Workpapers:
Documenting Internal
Audit Activities
ACT3642
1/2009
A.Phassawan S.
Agenda
 Importance of Workpapers
 Functions of Workpapers
 Workpaper Content and Organization
 Workpaper Preparation Techniques
 Workpaper Review Process
Importance of Workpapers
 Workpapers are the written records kept by internal
auditors that contain the documentation, reports,
correspondence, and other sample materials
gathered or accumulated during the internal audit.
 The term workpaper is an auditor expression that
describes a physical or computer file that includes
the schedules, analyses, and copies of document
prepared as a part of an audit.
Importance of Workpapers
 The common nature of all workpapers is that they are
the evidence used to describe the results of an
internal audit.

They should be formally retained for subsequent
reference and substantiation of reported audit
conclusions and recommendations.
 As a bridge between actual internal audit
procedures and the reports issued, workpapers
are a means to an end.
Importance of Workpapers
 Workpapers are created to fit particular audit tasks
and are subject to a great deal of flexibility.

Workpapers must support and document the purposes
and activities of internal auditor.
 Workpapers are the only record of that audit work
performed, and they may provide future evidence of
what did and did not happen in the audit at some
point in time.
Agenda
 Importance of Workpapers
 Functions of Workpapers
 Workpaper Content and Organization
 Workpaper Preparation Techniques
 Workpaper Review Process
Functions of Workpapers
 The auditor forms an audit conclusion and opinion
that are reported to the management, usually in the
form of audit findings and recommendations
published in an internal audit report.

To support the auditor’s assertions and conclusions, the
audit evidence, documented in the auditor’s workpapers,
should be prepared.
 The objective of workpapers is to document an
adequate audit that was conducted following
professional standards.
Functions of Workpapers

The auditor can better understand the overall role of
workpapers in the audit process by considering the
major functions these papers serve:
1.
2.
3.
4.
5.
6.
7.
8.
Basis for planning an audit
Record of audit work performed
Use during the audit
Description of situations of special interest
Support for specific audit conclusions
Reference source
Staff appraisal
Audit coordination
Functions of Workpapers
1.
Basis for planning an audit

Workpapers from prior audit provide the auditor with
background information for conducting a current review in
the same overall area.

They may contain descriptions of the entity, evaluation of IA,
time budgets, audit program used, and other results of past
audit work.
Functions of Workpapers
2.
Record of audit work performed

Workpapers describe the current audit work performed and
reference it to an audit program.

Even if the audit is of a special nature, such as a fraud
investigation where there may not be a formal audit
program, a record should be established as the auditing
work is actually carried out.
Functions of Workpapers
3.
Use during the audit

The workpapers prepared play a direct role in carrying out
the specific audit effort.

For example, a flowchart might be prepared and then used
to provide guidance for a further review of the actual
activities in some process.
Functions of Workpapers
4.
Description of situations of special interest

As the audit work is carried out, situations may occur that
have special significance in such areas as:
 Compliance with policies and procedures,
 Accuracy,
 Efficiency,
 Personnel performance, or
 Potential cost savings.
Functions of Workpapers
5.
Support for specific audit conclusions

The final product of most internal audits is a formal audit
report containing findings and recommendations.

The workpapers should provide sufficient evidential matter
to support the specific audit findings that would be included
in an audit report.
Functions of Workpapers
6.
Reference source

Workpapers can answer additional questions raised by
management or by external auditors.

They also provide basic background materials that may be
applicable to future audits of the particular entity or activity.
Functions of Workpapers
7.
Staff appraisal

The performance of staff members during an audit-including
the ability to gather and organize data, evaluate it, and
arrive at conclusions-is directly reflected in the workpapers.
8.
Audit coordination

An internal auditor may exchange workpapers with external
auditors, each relying on the other’s work.
Government auditors, in regulatory reviews of internal
controls, may request to examine the IA’s workpapers.

Functions of Workpapers
(i) Workpaper standards
 According to IIA standards, internal auditors should
record relevant information to support the
conclusions and engagement results.

Based on practice advisories, workpapers can
provide supporting information.
Functions of Workpapers
(i) Workpaper standards
 An internal audit department should develop its own
workpaper standards that are consistent with the IIA
standards.

Since workpapers will be used by other members of
IA function, including management and QA, as well
as external auditors and legal functions, the
workpapers should follow a consistent set of
standards.
Functions of Workpapers
(i) Workpaper standards
 As following the standards, workpapers should be
able to stand alone,


so that an authorized outside party can read through them
and understand the objectives of the audit, the work
performed, and any outstanding issues or findings.
Workpapers should be concerned with the following areas:
(i) Relevant to audit objectives, (ii) Condensation of detail, (iii)
Clarity of presentation, (iv) Workpaper accuracy, (v) Action
on open items, and (vi) Standards of form.
Functions of Workpapers
Concerned areas in workpapers
 Relevant to audit objectives

The content must be relevant to both the total audit
assignment and the specific objectives of the particular
portion of the review.

There is no need for materials that do not contribute to
the objectives of the specific audit performed.
Functions of Workpapers
Concerned areas in workpapers
 Condensation of detail

Condensation and careful summarization of detail
reduces the bulk of workpapers and makes their later use
more efficient.

A total summary with test results, some sample details,
and a copy of the computer program used may be
sufficient.
Functions of Workpapers
Concerned areas in workpapers
 Clarity of presentation


To present clear and understandable material, auditors
and their supervisors should review workpaper
presentations on an ongoing basis and make
recommendations for improvements.
Workpaper accuracy

Accuracy is essential for all audit schedules and other
quantitative data because workpapers may be used at
any time in the future to answer questions.
Functions of Workpapers
Concerned areas in workpapers
 Action on open items

Questions are frequently raised during an audit, as part
of the workpaper notes, or information is disclosed that
requires follow-up.

There should be no open items in workpapers on
completion of the audit

All workpaper items should either be cleared or formally
documented for future audit actions.
Functions of Workpapers
Concerned areas in workpapers
 Standards on form

Workpapers must be prepared in a consistent format.
The standards of form should include:
 Preparation of headings
 Organization
 Neatness and legibility
 Cross-indexing
Functions of Workpapers
(ii) Workpaper formats
 The workpaper can be manually prepared and
developed through word-processing software.

Workpaper pages should be titled, dated, initialed by
the preparer, and prepared in a neat and orderly
manner.

Exhibit 15.1 shows substance and format standards.
Agenda
 Importance of Workpapers
 Functions of Workpapers
 Workpaper Content and Organization
 Workpaper Preparation Techniques
 Workpaper Review Process
Workpaper Content and
Organization
a) Workpaper document organization
 A typical audit will involve gathering a large number
of materials to document the audit process.

The form and content of those individual
workpapers may vary greatly.

Three types of documents are organized: (i)
Permanent file, (ii) Administrative file, and (iii) Audit
procedure file
Workpaper Content and
Organization
(i)

Permanent files
A permanent workpaper file contains data of a
historical or continuing nature pertinent to current
audits.
 Overall
organization charts of the audit unit
 Charts of accounts and copies of major policies and
procedures
 Copies of last audit report, the audit program used, and
any follow-up comments
 F/S about the entity and other useful analytical data
 Information about the audit unit such as major products,
processes.
Workpaper Content and
Organization
Permanent files
 A permanent file is not meant to be permanent in
that it will never change; rather, it provides the
auditor a source of background material to help plan
the new audit.
(i)

The permanent file is a source of continuity to tie
audits together over time. Exhibit 15.2 shows
example.
Workpaper Content and
Organization
(ii) Administrative files
(iii) Audit Procedures files

These files and folders record the actual audit work
performed and vary with the type and nature of the
audit assignment.
Workpaper Content and
Organization

Most internal audit procedure files contain the
following 9 elements:
1) Listing of completed audit procedures



Workpapers document the audit procedures and include
copies of the audit programs along with the initials of the
auditors and the dates of the audit steps.
Commentary notes may be on the programs or attached
as cross-referenced supplementary notes.
Exhibit 15.3 shows the example.
Workpaper Content and
Organization
2)
Completed questionnaires

Some internal audit functions use standard
questionnaires covering particular types of internal
control procedures.
These questionnaires normally provide for yes and no
answers and appropriate supplementary comments.

Workpaper Content and
Organization
3)
Descriptions of operational procedures

Workpapers frequently describe briefly the nature and
scope of a specific type of operational activities.
This description can provide a basis for later audit
management probing and evaluation.
It can be in flowchart.
The auditor should always note the source of information
to develop this description.



Workpaper Content and
Organization
4)
Review activities

Many operational audit workpapers cover specific
investigations that appraise selected activities.
These can include testing of data, observations of
performance, and inquiries to designated individuals.
Exhibit 15.4 shows an example.


Workpaper Content and
Organization
5)
Analyses and schedules pertaining to financial
statements

In a financial audit, a special variety of workpapers
relates to attesting to accuracy of FS or account
balances.
Fairness and accuracy statements may include:

Analyses of individual accounts, such as accruals
 Details of backup data and supporting physical counts
 Results of specific kinds of verification
 Explanations of adjustments to accounts
 Summaries of statement balances and adjustments

Workpaper Content and
Organization
6)
Organizational documents

Organization charts, minutes of meetings, polices or
procedures, and copies of contracts are basic
organization documents.
The internal auditor does not have to include all material
in the workpapers.
For example, it may be sufficient to include a table of
contents and have relevant extracts rather than
incorporating an entire procedures manual.


Workpaper Content and
Organization
7)
Findings point sheets or drafts of reports

Point sheets describing the nature of the audit finding as
well as preference to the detailed audit work should be
included in audit procedures files.
8)


Supervisor’s notes (see exhibit 15.8)
During an audit, the in-charge auditor or audit supervisor
prepares review comments that may require explanation
by the auditor.
Further audit work may be needed.
Workpaper Content and
Organization
9)
Audit bulk files

Internal audits often produce large amounts of evidence
materials, which should be retained but not included in
the primary workpapers such as the returned
questionnaires.
These materials should be classified as workpapers but
should be retrieved from the bulk file as necessary.

Agenda
 Importance of Workpapers
 Functions of Workpapers
 Workpaper Content and Organization
 Workpaper Preparation Techniques
 Workpaper Review Process
Workpaper Preparation
Techniques

There are several basic techniques needed for
preparing adequate workpapers.




Indexing and cross-referencing
Tick marks
References to external audit sources
Workpaper rough notes
Workpaper Preparation
Techniques
Workpaper indexing and cross-referencing
 Similar to reference notations in textbooks, sufficient
cross-references and notations should allow an
auditor to take a significant reference and trace it
back to its original citation or source.
1)

Index numbers on workpapers are the same as
volume and page numbers in a published textbook.

Exhibit 15.1 show a workpaper page with an index
number.
Workpaper Preparation
Techniques
Workpaper indexing and cross-referencing
 Cross-referencing refers to placing other reference
workpaper index numbers within a given workpaper
schedule.
1)

Cross-reference numbers are important in financial
audits where all numbers on various schedules
should be tied together to ensure consistency.
Workpaper Preparation
Techniques
Tick marks
 Tick marks are a form of auditor manual or pencil
shorthand notation.
2)

The auditors need only note somewhere in the
workpapers the tick mark used for each specific
propose.
Workpaper Preparation
Techniques
Tick marks
 Standard tick marks improve communication
because audit management can easily review and
understand workpapers.
2)

Exhibit 15.7 illustrates the set of traditional tick
marks that were used in the pencil and paper days.
Workpaper Preparation
Techniques
References to external audit sources
 Internal auditors often record information taken
from outside sources.
3)



For example, an auditor may gather an understanding
of an operation area through an interview with
management.
IA would record that interview through workpaper notes
and rely on what was told as the basis of further audit
tests or conclusions.
It is important to record the source of such commentary
directly in the workpapers.
Workpaper Preparation
Techniques
References to external audit sources
 Auditors may need to reference an external law or
regulation to support their audit work.
3)

In all, workpapers should clearly indicate the title
and source of all external references.

Exact page copies can be included to make a
specific point when necessary, but a reference
notation is normally sufficient.
Workpaper Preparation
Techniques
Workpaper rough notes
 When conducting interviews, auditors often make a
rough notes, often written in shorthand easily
readable only by the auditors.
4)


Auditors should rewrite these rough notes into
commentary.
The rough notes can also be included in the
workpapers, placed in the back of workpaper
manual binder or even in a separate file.
Agenda
 Importance of Workpapers
 Functions of Workpapers
 Workpaper Content and Organization
 Workpaper Preparation Techniques
 Workpaper Review Process
Workpaper Review Process

All workpapers should go through an independent
internal audit process to ensure that:




All necessary work has been performed,
Everything is properly described, and
The audit findings are adequately supported.
CAE has overall responsibility for this review but
usually delegates that work to supervisory members
of the IA department
Workpaper Review Process

Evidence of this supervisory review should consist
of the reviewer’s initials and dates on each
workpaper sheet reviewed.

In addition to initialing completed workpapers, the
supervisory reviewer should prepare a set of notes
with any questions raised during the review
process to give to the responsible auditor for
resolution.
Workpaper Review Process

Some of these questions may be of a more
significant nature and may require the auditor to do
some additional follow-up work.

Review questions should be cleared promptly, and
the reviewer should take the responsibility to ensure
that all open questions are resolved.
Workpaper Review Process

This workpaper review process should always take
place prior to the issuance of the final audit report.

This will ensure that all report findings have been
properly supported by audit evidence as
documented in the workpapers.
QUESTIONS