7.3 Storage of working papers-permanent audit file and current audit file, auditors note book or diary

The storage of working papers in the auditing process typically involves maintaining two main categories: the permanent audit file and the current audit file. Additionally, auditors may use an auditor’s note book or diary for recording important information during the audit. Here’s an overview of each:

1. Permanent Audit File: The permanent audit file contains documentation that is relevant for multiple audit periods and is retained indefinitely. It includes information that is of continuing significance, such as the entity’s organizational structure, articles of incorporation, bylaws, contracts, long-term agreements, and prior years’ financial statements. Other items that may be included are legal documents, correspondence, significant contracts, and historical financial data. The purpose of the permanent audit file is to provide a historical reference and help auditors gain a deeper understanding of the entity’s operations over time.
2. Current Audit File: The current audit file consists of working papers that are specific to the current audit engagement. It includes documentation related to the current year’s financial statements, audit planning, risk assessments, audit procedures performed, substantive testing, internal control evaluation, and the auditor’s findings and conclusions. The current audit file also contains evidence and supporting documentation for the auditor’s opinion on the financial statements for the current period. The current audit file is retained for a specified period, typically a few years, depending on regulatory and professional standards.
3. Auditor’s Note Book or Diary: An auditor’s note book or diary is a tool used by auditors to record important information, instructions, observations, and communications during the audit engagement. It serves as a working document to document discussions with management, notes on significant issues or findings, clarifications sought, audit adjustments, and other relevant details. The auditor’s note book or diary helps auditors maintain an organized record of their activities, thought processes, and any significant matters that arise during the audit. These notes can be referred to when preparing working papers or communicating findings to the engagement team and can also serve as support in case of inquiries or reviews of the audit work.