7.2 Sources, features and purposes of working papers

Working papers, also known as audit documentation or workpapers, are the written records and supporting materials created and retained by auditors during an audit engagement. These papers serve various purposes and possess specific features. Here are the sources, features, and purposes of working papers:

Sources of Working Papers:

1. Audit Procedures: Working papers are generated as a result of the audit procedures performed by the auditor. They document the steps taken to obtain evidence, including inquiries, observations, inspections, and analytical procedures.
2. Audit Evidence: Working papers capture the audit evidence obtained during the engagement. This evidence may include financial statements, contracts, invoices, bank statements, correspondence, and other relevant documents reviewed or obtained by the auditor.
3. Internal Documentation: Working papers may include internal documentation generated by the audit firm, such as engagement letters, audit plans, risk assessments, and memoranda discussing significant audit issues and decisions.

Features of Working Papers:

1. Organization: Working papers are typically organized in a structured and systematic manner. They may be divided into sections based on different areas of the audit, such as financial statements, internal controls, substantive testing, and management representations.
2. Clear Identification: Each working paper is typically labeled with a unique identifier, such as a reference number or description, to facilitate easy identification and cross-referencing.
3. Date and Signatures: Working papers are dated and often include the names and signatures of the audit team members involved in preparing and reviewing the documents. This provides accountability and a record of who performed the work.
4. Cross-Referencing: Working papers are cross-referenced to other related working papers or supporting documents to establish connections and traceability between different pieces of information and evidence.
5. Documentation of Findings: Working papers document the auditor’s findings, conclusions, and opinions. They include the results of audit procedures, analyses performed, and the auditor’s judgments and interpretations of the evidence.

Purposes of Working Papers:

1. Audit Evidence: Working papers serve as evidence of the work performed during the audit engagement. They demonstrate that the auditor has complied with auditing standards, obtained sufficient appropriate evidence, and conducted the audit with due professional care.
2. Supporting Audit Opinion: Working papers support the auditor’s opinion and provide a basis for the conclusions reached. They help justify the auditor’s judgments, assessments, and decisions to external parties, such as management, shareholders, regulators, and other stakeholders.
3. Review and Quality Control: Working papers facilitate the review and supervision of the audit engagement. They enable other members of the audit team, supervisors, or external reviewers to assess the work performed, provide feedback, and ensure compliance with professional standards and firm policies.
4. Reference for Future Audits: Working papers serve as a reference for future audits of the same entity. They provide information about prior audit procedures, findings, and significant matters. This helps auditors understand the entity’s history, assess changes, and plan subsequent audits effectively.
5. Training and Knowledge Sharing: Working papers can be used for training purposes within the audit firm. They provide examples of proper documentation, audit procedures, and work performed, enabling new auditors to learn from experienced team members and develop their skills.
6. Legal and Regulatory Compliance: Working papers support legal and regulatory compliance requirements. They provide a record of the audit engagement, including the auditor’s work, reasoning, and conclusions. In case of legal disputes, regulatory inquiries, or professional investigations, working papers can serve as evidence to defend the auditor’s actions and opinions.