Organization of work papers in the financial audit

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The Work Papers summarize the outcome of all verifications and document the auditor’s work, direct and guide the auditor’s report
They’Re your test item.

APPROACH TO THE PROBLEM

«Through the audit we obtain evidence of any order that is recorded in the work papers, in such a way that it can be said that without working papers there is no audit»

Objectives
GENERAL OBJECTIVE

To Expose the great importance of the working papers in the financial audit, knowing in which way the order and use of the work papers contributes to the management of the audit, taking it to the efficient drafting of the final report.

SPECIFIC OBJECTIVES

• Define Service Quality Indicators
• Select the tools used by the audit to measure the quality of the services.

BACKGROUND – NIA N º 230
Documentation

Establishes in paragraph 2 the following: «The Auditor shall document matters which are important to support the audit opinion and provide evidence that the audit was conducted in accordance with International Audit Standards»

THEORETICAL BASES

The work papers are the test elements of the performance of the audit work and are also 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 shall measure the Quality Control of the Auditor’s Work».

Hypothesis

The information contained in the work papers is the main record of the work carried out by the auditor and the conclusions reached in respect of significant facts.

DEFINITION OF WORK PAPERS

The work papers compose the evidence of the conduct of the audit work and the decisions taken; And they are also the basis for the preparation of the audit report. Likewise, it is used to measure the performance evaluation of the work team

NIA 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:

• International Audit Standards, to the Audit Standards issued by the Council of Public Accountants of Paraguay and
• To The provisions of the undersecretary of State of Taxation, under its legal powers.

In its planning the auditor must 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 during the course of his work circumstances have occurred that oblige some changes must include an annex complementing such changes, justifying the reasons Forcing you to practice them.

The audit work plan should be sufficiently detailed to guide the development of the analytical Audit program.

Its form and content will vary according to the size of the entity, the complexity of the audit and the approach that the auditor practices.

Conducting the Audit – The Work Papers –

They Are part of the work papers:

• Audit programs,
• Evaluation of internal control,
• Analysis Worksheets,
• Letters of conformation and reports supplied by third parties,
• Comments prepared or obtained by the auditor,
• Reports prepared by the Client (taxpayer administration) for the auditor, among others.
Conducting the Audit – The Work Papers –

The work papers may be stored in printed form, in magnetic files or other suitable means.

The work papers are the sole responsibility of the auditor both in his clothing and in his custody and cannot be disclosed or delivered to third parties, unless expressly authorized by the taxpayer.

IMPORTANCE OF WORK PAPERS

Because of the importance that the work papers have as a basis for the opinion of the auditor and how important they may subsequently have for their own professional responsibility, it is absolutely essential to leave it seated, that the absolute and Unrestricted, of the corresponding work papers is the auditor who has carried out the examination, subject only to the use of such work papers and the information contained therein, to the inescapable demands of the ethical duty of professional secrecy which Every auditor owns.

IMPORTANCE OF WORK PAPERS

Good work papers are of vital importance because:

Assists the auditor in the development of his/her work.
b) Provides an important support for audit opinion and evidence in which audit standards have been met.
c) Allows the executed work to be reviewed by a third party.
d) Fosters a methodical approach to the work being carried out.
In the relatively rare case of legal action, the work papers serve the auditor as evidence to defend his position in matters involving negligence and fraud.
f) Serves as a guide for subsequent audits or future audits to the same customer.
g) Finally, if a client’s records are stolen, they misplaced burn or alter; The complete work papers would prove their validity of the reconstruction of the records.

OBJECTIVE OF THE WORK PAPERS

The Audit work, of Didactic Multimedia S.A. with respect to the objectives of the work papers, expresses the following:

«The fundamental objective of the work papers is to provide evidence of the work procedures performed and the detailed comments that
Support the opinion »

OBJECTIVE OF THE WORK PAPERS

• They Constitute evidence of the work done of the conclusions reached and which served as basis for an opinion on the financial statements, that is, obtained during the auditing process.
• Source of information to obtain details of the balances of the different accounts and income statement.
• Serves as a source for historical information about the company, such as:

– Constitution, changes to capital and bylaws, loan, work contracts, etc.
– A medium that allows through its review:
– Measure the effectiveness and adequacy of the work done.
– Assess the strength of the different conclusions entered in the work papers.
– Determine possible modifications to the scopes entered in the audit programmes.

REQUIREMENTS OF THE WORK PAPERS

ORGANIZED
To facilitate the index or cross-reference of the related figures.

COMPLETE
This means that the scope set out in the audit programmes must be fully complied with.

REQUIREMENTS OF THE WORK PAPERS

READABLE
Papers should be written clearly enough to allow for further review.

ORDERED

Depending on the volume of the audit, the papers must be separate in files that allow their convenient handling; In addition the cards that make up each one of the files must be filed in logical and orderly sequence.

The Work Papers are owned by the Independent Auditor or the Auditing Firm

• The Work Papers, in Paraguay, are subject to review by:

– National Securities Commission;
– Superintendency of Banks;
– Insurance Superintendence;
Comptroller
– National Institute of cooperatives – inCOOP
– Undersecretary of State of Taxation – Resol. 73/2012
• According To The NAGA, the auditor can provide (lend) the work papers to the auditor, successor (predecessor), with authorization of the client’s management.

USEFULNESS OF WORK PAPERS

Help plan and execute the audit.
Help Monitor and revise the audit work.
Provide evidence of the audit work carried out to support the auditor’s opinion.
The work papers represent a permanent history of the work done by the auditor and serve as the basis for their findings and reports.

PRINCIPLES THAT SHOULD GOVERN THE PREPARATION OF THE WORK PAPERS

As should be the Work Papers AS THEY SHOULD BE WORK PAPERS

• Clear and concise.
• Provide an adequate and unambiguous record of the work done.
• Report the reasons for decisions taken on conflicting issues.

HOW THE WORK PAPERS SHOULD BE

• Work papers must be sufficiently complete and must show the following:
– The scope of work.
– Specific information and 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.

ELABORATION AND PRESENTATION OF THE WORK PAPERS
THE CARD

The Document is the representative unit of the Work Papers
The Card is the document containing the analysis, verification and information about the accounts or certain aspects of the business
The Work Papers constitute a set of Certificates

THE CARD AND THE RELATIVE IMPORTANCE

The auditor must have sufficient discretion to entenderacerca whether it is important or not a matter.
If it persists in considering problems as minor, it may accustomed to ignore issues in which it should be carefully stopped.
THE IDENTIFICATION AND RISKS INHERENT OR RELATED TO CERTAIN ASPECTS IN THE AUDITS

The risk may occur depending on the nature of the item being examined or on the basis of the extent of the selective tests to be carried out to ensure that it is properly proceeded at the stage of the transactions or operations being studied or Investigate. Work or tests must be represented on a card.

In the case of the available, for example, there may be some considerations from the point of view of fraudulent manipulation of certain officials of the entity, where there are more probabilities of risk of omission or alteration in the games of Cash and banks, which in the items of fixed assets.

AUDITING PROCEDURES
PRESENCE IN THE MAKING OF PHYSICAL INVENTORIES
INVENTORY TAKING ACT (Model)

In the city of Asunción, at three hours of the afternoon of the 5 of January of 2014, in the local of the company Automotoros of Paraguay S.A., located in the Avda.

Eusebio Ayala n ° 3071, gathered for the Taking of Inventory of the aforementioned company, the Gentlemen:

• Head of Inventory:
Advisors
• A team of twenty inventors suitable for the aforementioned work.
• The Audit Society «Cañete & Asociados» represented by its Manager Lic. María Cañete and the supervisor Lic. William Barron.

The General Inventory of the 2013 exercise of spare parts, accessories, automobiles, workshops and other stocks, was carried out on 2, 3 and 4 of the present month of January 2014, between 8:00 hours until 18:00 hours respectively and was developed according to a plan of Coherent and flexible work, satisfying the expectations of the company, reflecting a minimum margin of error.

It Was taken into account for the inventory all the stocks valued according to computer listing at the end of the period 2013, without obviating any article, therefore our presence in the days of inventory already mentioned, we attest to its fulfillment and fulfillment to Fullness of the work plan established by the company «Automotoros del Paraguay S.A.».
Signatures
P. AUTOMOTIVEs PY S.A. p. CAÑETE & ASOCIADOS

THE WORK PAPERS ACCORDING TO THEIR USE AND CONTENT
ELABORATION AND PRESENTATION OF THE WORK PAPERS, DEPENDING ON THEIR USE AND CONTENT:
• FOR USE:

-Permanent-Use Work Papers
(Permanent Audit Record) and
– Current-use Working Papers (Audit Current Record).

• FOR ITS CONTENT:
– Work Sheet.
– Summaries or summary Cards.
– Details or descriptive Certificates.
– Analytical or verification Certificates

THE WORK PAPERS, DEPENDING ON THEIR USE:

1) Current-Use Working Papers (Audit Dossier): They Are Limited-use working papers for a single audit and are prepared in the course of the same.
2) Permanent-Use Work Papers: They Are as their name implies, those that will be used permanently being useful for the checking of the accounts not only in the period in which they are prepared, but also in future exercises.

THE WORK PAPERS,
DEPENDING ON ITS CONTENT:
– The Parent or Summary Certificate.
– The Sub-Matrix Cards,
Analytical or Summary.
– The Details or Descriptive Certificates.
– The Verification Cards or Sub-Certificates.

MATRIX OR SUMMARY CERTIFICATE

The Matrix or Summary Certificate is the identification card showing the groups or items that are part of the financial statements. They’Re The listings of the major’s accounts with their balances.
They Serve as a summary and guide or index of the work papers that relate to each account. These will contain the figures for the previous year in order to make comparatives.

MATRIX OR SUMMARY CERTIFICATE

Sub-Matrix, analytical or summary cards show the ledger accounts that form a heading. They Are those that contain the first analysis of the States concerning one or several correctors of the worksheets and serve as a nexus between these and other certificates of analysis or verification.
The Detail Cards relate the items that make up a ledger account or any balance.

DETAIL OR DESCRIPTIVE DOCUMENT

VERIFICATION CARD OR SUB-CERTIFICATES

The verification certificates or sub-certificates, contain the work carried out to verify the correction of a game or operation. They Contain the analysis and/or the verification of the data of the summary and detail identification cards, detailed correctors or specific data that appear in these.
These sub-certificates include the description of the audit procedures applied.
When An audit sample is designed, the auditor shall consider the objectives of the audit procedure and the attributes of the universe from which the sample will be extracted.

The Materiality

Materiality must be considered within the concept of «relative importance» in the framework of reference for the preparation and presentation of financial statements of the International Accounting Standards Council – IASB.

The degree of materiality used in planning the nature, extent and opportunity of the auditing procedures is known as «materiality in planning».

Materiality is a relative concept. That is material for an Entity does not mean that it is also for another or that it is material for the fulfillment of a tax does not mean that it is material for another tax.

For this reason, to determine the degree of materiality to a specific taxpayer it is necessary to bear in mind the particular circumstances of the operational and financial situation of that taxpayer.

• Materiality must be defined both in the planning stage of the audit and in evaluating the financial statements taken together.
• The main difference is that when determining materiality in planning, preliminary figures are often used
(normally estimated), while in the evaluation stage, specific issues are assessed in the context of known figures.
• For this reason, setting a figure for materiality in planning does not preclude the auditor in any way in 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 below the PR level. Evia defined as material.
– Materiality –
• Setting A level of materiality in the planning stage does not preclude reviewing that level as the audit progresses.
• The auditor must re-evaluate the level of materiality used in planning the nature, extent and timeliness of his procedures to ensure that he has executed enough work to allow him to issue his audit opinion on the financial statements.
– Materiality –

The basic steps for estimating and defining materiality in planning include the following:

To Obtain a copy of the most recent financial statements in order to exercise or an interim period, financial information from previous years and budgets or forecasts, if applicable.
Use appropriate rules, according to procedures adopted by the auditor in his signature.
C. The exceptions contained in the tax report of the previous financial year.

PERMANENT AUDIT FILE

The Permanent audit file contains all the work papers that keep their importance from one year to the next, including all the information necessary for the audit of the current year and for future reviews of the financial statements.

The object of this file is to provide through documents, the financial and operative history of the client; Provide a source of reference for continuous and recurrent items that need to be reviewed, avoiding the need to read new extensive customer documents; Reduce the annual work of the preparation of new working papers for non-changing items; and separate and organize specialized data for future or subsequent audits, for tax investigations, for projects of changes in the capital structure and for other purposes.

The content of the permanent file varies according to the audit signature, but generally includes the following elements:

• Index or a general information sheet.
• Historical Information of the client.
• Review of accounting and internal control procedures (flowcharts of the main areas; Descriptive memorandum, internal control questionnaires), separating each of the areas.
• Accounting Handbook and account plan.
• 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 AUDIT CURRENT FILE

Is the «Constant Query File». It Is made up of all the Papers, data and correspondences that accumulate between the dates of the financial period.
The content of the Current file varies according to the audit signature,
But it usually includes the following elements:
• Index or a general information sheet.
• Planning File – original documents.
• Auditing firm’s work Papers.
• Work Papers of the interim visit (Evaluation of the system of
Internal Control – Methods of Study: Narrative descriptions, Questionnaires, Flowcharts. Internal Control Letter
• Correspondence and control of confirmations (banks, clients, suppliers, lawyers, insurance)
• Physical inventories, arches, etc.
• General Section – Work papers on the balance of sums and balances.
The content of the Current file varies according to the audit signature, but generally includes the following elements:
Active. Liabilities and Equity.
• Income and Expenses.
• New contracts, summary of the minutes, changes in the client’s writing, statements of accounts.
• Notes on unfinished work. Memo Sheets. Manager’s Points of care.
• The Audit report (final report), the FINANCIAL STATEMENTS and tax Affidavits.
• Time Report (Time control) and expenses.

AUDIT CURRENT FILE

Correspondence and control of confirmations

As An audit procedure, the management and/or management of the company will send a letter to the bank to request a copy of the bank statement and its corresponding confirmation or certificate at a given date to the external auditors who will confront the Bank Reconciliation (This letter of confirmation of bank balances and the respective statement, must be sent directly to the offices of the independent External Auditor).
Some auditors classify the weaknesses of internal control in order of importance, others expose them by areas. The observations in some cases are drafted including the recommendation. In other cases, a recommendation of a general nature followed by examples showing the lack of control is presented.

The same principles as those applicable to the accounting books, as regards their confidentiality, are extended to the work papers of the independent auditor; Which retains them in their possession for their own safeguard, within the rules governing ethics and professional secrecy, so that the fact of obtaining information of a client, it is not advisable to make public knowledge to third parties, except the Customer’s consent and/or relevant legislation.

USE OF IDENTIFICATION MARKS OR KEY IN WORK PAPERS

During the course of an exam, the auditor will use many marks or keys in various shapes and sizes and maybe colors, both in the customer records and in their own work papers.

USE OF IDENTIFICATION MARKS OR KEY IN WORK 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.

MARKS OR KEYS IN AUDITING
MARKS OR KEYS IN AUDIT THE MARKS OR KEYS IN AUDIT USE OF THE INDEXES IN THE WORK PAPERS

The work papers must bear an index and crossover of indices. The Index can take place either at the end of an audit or during this.

EMPLOYMENT OF INDEXES IN THE WORK PAPERS

To facilitate the ordering and archiving of the work papers and their quick localization, it is customary to mark each and every one of them in a visible place.

This Mark receives the name of index and through it one can know of which paper is treated and the place that corresponds to him in his respective record or file, helping its quick location when it is needed later.

BASIC RULES OF CROSS REFERECIACION

• ONLY IDENTICAL FIGURES ARE CROSS-REFERENCED.
• YOU CAN ONLY REFERENCE TOTALS
• ANY CROSS-REFERENCING SHOULD BE DONE IN RED.
• ALWAYS BE DONE IN BOTH DIRECTIONS.
• THE REFERENCE POSITION IN RELATION TO THE REFERENCED NUMBER INDICATES THE DIRECTION OF THE FLOW.

Conclusions

Once The audit work is completed, the total of the work papers must express:

• The Nature and condition of the client’s records and internal control system and the evidence collected by the auditor on the basis of such records.
• The nature of the financial statements, certificates or other information that the client offers to the auditor for examination.
• A system of indices that is essential for the conservation of the working papers in organized files: the permanent files, which contain in an orderly and updated form, the necessary information required in an audit or examination program Special and a current file that contains information about each test performed and at any time supports the report issued.
• The Auditor’s opinion on the basis of the financial statements.
• The necessity in the particular circumstances for the supervision and review of the work performed by an assistant.

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