk, and responding to assessed risk. LO3 Explain audit evidence in terms of its Appropriateness LO4 Describe the content and purpose of the audit plan as well as the specific audit programs and detailed procedures it contains. LO5 Evaluate audit working paper documentation for proper form and content.

Audit Working Papers Working papers are the auditors’ record of compliance with GAAS. Working papers should contain support for the decisions made in the course of the audit. The auditor is the owner of the working papers. Confidentiality requires client consent before the file is opened to third parties. There are three categories of working papers, generally stored in two files. LO5

Audit Working Papers Permanent file: Current file: Permanent file papers: information of continuing interest. Current file: Audit administrative papers: documentation of early planning. Audit evidence papers: evidence obtained and decisions made. LO5

Permanent File Papers Information that will be used year after year. Copies from the corporate charter or partnership agreements. Contracts, including leases, bonds, other agreements. Minutes from shareholders meetings. Continuing schedules for share capital, retained earnings, capital assets. LO5

Audit Administrative Papers Documentation of early planning phases. Engagement letter Staff assignments Organization charts Meeting notes Overall Audit strategy Internal control questionnaire Audit plan and programs Working trial balance Adjusting and reclassification entries Review notes LO5

Audit Evidence Papers Audit evidence working papers are typically organized in sections. Each section contains a lead sheet that shows the dollar amounts reported in the financial statements. The lead sheet provides references to all the working papers related to that section. Each working paper must show, through cross references, where it fits in the working paper file. LO5

Audit Evidence Papers The audit evidence papers must show assertions that were audited, the evidence gathered about them and the final decision reached. The working papers should also show: Evidence the work was planned and supervised. A description of the evidence gathered. Evidence of the evaluation and disposition of misstatements. Copies of letters or notes for matters reported to the auditee. LO5

Working Paper Arrangement and Indexing Working papers (W/P) are grouped in order according to financial statement captions. Each page in the file must have: Index: A page number that allows a W/P to be removed and replaced properly. Cross-referencing: Connects information between pages in the W/P file. Heading: Includes the entity under audit, period being audited, and a descriptive title. LO5

Working Paper Arrangement and Indexing W/P are grouped in order according to financial statement captions. Each page in the file must have: Initials: from the auditor and the reviewer. Dates: of the preparation and review. Tick marks: to indicate the work performed. Tick marks should be appropriately described. LO5

Audit W/P Software Specialized W/P software is becoming very popular. Advantages include: increase in productivity by automating tasks, integration with client database (extraction of trial balance or transactions), and facilitation of analysis, links to other databases, and websites. LO5