The Working Papers synthesize the result of all the verifications and document the work of the auditor, direct and guide the auditor's report.
They are its element of evidence.
organization-of-work-papers-in-financial-auditPROBLEM STATEMENT
"Through the audit, evidence of all kinds is obtained that is recorded in the working papers, in such a way that it can be affirmed that without working papers there is no audit"
OBJECTIVES
GENERAL PURPOSE
Explain the great importance of work papers in financial auditing, knowing how the order and use of work papers contributes to the management of the audit, leading to the efficient writing of the final report.
SPECIFIC OBJECTIVES
• Define the service quality indicators.
• Select the tools that the audit uses to measure the quality of services.
BACKGROUND - ISA No. 230
DOCUMENTATION
states in paragraph 2 the following: "The auditor shall document matters that are important to support the audit opinion and provide evidence that the audit was conducted in accordance with International Standards on Auditing"
THEORETICAL BASES
The working papers constitute the elements of proof of the performance of the audit work and also constitute the basis for the preparation of the audit report and for the evaluation of the performance of the work team.
“The correct organization of the work papers will measure the Quality Control of the Auditor's Work”.
HYPOTHESIS
The information contained in the working papers constitutes the main evidence of the work carried out by the auditor and of the conclusions reached regarding significant events.
DEFINITION OF WORKING ROLES
The working papers make up the elements of proof of the performance of the audit work and the decisions taken; and they also constitute the basis for the preparation of the audit report. In the same way, it serves to measure the evaluation of the performance of the work team
ISA 300
Planning the audit
The planning must be formalized in writing and includes the global plan, the analytical audit programs that allow the auditors to issue the required reports according to:
• The International Auditing Standards, the Auditing Standards issued by the Council of Public Accountants of Paraguay and
• The provisions of the Undersecretariat of State for Taxation, by virtue of its legal powers.
In planning, the auditor should develop and document an audit work plan describing the expected scope and conclusion of the audit.
The Audit Work Plan, as well as the Audit program, is the sole responsibility of the auditor and if circumstances that force some changes occur throughout his work, he must include an annex complementing such changes, justifying the reasons that oblige him to make them..
The audit work plan must be detailed enough to guide the development of the audit analytical program.
Its form and content will vary according to the size of the entity, the complexity of the audit and the focus of the auditor.
Conduct of the audit - The Working Papers -
They are part of the working papers:
• Audit programs,
• Internal control evaluation,
• Analysis sheets, • Conformity
letters and reports provided by third parties,
• Comments prepared or obtained by the auditor,
• Reports prepared by the client (taxpayer administration) for the auditor, among others.
Conduct of the audit - The Working Papers -
The working papers may be stored in printed form, in magnetic files or other suitable means.
The working papers are the sole responsibility of the auditor both in their preparation and in their custody and may not be disclosed or delivered to third parties, unless expressly authorized by the taxpayer.
IMPORTANCE OF WORK PAPERS
Due to the importance that working papers have as a basis for the auditor's opinion and because of how important they may later have for their own professional responsibility, it is absolutely essential to establish that the absolute and unrestricted ownership of the corresponding The work belongs to the auditor himself who has carried out the examination, subject only in the use of said working papers and the information contained in them, to the inescapable requirements of the ethical duty of professional secrecy that every auditor has.
IMPORTANCE OF WORK PAPERS
Good working papers are vitally important because:
a) Help the auditor in the development of his work.
b) Provides important support for the audit opinion and tests in which the audit standards have been satisfied.
c) It allows the work carried out to be reviewed by a third party.
d) Encourages a methodical approach to the work being carried out.
e) In the relatively rare case of legal action, the working papers serve as evidence for the auditor to defend her position in matters involving negligence and fraud.
f) Serves as a guide for subsequent audits or future audits of the same client.
g) Finally, if a client's records are stolen, they are lost, burned or altered; full working papers would prove their validity from the reconstruction of the records.
PURPOSE OF THE WORKING PAPERS
The Audit work of Didáctica Multimedia SA with respect to the objectives of the work papers, expresses the following:
"The fundamental objective of the working papers is to provide evidence of the work procedures performed and the detailed comments that
support the opinion"
PURPOSE OF THE WORKING PAPERS
• They constitute evidence of the work carried out on the conclusions reached and that served as the basis for an opinion on the financial statements, that is, obtained during the audit process.
• Source of information to obtain details of the balances of the different accounts of the balance sheet and income statement.
• Serves as a source for historical company information, such as:
- Constitution, modifications to capital and statutes, loan contracts, work contracts, etc.
- A means that allows through its review:
- Measure the effectiveness and sufficiency of the work done.
- Evaluate the strength of the different conclusions recorded in the working papers.
- Determine possible modifications to the scopes recorded in the audit programs.
WORKING PAPERS REQUIREMENTS
• ORGANIZED:
To facilitate the index or cross-reference of the related figures.
• COMPLETE:
This means that the scope set in the audit programs must be fully complied with.
WORKING PAPERS REQUIREMENTS
• LEGIBLE:
The papers must be written with sufficient clarity that they allow their later revision.
• ORGANIZED:
Depending on the volume of the audit, the papers should be separated into files that allow their comfortable handling; In addition, the certificates that make up each of the files must be filed in a logical and orderly sequence.
The Working Papers are the property of the Independent Auditor or the Audit Firm
• The Work Papers, in Paraguay, are subject to review by:
- National Value Comission;
- Superintendency of Banks;
- Superintendency of Insurance;
- Comptroller;
- National Institute of Cooperatives - INCOOP
- Undersecretary of State for Taxation - Resol. 73/2012
• Under NAGAS, the auditor may supply (loan) working papers to the auditor, successor (predecessor), with authorization from the client's management.
UTILITY OF WORK PAPERS
a) They help plan and execute the audit.
b) They help to supervise and review the audit work.
c) Provide evidence of the audit work carried out to support the auditor's opinion.
d) The working papers represent a permanent history of the work carried out by the auditor and serve as the basis for her conclusions and reports.
PRINCIPLES THAT SHOULD GOVERN IN THE PREPARATION OF WORK PAPERS
How the Working Papers should be HOW THE WORKING PAPERS SHOULD BE
• Clear and concise.
• Provide an adequate and unambiguous record of work performed.
• Report the reasons for the decisions made on controversial issues.
HOW THE WORKING PAPERS SHOULD BE
• The working papers must be sufficiently complete and must show the following:
- The scope of the work.
- The information and concrete facts.
- The sources from which the information was obtained.
- The conclusions reached.
- Easy to read, so that an experienced auditor can understand them without prior knowledge of the client, understand what the work was done and the reasons for the conclusions obtained.
PREPARATION AND PRESENTATION OF THE CÉDULA WORK PAPERS
The Cédula, is the representative unit of the Work Papers
The cédula is the document that contains the analysis, verification and information about the accounts or certain aspects of the business
The Work Papers constitute a set of Cédulas
THE ID AND RELATIVE IMPORTANCE
The auditor has to have sufficient judgment to understand whether or not a matter is important.
If you persist in treating problems as minor, you can get in the habit of overlooking issues on which you must carefully dwell.
THE CEDULA AND THE INHERENT RISKS OR RELATIVE TO CERTAIN ASPECTS IN THE AUDITS
The risk may occur depending on the nature of the item being examined or depending on the extent of the selective tests that must be carried out to ensure that the correct procedure is carried out in the phase of the transactions or operations that are studied or investigated. The work or evidence must be represented on a certificate.
In the case of the available, for example, there may be some considerations from the point of view of fraudulent manipulations of certain officials of the entity, where there are more probabilities of risk of omission or alteration in cash items in cash and banks., than in the items of fixed assets.
AUDIT PROCEDURES
PRESENCE AT THE PHYSICAL INVENTORY TAKING
ACT OF INVENTORY TAKING (Model)
In the city of Asunción, at three hours in the afternoon of January 5, 2014, at the premises of the company Automotores del Paraguay SA, located at Avda.
Eusebio Ayala N ° 3071, met for the Inventory of the aforementioned company, the gentlemen:
• Inventory Manager:
• Advisors:
• A team of twenty inventors suitable for the aforementioned work.
• The Audit Company "Cañete & Asociados" represented by its Manager Lic. María Cañete and the supervisor Lic. William Barrón.
The general inventory for 2013 of spare parts, accessories, automobiles, workshops and other inventories was carried out on days 2, 3 and 4 of the current month of January 2014, between 8:00 a.m. and 6:00 p.m. respectively. It was developed according to a coherent and flexible work plan, satisfying the expectations of the company, reflecting a minimum margin of error.
All the stocks valued according to the computerized list at the end of the 2013 period were taken into account for the inventory, without ignoring any item, therefore our presence in the inventory days already mentioned, we attest to its completion and full compliance with the plan of work established by the company "Automotores del Paraguay SA".
(Signatures)
p. AUTOMOTORES PY SA p. CAÑETE & ASSOCIATES
THE WORK PAPERS ACCORDING TO THEIR USE AND CONTENT
PREPARATION AND PRESENTATION OF THE WORK PAPERS, ACCORDING TO THEIR USE AND CONTENT:
• BY THEIR USE:
- Work Papers for permanent use
(Permanent Audit File) and
- Work Papers for current use (Current Audit File).
• FOR ITS CONTENT:
- Worksheet.
- Summary or summary certificates.
- Detailed or descriptive certificates.
- Analytical or verification certificates
THE WORK PAPERS, DEPENDING ON THEIR USE:
1) Work Papers of Current Use (Audit File): They are work papers of limited use, for a single audit and are prepared during the same.
2) Permanent Use Work Papers: They are, as their name indicates, those that will be used permanently, being useful for checking the accounts not only in the period in which they are prepared, but also in future years.
THE WORKING PAPERS,
DEPENDING ON THEIR CONTENT:
- The Matrix or Summary Certificate.
- The Sub Matrix,
Analytical or Summary Cédulas.
- The Detail or Descriptive Certificates.
- The Verification Certificates or Sub Cédulas.
MATRIX OR SUMMARY CARD
The Parent or Summary ID is the ID that shows the groups or items that make up the financial statements. They are the lists of the accounts of the major with their balances.
They serve as a summary and guide or index of the working papers that refer to each account. These will contain the figures from the previous exercise in order to make comparisons.
MATRIX OR SUMMARY CARD
The Sub Matrix, analytical or summary schedules, show the General Ledger accounts that make up an item. They are those that contain the first analysis of the states relative to one or more lines of the worksheets and serve as a link between these and the other analysis or verification cards.
The detail schedules list the items that make up a General Ledger account or any balance.
DETAIL OR DESCRIPTIVE CARD
VERIFICATION CERTIFICATE OR SUB CERTIFICATES
The verification certificates or sub-certificates contain the work carried out to verify the correctness of an item or operation. They contain the analysis and / or verification of the data of the summary and detail certificates, detailing the specific rules or data that appear in them.
In these sub-schedules you will find the description of the audit procedures applied.
When designing an audit sample, the auditor should consider the objectives of the audit procedure and the attributes of the universe from which the sample will be drawn.
Materiality
Materiality should be considered within the concept of "materiality" in the framework of reference for the preparation and presentation of financial statements of the International Accounting Standards Board - IASB.
The degree of materiality used in planning the nature, extent, and timing of audit procedures is known as "planning materiality."
Materiality is a relative concept. That it is material for one Entity does not mean that it is also material for another or that it is material for the compliance of one tax does not mean that it is material for another tax.
For this reason, to determine the degree of materiality for a specific taxpayer, it is necessary to bear in mind the particular circumstances of the operational and financial situation of said taxpayer.
• Materiality must be defined both in the planning stage of the audit and when evaluating the financial statements taken as a whole.
• The main difference is that when setting materiality in planning, preliminary figures
(usually estimated) are frequently used, while in the evaluation stage specific issues are evaluated in the context of known figures.
• For this reason, setting a figure for materiality in planning does not prevent the auditor in any way from deciding whether or not an error needs to be corrected and whether or not his report needs to be modified as a result of an event whose value is found. below the level previously defined as material.
- Materiality -
• Setting a materiality level at the planning stage does not preclude reviewing that level as the audit progresses.
• The auditor should re-evaluate the level of materiality used in planning the nature, extent and timing of his procedures to ensure that he has performed sufficient work to enable him to express his audit opinion on the financial statements.
- Materiality -
The basic steps to estimate and define materiality in planning include the following:
a) Obtain a copy of the most recent financial statements at the end of the year or an interim period, financial information from previous years and budgets or forecasts, if applicable.
b) Use appropriate rules, according to procedures adopted by the auditor at his firm.
c) The exceptions contained in the tax report for the previous year.
PERMANENT AUDIT FILE
The permanent audit file contains all those working papers that retain their importance from one year to the next, including all the information necessary for the current year's audit and for future reviews of the financial statements.
The purpose of this file is to provide through documents, the financial and operational history of the client; provide a reference source for ongoing and recurring items that need to be reviewed, avoiding the need to read lengthy new customer documents; reduce the annual work of preparing new working papers for items that do not change; and separate and organize specialized data for future or subsequent audits, for tax investigations, for capital structure change projects, and for other purposes.
The content of the permanent file varies by audit firm, but generally includes the following items:
• Index or a general information sheet.
• Historical customer information.
• Review of the accounting and internal control procedures (flow charts of the main areas; descriptive memoranda, internal control questionnaires), separating each of the areas.
• Accounting manual and chart of accounts.
• Analysis of the different accounts whose information is completed each year.
• Copies or extracts of the main contracts.
• Points to consider in future exams.
FILE
permanent file CURRENT AUDIT
It is the "Constant Consultation File". It is made up of all the papers, data and correspondence that accumulates between the dates of the fiscal year.
The content of the Stream file varies by audit firm,
but generally includes the following items:
• Table of contents or a general information sheet.
• Planning file - original documents.
• Working papers of the audit firm.
• Working papers of the interim visit (Evaluation of the
Internal Control system - Study Methods: Narrative Descriptions, Questionnaires, Flowcharts). Internal Control Letter
• Correspondence and control of confirmations (banks, clients, suppliers, lawyers, insurance)
• Physical inventories, accounting, etc.
• General section - working papers of the balance of sums and balances.
The content of the Stream file varies by audit firm, but generally includes the following items:
• Active. Liabilities and Equity.
• Income and expenses.
• New contracts, summary of the minutes, changes in the client's deed, account statements.
• Notes on unfinished work. Memo sheets. Manager's points of attention.
• The audit report (final report), the Financial Statements and Tax Returns.
• Time report (time control) and expenses.
CURRENT AUDIT FILE
Correspondence and control of confirmations
As an audit procedure, the management and / or direction of the company will send a letter to the bank to request a copy of the bank statement and its corresponding confirmation or certificate to the external auditors by a certain date, who will confront the bank reconciliation (this confirmation letter of bank balances and the respective statement must be sent directly to the offices of the independent external auditor).
Some auditors rank internal control weaknesses in order of importance, others expose them by area. The observations in some cases are written including the recommendation. In other cases, a general recommendation is presented followed by examples that demonstrate the control deficiency.
The same principles that are applicable to accounting books, with regard to their confidentiality, are extended to the independent auditor's working papers; which retains them in its power for its own safeguard, within the rules that govern ethics and professional secrecy, so that the fact of obtaining information from a client, it is not convenient to make public knowledge to third parties, except the consent of the client and / or pertinent legislation in this regard.
USE OF THE MARKS OR IDENTIFICATION KEY ON THE WORKING PAPERS
During the course of an examination, the auditor will use many marks or keys in various shapes and sizes and perhaps colors, both in client records and on his own working papers.
USE OF THE MARKS OR IDENTIFICATION KEY ON THE WORKING PAPERS
The marks represent symbols, code, signs or passwords that the auditor uses as a means to indicate the nature and extent of the verification applied at any stage of the audit.
THE BRANDS OR KEYS IN THE AUDIT
THE BRANDS OR KEYS IN THE AUDIT THE BRANDS OR KEYS IN THE AUDIT USE OF THE INDEXES IN THE WORKING PAPERS
The working papers must have an index and cross indexes. The index can take place either at the end of an audit or during it.
USE OF INDEXES ON WORKING PAPERS
To facilitate the ordering and filing of work papers and their quick location, it is customary to put a mark on each and every one of them in a visible place.
This brand is called an index and through it it is possible to know what paper it is and where it belongs in its respective file or file, helping to quickly locate it when it is needed later.
BASIC RULES OF CROSS REFERECIATION
• ONLY IDENTICAL FIGURES ARE CROSS-REFERENCED.
• ONLY TOTALS CAN BE REFERENCED
• ALL CROSS REFERENCES MUST BE MADE IN RED.
• IT SHOULD ALWAYS BE DONE IN BOTH DIRECTIONS.
• THE POSITION OF THE REFERENCE IN RELATION TO THE REFERRED NUMBER INDICATES THE DIRECTION OF THE FLOW.
Source: www.redcontable.com/e_univ The
indices allow you to easily reference (or cross) the certificates that, because they contain common data, when verified in one, are obviously verified in the other.
For example, upon seeing the increase in accumulated depreciation, it simultaneously reduces the debit to results by this concept and these, in order not to duplicate the work, it will be enough to note the following: "see calculations in schedules D.2.1"
Source: GUILLERMO ADOLFO CUELLAR MEJIA –http: //fccea.unicauca.edu.co
INDICES IN SUMMARY CEDULES Summary schedules , also known as main schedules, are those that make up the summary of similar related concepts. The totals that appear in a summary schedule correspond to the class of totals that are presented in the financial statements.
In this case, the summary certificates are identified by means of the combination of letters. Thus, the summary certificates related to the asset accounts are marked with simple letters and those of the liabilities and assets are marked with double letters, following, in both cases, the alphabetical order.
INDICES IN THE ANALYTICAL OR SUPPORT CARDS
The support or analytical certificates support, or carry the detail of each region that appears in the relative summary card.
REVIEW OF THE WORKING PAPERS
PRESERVATION OF THE RECORDS OR AUDIT FILES
• According to SAS No. 41 (Statement on Auditing Standards dated
05/31/82), the conservation of working papers would be 5 years.
• The General Resolution of SET No. 73/12 regarding the conservation and custody of working papers establishes that the external auditor will keep and guard for a period of five (5) years, counted from January 1 of the following year as of the date of issuance of the external tax audit opinion.
USE OF
WORK PAPERS FROM PREVIOUS YEARS
The work papers of previous years will be consulted in order to know the difficulties
encountered in that year, that is, as a reference
PARTS AND CONTENT ON WORKING PAPERS
- Header.
- The body.
- Evidence of the work done.
- Evidence of Review and Supervision.
- Others.
CONCLUSIONS
Once the audit work is finished, the total of the working papers must express:
• The nature and condition of the client's records and its internal control system and the evidence collected by the auditor based on these records.
• The nature of the financial statements, schedules or other information that the client offers to the auditor for examination.
• A system of indexes that is essential for the conservation of working papers in organized archives: permanent archives, which contain in an orderly and updated manner, the necessary information required in a special audit or examination program; and a current file that contains information on each exam carried out and at any time allows to support the report issued.
• The auditor's report based on the financial statements.
• The need in the particular circumstances for the supervision and review of the work performed by an assistant.
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