Partner’s Audit Engagement Documentation and Review

It will be your signature on the report, but the staff did most of the work. In addition, the risk assessment standards substantially increased the GAAS documentation requirements. Don’t get dinged in peer review or litigation because you didn’t know it had to be written down. All audit partners and managers will benefit from this course.

Highlights include coverage of all the current AICPA rules regarding workpapers, including: work documentation, ethics requirements, workpaper access by outsiders, and workpaper retention. The course also shows you what to look for when performing a high-level review so you know what the staff did, what they found and what decisions they made without re-reviewing all the working papers. It contains lots of examples, cases and suggestions.

This course combines the courses Partner’s Engagement Documentation and Partner’s Audit Engagement Review at a bargain price!

Objectives: 

• Identify what documentation is (and is not) required under current GAAS
• Identify steps 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

Introduction

The focus of this course is practical guidance for developing and enhancing the auditor's ability to exercise professional judgment when creating appropriate, sufficient, and competent audit documentation for audit engagements.

Although the form, content, and type of audit documentation is a matter of professional judgment, changes in quality control standards (including Peer Review Program requirements) increased oversight activities by regulators, and the ever-present litigation environment all combine to make effective and efficient workpaper documentation, including the rationale for modifying the generic forms, checklists, and practice aids provided by various vendors, more important than ever.

The emphasis in each of the chapters will be identifying ways to comply with the audit documentation requirements in professional standards. Specifically, attention will focus on how to document the processes related to

• Identifying and reaching appropriate conclusions as to engagement risk, business risk, and client risk for each engagement, and then designing appropriate responses to such risks.

• Planning the nature, extent, and timing of procedures to be performed.

• Analyzing the results of the work performed and forming appropriate conclusions.

• Supervising all aspects of the engagement to insure compliance with professional standards, including quality control.

This course's chapters and their content are as follows:

• Chapter 1, "Definition of Workpapers," discusses the authoritative standards for workpapers.

• Chapter 2, " Documentation of Planning and Supervision," discusses how the auditor documents his or her compliance with the first standard of fieldwork.

• Chapter 3, "Documenting the Required Understanding of the Entity, Tests of Control and Assessment of Risk," discusses obtaining the understanding necessary to assess risk, flowcharting, use of narratives and checklists, and documenting tests of controls and findings.

• Chapter 4, "Documenting Substantive Procedures and Audit Results," discusses the types of evidence and the auditor's required documentation for the different types of substantive procedures.

• Chapter 5, “Workpaper Administration,” discusses issues of workpaper access and retention.

Chapter 1 - Definition of Workpapers

Learning Objectives

After completing this chapter you should be able to

• Describe why workpapers are necessary.

• Identify the standards that impose specific workpaper requirements.

• Define the workpaper requirements in SAS No. 103 and other SASs.

SAS No. 103, Audit Documentation, requires auditors on every audit engagement to prepare and maintain audit documentation, which is often referred to as working papers or workpapers. In this chapter, we examine that requirement and learn about specific workpapers that are required by other professional standards. We also look at the impact of practice-monitoring programs and the litigation climate on documenting the work performed.

Why Workpapers Are Important

It is often the case that in lawsuits accountants are criticized or penalized not because their work was deficient but because their workpapers did not reflect the work done. That is, they did the work or considered the appropriate matters but could not prove it because the workpapers provided inadequate documentation. These accountants paid the price even though they applied the procedures that were appropriate in the circumstances.

If the workpapers do not reflect what was done, a court may have no basis to conclude that the appropriate procedures were performed. Failure to adequately document what was done may be assessed essentially as failure to perform appropriate procedures. Workpaper documentation is very important.

Workpapers are crucial after the audit because they

• Provide information about whether the audit was conducted as planned and whether the financial statements are presented in conformity with GAAP.

• Demonstrate evidence of conformity with auditing standards for supervisory review, practice monitoring programs (e.g., peer reviews), and for litigation, if necessary.

• Leave a roadmap for future audits.

Basic Workpaper Requirements

Generally accepted auditing standards impose many specific documentation requirements based on the notion that documentation is an essential element of audit quality. The trend in standards has been towards more specific documentation requirements as the Auditing Standards Board came to believe that the need to document an item will drive practice to better incorporate required procedures and considerations into audits.

Although auditing standards establish specific workpaper requirements, decisions about the quantity, type, and content of workpapers is generally a matter of auditor judgment. That is, standards require that certain things be documented, but how you document them is up to you, based on your preferences and your firm's policies.

In this section, we examine the fundamental requirements imposed by SAS No. 103. Then, we review specific guidelines required by other SASs. To reinforce the importance of these statements, we have reproduced the relevant portions. To do your job well as an auditor, it is essential that you understand the details in your professional standards and the reasons for them. Begin by reading SAS No. 103 (AU section 339) reproduced at Appendix 1A, taking special note of the functions and nature of workpapers, their contents, and ownership.

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