Partner’s Audit Engagement Review

It’s your signature, but the staff did most of the work. How confident are you?

This course tells you how to perform a high-level review and come away with knowledge of: (1) what your staff did; (2) what they found; and (3) what decisions did they make. All of these items have a direct affect on the financial statements and your report. This course contains numerous examples, cases and suggestions on performing such a review. All audit partners and managers will benefit from this course.

Highlights include areas of special attention for partners, work paper access issues and case studies.

Objectives:

Identify the steps in partner-level reviews to ensure that the audit strategy has been implemented and that the partner is aware of all significant issues and all important judgments made by the staff

Prerequisite: Management of audit engagements

Overview

The objective of this course is to describe how audit partners and managers review working papers to

• Evaluate the judgment, skills, organization, and work efforts of staff members.
• Ensure that audit work was performed in accordance with generally accepted auditing standards.
• Ensure that adequate evidence has been collected and analyzed during the course of the audit to support the opinion on the client’s financial statements.

This course discusses the goals of high-level working paper review, provides guidance on how to review documentation and illustrates through examples and cases common types of problems the high-level review should detect.

This course describes the high-level review as “partner review,” but it is intended for managers as well as partners, as managers may perform some of these review functions depending on the size of the audit and structure of the firm.

Organization

This course is organized as follows:

• Chapter 1, “Working Paper Basics,” discusses the GAAS documentation requirements and the concept of working paper review.
• Chapter 2, “Nuts and Bolts of Reviewing,” discusses how the partner review is conducted.
• Chapter 3, “Areas of Concern,” covers specific areas that the partner focuses on and issues that arise in them.
• Chapter 4, “Reducing the Risks When Working Papers are Summoned,” discusses issues attending review by outsiders such as regulators.

Working Paper Basics

Learning Objectives

After completing this chapter you will be able to understand:

• The basic documentation requirements in GAAS.
• The different levels of review working papers are subject to.

Introduction

This chapter discusses the requirements for working papers in audit engagements. First, you will study the authoritative literature on working papers. Next, you will consider the review process, including the concept of review, the different types of working papers, the mechanics of review, and the specific accounts to be reviewed.

SAS No. 103, Audit Documentation, establishes the basic documentation requirements in GAAS. Because it sets the basic working paper ground rules, it has been reproduced it in this workbook as Appendix 1A.

Audit Standards Affecting Workpaper Content

SAS No. 103

SAS No. 103, Audit Documentation, requires the auditor to prepare and maintain workpapers on every audit. It says that the form and content of workpapers should be designed to meet the circumstances of the particular audit engagement, but workpapers should be sufficient to

• Provide a clear understanding of the
  • Nature, timing, and extent of auditing procedures applied,
  • Results of the auditing procedures,
  • Evidence obtained and its source,
  • Conclusions reached;
• Indicate who performed and reviewed the work and when the work was performed and reviewed;
• Show that the accounting records agree or reconcile with the financial statements or other information being reported on.

Although the level of detail to be provided is a matter of the auditor’s professional judgment, the documentation should be sufficiently detailed that an experienced auditor with no previous connection to the audit can understand the scope and results of the work, the conclusions reached, and that the financial statements agree or reconcile to the underlying accounting records.

Other SASs

The following other SASs also establish specific workpaper requirements. The following is an overview of their provisions:

733350