INTRODUCTION

Audit Report

Definition: An audit report is a written opinion of an auditor regarding an entity's financial

statements. The report is written in a standard format, as mandated by generally accepted
auditing standards (GAAS). GAAS requires or allows certain variations in the report,
depending upon the circumstances of the audit work that the auditor engaged in. The
following report variations may be used:

A clean opinion, if the financial statements are a fair representation of an entity's

financial position.

A qualified opinion, if there were any scope limitations that were imposed upon the
auditor's work.

An adverse opinion, if the financial statements were materially misstated.

A disclaimer of opinion, which can be triggered by several situations. For example,

the auditor may not be independent, or there is a going concern issue with the auditee.

The typical audit report contains three paragraphs, which cover the following topics:
1. The responsibilities of the auditor and the management of the entity.
2. The scope of the audit.
3. The auditor's opinion of the entity's financial statements.
An audit report is issued to a user of an entity's financial statements. The user may rely upon
the report as evidence that a knowledgeable third party has investigated and rendered an
opinion on the financial statements. An audit report that contains a clean opinion is required
by many lenders before they will loan funds to a business. It is also necessary for a publiclyheld entity to attach the relevant audit report to its financial statements before filing them
with the Securities and Exchange Commission.

TYPES OF AUDIT

An audit report is an appraisal of a small businesss complete financial status. Completed by

an independent accounting professional, this document covers a companys assets and
liabilities, and presents the auditors educated assessment of the firms financial position and
future. Audit reports are required by law if a company is publicly traded or in an industry
regulated by the Securities and Exchange Commission (SEC). Companies seeking funding, as
well as those looking to improve internal controls, also find this information valuable. There
are four types of audit reports.
Unqualified Opinion
Often called a clean opinion, an unqualified opinion is an audit report that is issued when an
auditor determines that each of the financial records provided by the small business is free of
any misrepresentations. In addition, an unqualified opinion indicates that the financial records
have been maintained in accordance with the standards known as Generally Accepted
Accounting Principles (GAAP). This is the best type of report a business can receive.
Typically, an unqualified report consists of a title that includes the word independent. This
is done to illustrate that it was prepared by an unbiased third party. The title is followed by
the main body. Made up of three paragraphs, the main body highlights the responsibilities of
the auditor, the purpose of the audit and the auditors findings. The auditor signs and dates the
document, including his address.
Qualified Opinion
In situations when a companys financial records have not been maintained in accordance
with GAAP but no misrepresentations are identified, an auditor will issue a qualified opinion.
The writing of a qualified opinion is extremely similar to that of an unqualified opinion. A
qualified opinion, however, will include an additional paragraph that highlights the reason
why the audit report is not unqualified.
Adverse Opinion
The worst type of financial report that can be issued to a business is an adverse opinion. This
indicates that the firms financial records do not conform to GAAP. In addition, the financial
records provided by the business have been grossly misrepresented. Although this may occur
by error, it is often an indication of fraud. When this type of report is issued, a company must

correct its financial statement and have it re-audited, as investors, lenders and other
requesting parties will generally not accept it.
Disclaimer of Opinion
On some occasions, an auditor is unable to complete an accurate audit report. This may occur
for a variety of reasons, such as an absence of appropriate financial records. When this
happens, the auditor issues a disclaimer of opinion, stating that an opinion of the firms
financial status could not be determined.

Advantages, Disadvantages and Limitations of Audit

It is mandatory for public companies to have statutory financial statements audit. Many
business stakeholders have embraced auditing. So today we will look at the advantages of
having financial statements audit and the disadvantages.

1. Advantages of Audit

1.

Audited accounts are readily accepted by Government authorities like Tax authorities and

Central banks.
2.

By auditing the accounts Errors and frauds can be detected and rectified in time.

3.

Audited accounts carry greater authority than the accounts which have not been audited.

4.

For accessing finance from financial institutions like Banks, previous years audited

accounts are evaluated for determining repayment capability.

5.

Regular audit of account create fear among the employees in the accounts department

and exercise a great moral influence on clients staff thereby restraining them from commit
frauds and errors.
6.

Audited accounts facilitate settlement of claims on the retirement/death of a partner.

7.

In the event of loss of property by fire or on happening of the event insured against,

Audited accounts help in the early settlement of claims from the insurance company.
8.

In case of Public Company where ownership is separated from management, auditing of

accounts reassure the shareholders that accounts have been properly maintained, funds are
utilized for the right purpose and the management have not taken any undue advantage of
their position.

9.

To determine the value of the business in the event of purchase or sales of the business,

audited account will be the treated as the base for the evaluation.
10. The audit of accounts by a qualified auditor also help the management to understand the
financial position of the business and also it will help the management to take decision on
various matters like report in internal control system of the organization or setting up of an
internal audit department etc.
11. If the accounts have been audited by an independent person, disputes between the
management and labor unions on payment of bonus and higher wages can be settled
amicably.
12. In the event of admission of a new partner, audited accounts will facilitate the formation
of terms and conditions for joining the new partner. Last 3 years audited accounts will give a
general idea about the growth and financial position of the business to the new partner.

2. Disadvantages of Audit
1.

The payment of audit fees brings extra cost burden to the organization.

2.

During an audit the auditor requires the attention several company staff and therefore

causes disruption.

3. Limitations of Audit
1.

An audit does not assure future viability of the organization audited

2.

An audit does not assure the effectiveness and efficiency of management.

3.

Auditors express opinion and therefore does not give total assurance of the true fair

presentation of annual reports.

Performance audits:
Safety, security, information systems performance, and environmental concerns are
increasingly the subject of audits. There are now audit professionals who specialize in
security audits and information systems audits. With nonprofit organizations and government
agencies, there has been an increasing need for performance audits, examining their success
in satisfying mission objectives.
Quality audits:
Quality audits are performed to verify conformance to standards through review of objective
evidence. A system of quality audits may verify the effectiveness of a quality management
system. This is part of certifications such as ISO 9001. Quality audits are essential to verify
the existence of objective evidence showing conformance to required processes, to assess
how successfully processes have been implemented, and to judge the effectiveness of
achieving any defined target levels. Quality audits are also necessary to provide evidence
concerning reduction and elimination of problem areas, and they are a hands-on management
tool for achieving continual improvement in an organization.
To benefit the organization, quality auditing should not only report non-conformance and
corrective actions but also highlight areas of good practice and provide evidence of
conformance. In this way, other departments may share information and amend their working
practices as a result, also enhancing continual improvement.
Operations audit:
An operations audit is an examination of the operations of the client's business. In this audit
the auditor thoroughly examines the efficiency, effectiveness and economy of the operations
with which the management of the entity (client) is achieving its objective. The operational

audit goes beyond the internal controls issues since management does not achieve its
objectives merely by compliance of satisfactory system of internal controls. Operational
audits cover any matters which may be commercially unsound. The objective of operational
audit is to examine Three E's, namely: Effectiveness doing the right things with least
wastage of resources. Efficiency performing work in least possible time. Economy
balance between benefits and costs to run the operations.

A control self-assessment is a commonly used tool for completing an operations audit.

FINANCIAL AUDIT
A financial audit is conducted to provide an opinion whether "financial statements" (the
information being verified) are stated in accordance with specified criteria. Normally, the
criteria are international accounting standards, although auditors may conduct audits of
financial statements prepared using the cash basis or some other basis of accounting
appropriate for the organization. In providing an opinion whether financial statements are
fairly stated in accordance with accounting standards, the auditor gathers evidence to
determine whether the statements contain material errors or other misstatements.[1]
The audit opinion is intended to provide reasonable assurance, but not absolute assurance,
that the financial statements are presented fairly, in all material respects, and/or give a true
and fair view in accordance with the financial reporting framework. The purpose of an audit
is to provide an objective independent examination of the financial statements, which
increases the value and credibility of the financial statements produced by management, thus
increase user confidence in the financial statement, reduce investor risk and consequently
reduce the cost of capital of the preparer of the financial statements.
In accordance with the US GAAP, auditors must release an opinion of the overall financial
statements in the auditor's report. Auditors can release three types of statements other than an
unqualified/unmodified opinion. The unqualified auditor's opinion is the opinion that the
financial statements are presented fairly. A qualified opinion is that the financial statements
are presented fairly in all material respects in accordance with US GAAP, except for a
material misstatement that does not however pervasively affect the user's ability to rely on the
financial statements. A qualified opinion can also be issued for a scope limitation that is of
limited significance. Further the auditor can instead issue a disclaimer, because there is
insufficient and appropriate evidence to form an opinion or because of lack of independence.
In a disclaimer the auditor explains the reasons for withholding an opinion and explicitly
indicates that no opinion is expressed. Finally, an adverse audit opinion is issued when the
financial statements do not present fairly due to departure from US GAAP and the departure
materially affects the financial statements overall. In an adverse auditor's report the auditor
must explain the nature and size of the misstatement and must state the opinion that the
financial statements do not present fairly in accordance with US GAAP.

Financial audits are typically performed by firms of practicing accountants who are experts in
financial reporting. The financial audit is one of many assurance functions provided by
accounting firms. Many organizations separately employ or hire internal auditors, who do not
attest to financial reports but focus mainly on the internal controls of the organization.
External auditors may choose to place limited reliance on the work of internal auditors.
Auditing promotes transparency and accuracy in the financial disclosures made by an
organization, therefore would likely reduce such corporations concealmeant of unscrupulous
dealings.
The purpose of a financial statement audit is to add credibility to the reported financial
position and performance of a business. The Securities and Exchange Commission requires
that all entities that are publicly held must file annual reports with it that are audited.
Similarly, lenders typically require an audit of the financial statements of any entity to which
they lend funds. Suppliers may also require audited financial statements before they will be
willing to extend trade credit (though usually only when the amount of requested credit is
substantial).
Audits have become increasingly common as the complexity of the two primary accounting
frameworks, Generally Accepted Accounting Principles and International Financial Reporting
Standards, have increased, and because there have been an ongoing series of disclosures of
fraudulent reporting by major companies.
The primary stages of an audit are:
1. Planning and risk assessment. Involves gaining an understanding of the business and the
business environment in which it operates, and using this information to assess whether there
may be risks that could impact the financial statements.
2. Internal controls testing. Involves the assessment of the effectiveness of an entity's suite of
controls, concentrating on such areas as proper authorization, the safeguarding of assets, and
the segregation of duties. This can involve an array of tests conducted on a sampling of
transactions to determine the degree of control effectiveness. A high level of effectiveness
allows the auditors to scale back some of their later audit procedures. If the controls are
ineffective (i.e., there is a high risk of material misstatement), then the auditors must use

other procedures to examine the financial statements. There are a variety of risk assessment
questionnaires available that can assist with internal controls testing.
3. Substantive procedures. Involves a broad array of procedures, of which a small sampling
are:

Analysis. Conduct a ratio comparison with historical, forecasted, and industry results
to spot anomalies.

Cash. Review bank reconciliation, count on-hand cash, confirm restrictions on bank
balances, issue bank confirmations.

Marketable securities. Confirm securities, review subsequent transactions, verify

market value.

Accounts receivable. Confirm account balances, investigate subsequent collections,

test year-end sales and cutoff procedures.

Inventory. Observe the physical inventory count, obtain confirmation of inventories

held at other locations, test shipping and receiving cutoff procedures, examine paid
supplier invoices, test the computation of allocated overhead, review current
production costs, trace compiled inventory costs to the general ledger.

Fixed assets. Observe assets, review purchase and disposal authorizations, review
lease

documents,

examine

appraisal

reports,

recalculate

depreciation

and

amortization.

Accounts payable. Confirm accounts, test year-end cutoff.

Accrued expenses. Examine subsequent payments, compare balances to prior years,

recompute accruals.

Debt. Confirm with lenders, review lease agreements, review references in board of
directors minutes.

Revenue. Examine documents supporting a selection of sales, review subsequent

transactions, recalculate percentage of completion computations, review the history of
sales returns and allowances.

Expenses. Examine documents supporting a selection of expenses, review subsequent

transactions, confirm unusual items with suppliers.

An audit is the most expensive of all the types of examination of financial statements. The
least expensive is a compilation, followed by a review. Due to its cost, many companies
attempt to downgrade to a review or compilation, though this is only an option if it is
acceptable to the report recipients. Publicly held entities must have their quarterly financial
statements reviewed, in addition to the annual audit.

AUDIT PLANNING (SA 300)

Introduction:
Planning an audit involves establishing the overall audit strategy for the engagement and
developing an audit plan. The objective of auditor is to plan the audit so that it will be
performed in an effective manner. Once the overall plan can be developed to address various
matters identified in the overall audit strategy, considering the need to achieve the audit
objectives through efficient use of auditors resources. Auditor should consider various
matters in developing the overall plan like:

Terms of Engagement,

Nature and Timing of reports,

Applicable legal and statutory requirements,

Accounting policies adopted by the client,

Identification of significant audit areas,

Setting Materiality levels etc. and more.

Auditor needs to obtain level of knowledge of clients business that will enable them to
identify events, transactions and practices that, in their judgment, may have a significant
effect on financial information. Audit plan is more detailed
than overall audit strategy that includes the nature, timing and extent of audit procedures to
be performed by engagement team members. Engagement partner and other key members of
engagement team shall be involved in planning the audit, including planning and
participating in the discussion among engagement team members so as to enhance
effectiveness and efficency of planning process.
Auditor shall plan nature, timing and extent of direction and supervision of engagement team
members and review of their work. Audit planning ideally commences at the conclusion of
previous years audit, and along with related programme, it should be reconsidered for
modification as the audit of their compliance and substantive procedures progress. For an
initial audit, auditor may need to expand the planning activities because the auditor does not
ordinarily have previous experience with the entity that is considered when planning
recurring engagement.
For preparing the Audit Plan the auditor has to do the following Preliminary Planning
Activities
Audit plan
From Wikipedia, the free encyclopedia
Audit planning is a vital area of the audit primarily conducted at the beginning of audit
process to ensure that appropriate attention is devoted to important areas, potential problems
are promptly identified, work is completed expeditiously and work is properly coordinated.
"Audit planning" means developing a general strategy and a detailed approach for the
expected nature, timing and extent of the audit. The auditor plans to perform the audit in an
efficient and timely manner.
Definition

An Audit plan is the specific guideline to be followed when conducting an audit.[2] it helps
the auditor obtain sufficient appropriate evidence for the circumstances, helps keep audit
costs at a reasonable level, and helps avoid misunderstandings with the client.
It addresses the specifics of what, where, who, when and how:

What are the audit objectives?

Where will the audit be done? (i.e. scope)

When will the audit(s) occur? (how long?)

Who are the auditors?

How will the audit be done?

Benefits of Audit Plan

It helps the auditor obtain sufficient appropriate evidence for the circumstances

It helps keep audit costs at a reasonable level.

It helps avoid misunderstandings with the client.

ensure that potential problems are promptly identified

It helps to know the scope of audit program by an Auditor.

Process of Audit Planning

It includes following procedures

Knowledge of client's business

Development of audit strategies or overall plan (who, when and how)

Preparation of audit programme

2 ADVANTAGES OF AUDIT PROGRAMME

It provides the assistant carrying out the audit with total and clear setof instructions of
the work generally to be done.
It is essential, particularly for major audits, to provide a totalperspective of the work
to be performed.
Selection of assistants for the jobs on the basis of compatibilitybecomes easier when
the work is rationally planned, defined andsegregated.
Without a written and pre-determined programme, work is necessarilyto be carried
out on the basis of some mental plan. In such asituation there is always a danger of
ignoring or overlooking certainbooks and records. Under a properly framed
programme, the dangeris significantly less and the audit can proceed systematically.
The assistance, by putting their signature on programme, accepts theresponsibility for
the work carried out by them individually and, ifnecessary, the work done may be
traced back to the assistant.
The principal can control the progress of the various audits in hand byexamination of
audit programmes initiated by the assistants deputedto the jobs for completed work.
It serves as a guide for audits to be carried out in the succeedingyear.
A properly drawn up audit programme serves as evidence in theevent of any charge of
negligence being brought against the auditor. Itmay be of considerable value in
establishing that he exercisedreasonable skill and care that was expected of
professional auditor.
3.7.3 DISADVANTAGES OF AUDIT PROGRAMME
The work may become mechanical and particular parts of theprogramme may be
carried out without any understanding of the object ofsuch parts in the whole audit
scheme.

The programme often tends to becomes rigid and inflexible followingset grooves; the
business may change in its operation of conduct, but theold programme may still be
carried on. Changes in staff or internal controlmay render precaution necessary at
points different from those originallydecided upon.
Inefficient assistants may take shelter behind the programme i.e.,defend deficiencies
in their work on the ground that no instructions in thematter is contained therein.
A hard and fast audit programme may kill the initiative of efficient andenterprising
assistants.
All these disadvantages may be eliminated by imaginative supervision ofthe work carried on
by the assistants; the auditor must have a receptiveattitude as regards the assistants; the
assistants should be encouraged toobserved matters objectively and bring significant matters
to the notice ofsupervisor/principal.
Understanding the Entity and its Enviourment
Obtaining the required knowledge of the business is a continuous and cumulative process of
gathering and assessing the information and relating the resulting knowledge to audit
evidence and information at all stages of audit. For example, although information is gathered
at the planning stage, it is ordinarily refined and added to in later stages of the audit as the
auditor and the members of his audit team learn more about the business.
For continuing engagements, the auditor would update and re-evaluate information gathered
previously, including information in the prior years working papers. The auditor would also
perform procedures designed to identify significant changes that have taken place since the
last audit, and document the same.
Understanding of Accounting process and Control environment
The auditor obtains an understanding of the accounting system sufficient to identify and
understand:

Major classes of transactions in the entitys operations

How such transactions are initiated

Significant accounting records, supporting documents and specific accounts in the

financial statements and

The accounting and financial reporting process, from the initiation of significant
transactions and other events to their inclusion in the financial statements.

The auditor should obtain an understanding of the control environment sufficient to assess
managements attitudes, awareness and actions regarding internal controls and their
importance in the entity. Auditors overall understanding of the entitys internal control
systems sufficient to develop the audit plan.
Assessing Audit Risk
Audit risk has defined as, the risk that the auditor gives an inappropriate audit opinion when
financially statements are material misstated. The auditor has to assess the risk for
determining the extend of audit to be done or extend of sampling to be done, for preparing the
audit plan.
After such above assessing such parameters auditor should summaries the audit plan by way
of audit programme which should set forth the procedure needed to implement the audit plan.
The audit plan may contain the audit objectives for each area and should have sufficient
details to serve as a set of instructions to the assistants involved in the audit.
The auditor may wish to discuss elements of his overall plan and certain audit procedures
with the client to improve efficiency of the audit and to coordinate audit procedures with
work of the clients personnel. The overall audit plan and the audit programme, however,
remains auditors responsibility.
AUDIT DOCUMENTATION (SA 230)
Audit Documentation- Emergence of concept

In audit, the auditor is expected to maintain the systematic track of records to provide a high
level of assurance on the reliability of financial statements. The auditor provides a positive
opinion, which essentially states that based on the work performed; the financial statements
comply with relevant accounting standards and principles. The level of testing procedures to
obtain the evidence necessary to support such an opinion needs to be high. It is essential for
the auditor to design audit plan in such a manner that the audit procedures brings into light all
material and relevant factors that go in as part of the audit and finally finds its place in the
Audit Report. Oral explanations are not sufficient to document auditors work or conclusions.
Auditors should document audit evidence that contradicts or is inconsistent with audit
conclusions. The audit working papers constitute the link between the auditors report and the
clients record. Thus the concept of Audit Documentation came into emergence.
Audit Documentation- Definition & Meaning

As per SA -230 issued by the ICAI

Audit documentation is the working papers prepared and obtained by the auditor and retained
by him in connection with performance of an audit.

As per International Standard on Auditing 230 (Revised)

Audit Documentation is the record of audit procedures performed, relevant audit evidence
obtained, and conclusions the auditor reached.
Audit documentation- A Practical Approach- Audit documentation has to provide the
principal support for the representations in the auditors report and to assist in the planning,
performance, and supervision of the audit engagement. The most fundamental aspect of
documentation is preparation or acquisition of working papers by the auditor in connection
with performance of his audit. The objective of working papers is to record the audit work
from one year to another. Thus the auditor should provide for the entire following essential
features.
Scope and Extent of Working Papers:

The working papers can contain the following information:

1. Clients Name
2. Type of engagement
3. Nature of business
4. Internal control system of the client
5. Reliance on internal control Measures
6. How the knowledge of business was obtained?
7. Clarifications obtained from the client.

The auditor should sufficiently document the matters to give experienced auditors
who were not previously involved in the audit a clear understanding of the work
performed, the evidence obtained and the conclusions reached. Basically the
subsequent matters should be covered.
1. The nature, timing, and extent of the audit procedures performed to comply
with SA s and applicable legal and regulatory requirements,
2. The results of the audit procedures and the audit evidence obtained

Form and Content of Working Papers:

The various aspects of the business environment may affect the process of audit. So
the auditor should look after such things. As per the guidelines issued by the SA -230
the form or content of the working papers are affected by various matters such as
1. The nature of the audit engagement
2. The form of auditors report
3. The nature and complexity of the clients business
4. The nature and condition of clients records and degree of reliance on internal
controls

5. The need in particular circumstances for direction, supervision and review of

work performed by assistants.
6. Extent of judgment required in performing the work and evaluating the results,
for

example,

accounting

estimates

require

greater

judgment

and

commensurately more extensive documentation;

Further, the working papers should record the

1. Audit plan
2. The nature of audit
3. The timing and extent of auditing procedures performed

Significant Matters to be included in Working Papers:

When preparing audit working papers, the auditor of an entity may also find it helpful
and efficient to record various aspects of the audit together on a single working paper,
with cross-references to supporting working papers where appropriate. Examples of
matters that may be documented together in an audit include the understanding of the
entity and its internal control,
1. The overall audit strategy and audit plan,
2. Materiality,
3. Assessed risks,
4. Significant matters noted during the audit, and conclusions reached.
5. Significance of the evidence obtained to the assertion being tested

a.Process of Audit DocumentationThe documentation process goes hand-in-hand with the Audit process. Thus in connection of
above points considered, the actual process of documentation can be divided into three
categories as follows:

a. Pre-audit Documentation
b. Audit ongoing documentation
c. Post-audit Documentation
a. Pre-audit Documentation- Main Features
Pre-audit documentation mainly comprise of the acquisition of the papers necessary for the
Audit purpose such as

Appointment letter from the appointing body

Correspondence letters with the previous auditors

Sharing responsibilities with the other auditors.

b. Audit ongoing Documentation- Main features

The main groups of documentation activities, which are to be completed during the audit
process, are follows:

Preparation of Audit program

Filling of important documents

Correspondence letters with the management

c. Post-audit Documentation- Main Features

The post audit documentation is equally important as it benefits the auditors of subsequent
year. The post-audit activities include:

Letter of reappointment of auditors

Notice of AGM, etc.

d. Significance of Audit Documentation:

1. Aid in Peer Review:

The term Review is defined as subject to a formal inspection or appraisal and
reassessment of the matter in question.
Thus, peer review for chartered accountants would mean evaluation of a colleagues work
professionally. Peer review applies only to practicing Chartered Accountants as Audit and
practicing Chartered Accountants can perform assurance work only.
Peer review is conducted with an idea to suggest improvements in the reporting services
provided unlike auditing and investigation which are conducted with a focus to
comment on the truthfulness of the financial and accounting records.
This leads to strengthening of the audit process and methodology deployed, including
documentation of working papers as the basis for arriving at conclusions on critical matters.
Documentation is the main focus for Peer Review. The experienced auditor with the help of
documentation can very well conduct the audit Peer Review if the Documentation is good.
2. Aid in legal and professional requirements:
The Institute of Chartered Accountants of India has specified certain professional and
technical ethics, which every Chartered Accountant is required to follow. These ethics are
defined by codes of conduct and the standards issued by ICAI. Wherever the Institute feels
that any CA does not follow these ethics, prosecution is initiated against him and if he is
found guilty, the disciplinary actions are taken.
In prosecution cases the Documentation proves to be one of the important evidence.

Specific Purposes & Objective of Audit Documentation:

a. Assisting auditors to plan & perform audit

b. Assisting those responsible to direct, supervise and review the work performed
c. Providing and demonstrating the accountability of those performing the work e.g.
(compliance with applicable standards)

d. Assisting quality control reviewers to understand and assess how the engagement team
reached and supported the significant conclusions
e. Enabling internal and external inspection teams and peer reviewers to assess compliance
with professional, legal and regulatory standards and requirements and
f. Assisting successor auditors and article assistant

Importance of Audit Documentation:

The audit documentation constitute important evidence of matters considered by the auditor
during the course of the audit, some of which may not find a place in his report submitted to
the shareholders or the directors, for the reason that on the basis of an explanation given to
him by the management, he, on being satisfied, decided to drop them. As such,
1. Audit notes can be an important defense for the auditor in the event of an
action for negligence in the discharge of his duties being subsequently brought
against him.
2. The working papers provide guidance to the audit staff with regard to the
manner of checking the schedule.
3. The auditor is able to fix responsibility on the staff member who signs each
schedule checked by him
4. It acts as evidence in the court of law when a charge of negligence is brought
against the auditor.
5. It acts as the process of planning for the auditor so that he can estimate the
time that may be required for checking the schedules.
6. Provide a source of information for non-audit purpose-Working papers can
serve as a repository of information that may assist in non-audit tasks. Audit
working papers often provide convenient summarizations of auditee data and
may be useful in ways unrelated to the original audit assignment. For example,
models of the management control framework may be helpful to auditees as
planning input for system design changes or as a training device for their staff.

Also, the work done by auditors may be useful as input to other studies such as
those performed by program evaluators.
7. Helps in Quality Control Proper Audit Documentation definitely helps in
Quality improvement as well as Quality control. If the significant matters are
properly documented, it will definitely help in the reporting matters with the
utmost accuracy.

Auditors rights and responsibilities:

As specified in the SA -230, the auditor should adopt reasonable procedures for custody and
confidentiality of his working papers and should retain them for a period of time sufficient to
meet the needs of his practice and satisfy any associated legal or professional requirements of
record retention.
Sometimes, the clients and the other auditors seek access to their audit working papers. At
that point, the auditor should be aware of his rights as specified in SA -230 as follows:
1. The paragraph 13 therein says, Working Papers are the property of the
Auditor. However the auditor may at his discretion, make portions of or
extracts from are working papers available to his client and other auditors.
2. It is provided in paragraph 14 that the Auditor should adopt reasonable
procedures for custody and confidentiality of his working papers
3. Part 1 of the second schedule to the Chartered Accountants Act, 1949,
provides that a Chartered Accountant in practice shall be deemed to be guilty
of professional misconduct, if he discloses information acquired in the course
of his professional engagement to any person other than his client, without
consent of his client or otherwise than as required by any law for the time
being in force.
4. Even the client does not have a right to access the working papers of the
auditor. However the auditor may at his discretion make portions of or extracts
from his working papers available to the client.

To what extent should an audit be planned?

According to ISA 300, the nature and extent of planning activities will vary according:
i]

Size and complexity of the entity,

ii]

The auditors previous experience with the entity, and

iii]

Changes in circumstances that occur during the audit engagement.

When to plan
As is common in planning for any other activity, it should be noted that Planning is not a
discrete phase of an audit, but rather a continual and iterative process that often begins shortly
after (or in connection with) the completion of the previous audit and continues until the
completion of the current audit engagement. However, in planning an audit, the auditor
considers the timing of certain planning activities and audit procedures that need to be
completed prior to the performance of further audit procedures. For example, the auditor
plans the discussion among engagement team members:
i]

The analytical procedures to be applied as risk assessment procedures,

ii]

The obtaining of a general understanding of the legal and regulatory framework

applicable to the

iii]

Entity and how the entity is complying with that framework,

iv]

The determination of materiality,

v]

The involvement of experts, and

vi]

The performance of other risk assessment procedures

Prior to identifying and assessing the risks of material misstatement and performing further
audit procedures at the assertion level for classes of transactions, account balances, and
disclosures that are responsive to those risks.
Preliminary Engagement Activities
Audit planning is preceded by performance of the following activities before beginning of the
current audit engagement:
i]

Perform procedures regarding the continuance of the client relationship and the specific
audit engagement

ii]

Evaluate compliance with ethical requirements, including independence

iii]

Establish an understanding of the terms of the engagement

The purpose of performing these preliminary engagement activities is to help ensure that the
auditor has considered any events or circumstances that may adversely affect the auditors
ability to plan and perform the audit engagement to reduce audit risk to an acceptably low
level. Performing these preliminary engagement activities helps to ensure that the auditor
plans an audit engagement for which:
i]

The auditor maintains the necessary independence and ability to perform the
engagement.

ii]

There are no issues with management integrity that may affect the auditors willingness
to continue the engagement.

iii]

There is no misunderstanding with the client as to the terms of the engagement.

Planning Activities
These involve:
i]

Establishment of the Overall Audit Strategy

ii]

Development of an Audit plan

Overall audit strategy

The overall audit strategy sets the scope, timing and direction of the audit, and guides the
development of the more detailed audit plan. The establishment of the overall audit strategy
involves:
a] Determining the characteristics of the engagement that define its scope, such as the
financial reporting framework used, industry-specific reporting requirements and the
locations of the components of the entity;
b] Ascertaining the reporting objectives of the engagement to plan the timing of the audit
and the nature of the communications required, such as deadlines for interim and final
reporting, and key dates for expected communications with management and those
charged with governance; and
c] Considering the important factors that will determine the focus of the engagement teams
efforts, such as determination of appropriate materiality levels, preliminary identification
of areas where there may be higher risks of material misstatement, preliminary
identification of material components and account balances, evaluation of whether the
auditor may plan to obtain evidence regarding the effectiveness of internal control, and
identification of recent significant entity-specific, industry, financial reporting or other
relevant developments.

In developing the overall audit strategy, the auditor should consider the results of preliminary
engagement activities and, where practicable, experience gained on other engagements
performed for the entity.

The following are examples of matters the auditor may consider in establishing the overall
audit strategy for an engagement.
Scope of the Audit Engagement
The auditor may consider the following matters when establishing the scope of the audit
engagement:

The financial reporting framework on which the financial information to be audited

has been prepared, including any need for reconciliations to another financial
reporting framework.

Industry-specific reporting requirements such as reports mandated by industry

regulators.

The expected audit coverage, including the number and locations of components to be
included.

The nature of the control relationships between a parent and its components that
determine how the group is to be consolidated.

The extent to which components are audited by other auditors.

The nature of the business segments to be audited, including the need for specialized
knowledge.

The reporting currency to be used, including any need for currency translation for the
financial information audited.

The need for a statutory audit of standalone financial statements in addition to an

audit for consolidation purposes.

The availability of the work of internal auditors and the extent of the auditors
potential reliance on such work.

The entitys use of service organizations and how the auditor may obtain evidence
concerning the design or operation of controls performed by them.

The expected use of audit evidence obtained in prior audits, for example, audit
evidence related to risk assessment procedures and tests of controls.

The effect of information technology on the audit procedures, including the

availability of data and the expected use of computer-assisted audit techniques.

The coordination of the expected coverage and timing of the audit work with any
reviews of interim financial information and the effect on the audit of the information
obtained during such reviews.

The discussion of matters that may affect the audit with firm personnel responsible for
performing other services to the entity.

The availability of client personnel and data.

Reporting Objectives, Timing of the Audit and Communications Required

The auditor may consider the following matters when ascertaining the reporting objectives of
the engagement, the timing of the audit and the nature of communications required:

The entitys timetable for reporting, such as at interim and final stages.

The organization of meetings with management and those charged with governance to
discuss the nature, extent and timing of the audit work.

The discussion with management and those charged with governance regarding the
expected type and timing of reports to be issued and other communications, both
written and oral, including the auditors report, management letters and
communications to those charged with governance.

The discussion with management regarding the expected communications on the

status of audit work throughout the engagement and the expected deliverables
resulting from the audit procedures.

Communication with auditors of components regarding the expected types and timing
of reports to be issued and other communications in connection with the audit of
components.

The expected nature and timing of communications among engagement team

members, including the nature and timing of team meetings and timing of the review
of work performed.

Whether there are any other expected communications with third parties, including
any statutory or contractual reporting responsibilities arising from the audit.

Direction of the Audit

The auditor may consider the following matters when setting the direction of the audit:

With respect to materiality:

o Setting materiality for planning purposes.
o Setting and communicating materiality for auditors of components.
o Reconsidering materiality as audit procedures are performed during the course
of the audit.
o Identifying the material components and account balances.

Audit areas where there is a higher risk of material misstatement.

The impact of the assessed risk of material misstatement at the overall financial
statement level on direction, supervision and review.

The selection of the engagement team (including, where necessary, the engagement
quality control reviewer) and the assignment of audit work to the team members,
including the assignment of appropriately experienced team members to areas where
there may be higher risks of material misstatement.

Engagement budgeting, including considering the appropriate amount of time to set

aside for areas where there may be higher risks of material misstatement.

The manner in which the auditor emphasizes to engagement team members the need
to maintain a questioning mind and to exercise professional skepticism in gathering
and evaluating audit evidence.

Results of previous audits that involved evaluating the operating effectiveness of

internal control, including the nature of identified weaknesses and action taken to
address them.

Evidence of managements commitment to the design and operation of sound internal

control, including evidence of appropriate documentation of such internal control.

Volume of transactions, which may determine whether it is more efficient for the
auditor to rely on internal control.

Importance attached to internal control throughout the entity to the successful

operation of the business.

Significant business developments affecting the entity, including changes in

information technology and business processes, changes in key management, and
acquisitions, mergers and divestments.

Significant industry developments such as changes in industry regulations and new

reporting requirements.

Significant changes in the financial reporting framework, such as changes in

accounting standards.

Other significant relevant developments, such as changes in the legal environment

affecting the entity.

The process of developing the overall audit strategy helps the auditor to ascertain the nature,
timing and extent of resources necessary to perform the engagement. The overall audit
strategy sets out clearly:

i]

The resources to deploy for specific audit areas, such as the use of appropriately
experienced team members for high risk areas or the involvement of experts on
complex matters;

ii]

The amount of resources to allocate to specific audit areas, such as the number of team
members assigned to observe the inventory count at material locations, the extent of
review of other auditors work in the case of group audits, or the audit budget in hours
to allocate to high risk areas;

iii]

When these resources are deployed, such as whether at an interim audit stage or at key
cut-off dates; and

iv]

How such resources are managed, directed and supervised, such as when team briefing
and debriefing meetings are expected to be held, how engagement partner and manager
reviews are expected to take place (for example, on-site or off-site), and whether to
complete engagement quality control reviews.

Once the overall audit strategy has been established, the auditor is able to start the
development of a more detailed audit plan to address the various matters identified in the
overall audit strategy.
The Audit Plan
The audit plan is more detailed than the overall audit strategy and includes the nature, timing
and extent of audit procedures to be performed by engagement team members in order to
obtain sufficient appropriate audit evidence to reduce audit risk to an acceptably low level.
Documentation of the audit plan also serves as a record of the proper planning and
performance of the audit procedures that can be reviewed and approved prior to the
performance of further audit procedures.
The audit plan includes:
i]

A description of the nature, timing and extent of planned risk assessment procedures
sufficient to assess the risks of material misstatement,

ii]

A description of the nature, timing and extent of planned further audit procedures at the
assertion level for each material class of transactions, account balance, and disclosure.
The plan for further audit procedures reflects the auditors decision whether to test the
operating effectiveness of controls, and the nature, timing and extent of planned
substantive procedures; and

iii]

Such other audit procedures required to be carried out for the engagement in order to
comply with ISAs (for example, seeking direct communication with the entitys
lawyers).

The 10 Steps in Planning an Audit

The steps in planning an audit include (Planning Procedures):
1. Basic discussions with the client about the nature of the engagement and the client's
business and industry are performed first, and the auditor meets the key employees, or
new employees of a continuing client. The overall audit strategy or the timing of the audit
may be discussed, but don't discuss specific audit procedures.
2. Review of audit documentation from previous audits performed by the accounting
firm or a predecessor auditor (if the latter makes these audit documentation available) will
assist in developing an outline of the audit program.
3. Ask about recent developments in the company such as mergers and new product
lines which will cause the audit to differ from earlier years.
4. Interim financial statements are analyzed to identify accounts and transactions that
differ from expectations (based on factors such as budgets or prior periods). The
performance of such analytical procedures is mandatory in the planning of an audit to
identify accounts that may be misstated and that deserve special emphasis in the audit
program.

5. Non-audit personnel of the accounting firm who have provided services (such as tax
preparation) to the client should be identified and consulted to learn more about the client.
6. Staffing for the audit should be determined and a meeting held to discuss the
engagement.
7. Timing of the various audit procedures should be determined. For example, internal
control testing needs to be performed early in the engagement, inventory counts need to
be performed at or near the balance sheet date and the client representation letter cannot
be obtained until the end of the audit fieldwork.
8. Outside assistance needs should be determined, including the use of a specialist as
required (a tax practitioner or an information technology (IT) professional) and the
determination of the extent of involvement of the internal auditors of the client.
9. Pronouncements on accounting principles and audit guides should be read or
reviewed to assist in the development of complete audit programs fitting the unique needs
of client's business and industry.
10. Scheduling with the client is needed to coordinate activities. For example, clientprepared schedules need to be ready when the auditor is expected to examine them, and
the client needs to be informed of dates when they will be prohibited from accessing bank
safe deposit boxes to ensure the integrity of counts of securities held at banks.

7 Major Phases of Audit [of Financial Statements]

Phase-1. Audit Planning

Audit planning involves developing an overall strategy for performing the audit. During
planning auditors establish an understanding with their client as to the nature of services to be
provided and the responsibilities of each partythis is ordinarily accomplished through use
of an engagement letter. In addition, they develop an overall audit strategy, an audit plan, and
an audit program.
Planning continues throughout the entire audit as the auditor accumulates sufficient
appropriate audit evidence to support the audit opinion.
Phase-2. Obtain an Understanding of the Client and Its Environment [Including Internal
Control]
Auditors must attain a sufficient background to assess the risk of material misstatement of the
financial statements and to design the nature, timing, and extent of further audit procedures.
Risk assessment procedures are used here and include inquiries of management and others
within the entity, analytical procedures, observation and inspection, and other procedures.

Obtaining an understanding of the nature of internal control is an essential part of this

understanding, as it allows the auditor to identify areas that may be misstated and to design
other procedures based on characteristics of the existing system.
Phase-3. Assess Risks of Misstatement and Design Further Audit Procedures
Auditors use the information collected while obtaining their understanding of the client and
its environment to identify classes of transactions (transaction classes), account balances, and
disclosures that might be materially misstated. Assessing the risks of misstatement (the risk
assessment) is performed both at the overall financial statement level and at the relevant
assertion level and includes considering:

What could go wrong?

How likely it is that it will go wrong?

What are the likely amounts involved?

Risk assessment provides the auditors with evidence on potential risks of material
misstatement. The risks of material misstatement are composed of inherent and control risks
for relevant assertions. Inherent risk is the susceptibility of a relevant assertion to material
misstatement, assuming that there are no related controls. Inherent risk arises for a variety of
reasons including the business risk faced by management, the possibility of material
misstatement due to fraud, and significant measurement uncertainty in accounting estimates
and in non-routine transactions.
Control risk is the risk that a material misstatement could occur in a relevant assertion
and not be prevented or detected on a timely basis by the entitys internal control.

After analyzing the design and implementation of internal control, the auditors must decide
whether the system appears adequate to prevent or detect and correct material misstatements.
For example, if the auditors believe that internal control is weak for an important area (that is,
control risk is high), they will assess the risk of material misstatement as high. On the other
hand, if the system seems capable of preventing or detecting and correcting misstatements,

the auditors may conclude that internal control may be strong. But in this case they must
determine that it is strong by performing tests of controls.
Based on the assessed risks of misstatement for various transactions, account balances, and
disclosures, and on various requirements to perform certain audit procedures regardless of the
individual company risk assessment, the auditors will design and perform further audit
procedurestests of controls and substantive procedures.

Phase-4. Perform Tests of Controls

Tests of controls are performed to determine whether key controls are properly designed and
operating effectively.
To illustrate a test of a control, consider the control activity in which the accounting
department accounts for the serial sequence of all shipping documents before preparing the
related journal entries. The purpose of this control is to ensure that each shipment of
merchandise is recorded in the accounting records (i.e., to ensure the completeness of
recorded sales and accounts receivable).
Phase-5. Perform Substantive ProceduresGeneral
Substantive procedures (also referred to as substantive tests) are used to substantiate
account balances. Substantive procedures restrict detection risk, the risk that audit
procedures will incorrectly lead to a conclusion that a material misstatement does not exist in
an account balance when in fact such a misstatement does exist.
While tests of controls, as noted above, provide evidence as to whether controls are operating
effectively, substantive procedures provide evidence as to whether actual account balances
are proper. The auditors reliance on substantive procedures to achieve an audit objective
may be derived from (1) substantive analytical procedures, and (2) tests of details of account
balances, transactions, and disclosures as they are described in more detail below:

Substantive proceduresAnalytical procedures. Analytical procedures used as

substantive procedures are used to obtain evidential matter about particular assertions
related to account balances or classes of transactions. In these tests auditors gather

evidence about relationships among various accounting and non-accounting data such
as industry and economic information. When unexpected changes occur (or expected
changes do not occur) in these relationships, an auditor obtains an explanation and
investigates.

Substantive proceduresTests of details of account balances, transactions and

disclosures. The objective of these tests is to detect misstatements in the financial
statementsmore specifically, misstatements of relevant assertions relating to
transactions, account balances, and disclosures. The details supporting financial
statement accounts are tested to obtain assurance that material misstatements do not
exist. Sending confirmations for year-end receivable accounts is an example of a
substantive test of details.

Phase-6. Complete the Audit

Auditors perform a number of procedures near the end of the audit. For example, evidence is
aggregated and evaluated for sufficiency.
Analytical procedures are performed (again) to assist the auditor in assessing conclusions
reached and for evaluating overall financial statement presentation.
Final decisions are made as to required financial statement disclosures and as to the
appropriate audit report.
Phase-7. Audit Report
A standard unqualified audit report is issued by CPAs when their examination and the results
thereof are satisfactory. This standard unqualified report is modified as the audit examination
deviates from normal, or as the financial statements fail to comply with generally accepted
accounting principles (GAAP).

Changes to Planning Decisions During the Course of the Audit

As planning is not static. the overall audit strategy and the audit plan should be updated and
changed as necessary during the course of the audit. It is acknowledged by ISA 300 that as a
result of unexpected events, changes in conditions, or the audit evidence obtained from the
results of audit procedures, the auditor may need to modify the overall audit strategy and
audit plan, and thereby the resulting planned nature, timing and extent of further audit
procedures. Information may come to the auditors attention that differs significantly from the
information available when the auditor planned the audit procedures. For example, the
auditor may obtain audit evidence through the performance of substantive procedures that
contradicts the audit evidence obtained with respect to the testing of the operating
effectiveness of controls. In such circumstances, the auditor re-evaluates the planned audit
procedures, based on the revised consideration of assessed risks at the assertion level for all
or some of the classes of transactions, account balances or disclosures.
AUDITING
Planning for the Direction, Supervision and Review
ISA 300 requires the auditor to plan the nature, timing and extent of direction and supervision
of engagement team members and review of their work.
The nature, timing and extent of the direction and supervision of engagement team members
and review of their work vary depending on many factors, including:

i]

The size and complexity of the entity,

ii]

The area of audit,

iii]

The risks of material misstatement, and

iv]

The capabilities and competence of personnel performing the audit work.

The auditor should plan the nature, timing and extent of direction and supervision of
engagement team members based on the assessed risk of material misstatement. As the
assessed risk of material misstatement increases, a given area of the audit, the auditor
ordinarily increases the extent and timeliness of direction and supervision of engagement
team members and performs a more detailed review of their work. Similarly, the auditor
should plan the nature, timing and extent of review of the engagement teams work based on
the capabilities and competence of the individual team members performing the audit work.
In audits of small entities, an audit may be carried out entirely by the audit engagement
partner (who may be a sole practitioner). In such situations, questions of direction and
supervision of engagement team members and review of their work do not arise as the audit
engagement partner, having personally conducted all aspects of the work, is aware of all
material issues.
The audit engagement partner (or sole practitioner) nevertheless needs to be satisfied that the
audit has been conducted in accordance with ISAs. Forming an objective view on the
appropriateness of the judgments made in the course of the audit can present practical
problems when the same individual also performed the entire audit. When particularly
complex or unusual issues are involved, and the audit is performed by a sole practitioner, it
may be desirable to plan to consult with other suitably-experienced auditors or the auditors
professional body.

Documentation of the planning activities

ISA 300 requires the auditor to document the overall audit strategy and the audit plan,
including any significant changes made during the audit engagement.
The documentation of the overall audit strategy records the key decisions considered
necessary to properly plan the audit and to communicate significant matters to the
engagement team. For example, the auditor may summarize the overall audit strategy in the
form of a memorandum that contains key decisions regarding the overall scope, timing and
conduct of the audit.
The documentation of the audit plan is sufficient to demonstrate the planned nature, timing
and extent of risk assessment procedures, and further audit procedures at the assertion level
for each material class of transaction, account balance, and disclosure in response to the
assessed risks. The auditor may use standard audit programs or audit completion checklists.
However, when such standard programs or checklists are used, the auditor appropriately
tailors them to reflect the particular engagement circumstances.
The documentation of any significant changes to the originally planned overall audit strategy
and to the detailed audit plan includes the reasons for the significant changes and the
auditors response to the events, conditions, or results of audit procedures that resulted in
such changes. For example, the auditor may significantly change the planned overall audit
strategy and the audit plan as a result of a material business combination or the identification
of a material misstatement of the financial statements. A record of the significant changes to
the overall audit strategy and the audit plan, and resulting changes to the planned nature,
timing and extent of audit procedures, explains the overall strategy and audit plan finally
adopted for the audit and demonstrates the appropriate response to significant changes
occurring during the audit.

The form and extent of documentation depend on such matters as the size and complexity of
the entity, materiality, the extent of other documentation, and the circumstances of the
specific audit engagement.

Communications with Those Charged with Governance and Management

The auditor may discuss elements of planning with those charged with governance and the
entitys management. These discussions may be a part of overall communications required to
be made to those charged with governance of the entity or may be made to improve the
effectiveness and efficiency of the audit. Such discussions ordinarily include the overall audit
strategy and timing of the audit, including any limitations thereon, or any additional
requirements. Discussions with management often occur to facilitate the conduct and
management of the audit engagement (for example, to coordinate some of the planned audit
procedures with the work of the entitys personnel). It is cautioned that although these
discussions often occur, the overall audit strategy and the audit plan remain the auditors
responsibility.
It is important to note that when discussions of matters included in the overall audit strategy
or audit plan occur, care is required in order to not compromise the effectiveness of the
audit. For example, the auditor considers whether discussing the nature and timing of
detailed audit procedures with management compromises the effectiveness of the audit by
making the audit procedures too predictable.
AUDITING
Additional Considerations in Initial Audit Engagements
The auditor should perform the following activities prior to starting an initial audit:
i]

Perform procedures regarding the acceptance of the client relationship and the specific
audit engagement

ii]

Communicate with the previous auditor, where there has been a change of auditors, in
compliance with relevant ethical requirements.

The purpose and objective of planning the audit are the same whether the audit is an initial or
recurring engagement. However, for an initial audit, the auditor may need to expand the
planning activities because the auditor does not ordinarily have the previous experience with
the entity that is considered when planning recurring engagements. For initial audits,

additional matters the auditor may consider in developing the overall audit strategy and audit
plan include the following:
i]

Unless prohibited by law or regulation, an arrangement to be made with the previous

auditor, for example, to review the previous auditors working papers.

ii]

Any major issues (including the application of accounting principles or of auditing and
reporting standards) discussed with management in connection with the initial selection
as auditors, the communication of these matters to those charged with governance and
how these matters affect the overall audit strategy and audit plan.

iii]

The planned audit procedures to obtain sufficient appropriate audit evidence regarding
opening balances [ISA 510, Initial EngagementsOpening Balances].

iv]

The assignment of firm personnel with appropriate levels of capabilities and

competence to respond to anticipated significant risks.

v]

Other procedures required by the firms system of quality control for initial audit
engagements (for example, the firms system of quality control may require the
involvement of another partner or senior individual to review the overall audit strategy
prior to commencing significant audit procedures or to review reports prior to their
issuance).

Tips for Auditors on documentation / working papers

General guidelines for the preparation of working papers are:
a) Clarity and Understanding -As a preparer of audit documentation, step back and read your
work objectively. Would it be clear to another auditor?
Working papers should be clear and understandable without supplementary oral explanations.
With the information the working papers reveal, a reviewer should be able to readily
determine their purpose, the nature and scope of the work done and the preparers
conclusions.
b) Completeness and Accuracy As a reviewer of documentation, if you have to ask the audit
staff basic questions about the audit, the documentation probably does not really serve the
purpose.
Work papers should be complete, accurate, and support observations, testing, conclusions,
and recommendations. They should also show the nature and scope of the work performed.
c) Pertinence Limit the Information in working papers to matters that are important and
necessary to support the objectives and scope established for the assignment.
d) Logical Arrangement File the Working papers in a logical order.
e) Legibility and Neatness Be neat in your work. Working papers should be legible and as
neat as practical. Sloppy work papers may lose their worth as evidence. Crowding and
writing between lines should be avoided by anticipating space needs and arranging the work
papers before writing.

f) Safety- Keep your work papers safe and retrievable

g) Initial and Date- Put your initials and date on every working paper
h) Summary of conclusions- Summarize the results of work performed and identify the
overall significance of any weaknesses or exceptions found.

Epilogue

It is clear from the above discussion that the Proper Documentation creates more
opportunities to offer new services. It helps in improving the writing and communication
skills of auditors and assistants. It acts as a reminder to clients of what has been done for
them thus helping the auditors.
In general it is opined that this concept of Audit Documentation provides organizational
flexibility to enable the professional expertise and entrepreneurial initiative to combine,
organize and operate in a flexible, innovative and efficient manner. It is needless to say that
such a measure is justified in the context of global economic trends that facilitates
investments and provision of services to flow across borders for the practicing members of
The Institute of Chartered Accountants of India.