[230]
Working papers
(Issued March 1995)
Contents
Paragraphs
Introduction
Form and content of working papers
Confidentiality, safe custody and ownership of working papers
1–4
5–15
16–19
Compliance with International Standards on Auditing
20
Effective date
21
135
Working papers
Statements of Auditing Standards (‘SASs’) are to be read in the light of ‘The scope and
authority of APB pronouncements’. In particular, they contain basic principles and
essential procedures (‘Auditing Standards’), indicated by paragraphs in bold type,
with which auditors are required to comply in the conduct of any audit. SASs also
include explanatory and other material which is designed to assist auditors in
interpreting and applying Auditing Standards. The definitions in the Glossary of terms
are to be applied in the interpretation of SASs.
Introduction
The purpose of this SAS is to establish standards and provide guidance regarding
working papers in the context of the audit of financial statements.
1
Auditors should document in their working papers matters which are important in
supporting their report. (SAS 230.1)
2
Working papers are the material that auditors prepare or obtain, and retain in
connection with the performance of the audit. Working papers may be in the form of
data stored on paper, film, electronic media or other media. Working papers
support, amongst other things, the statement in the auditors’ report as to the
auditors’ compliance or otherwise with Auditing Standards, and thus record compliance with Auditing Standards to the extent that this is important in supporting
their report.
3
Working papers are the record of:
4
(a) the planning and performance of the audit;
(b) the supervision and review of the audit work; and
(c) the audit evidence resulting from the audit work performed which the auditors
consider necessary and on which they have relied to support their report.
Form and content of working papers
Working papers should record the auditors’ planning, the nature, timing and extent
of the audit procedures performed, and the conclusions drawn from the audit
evidence obtained. (SAS 230.2)
5
Auditors should record in their working papers their reasoning on all significant
matters which require the exercise of judgment, and their conclusions thereon. (SAS
230.3)
6
The extent of working papers is a matter of professional judgment since it is neither
necessary nor practical to document every matter auditors consider. Auditors base
their judgment as to the extent of working papers upon what would be necessary to
provide an experienced auditor, with no previous connection with the audit, with an
understanding of the work performed and the basis of the decisions taken. However,
even then, that experienced auditor may only be able to obtain a comprehensive
7
137
APB Statements of Auditing Standards
understanding of all aspects of the audit by discussing them with the auditors who
prepared them.
8
It is in those areas of the audit that involve difficult questions of principle or
judgment that auditors’ judgment may be questioned subsequently, particularly by a
third party who has the benefit of hindsight. In such circumstances it is important to
be able to demonstrate the relevant facts that were known at the time the auditors
reached their conclusion.
9
Auditors draw conclusions relating to specific financial statement assertions. However, all such conclusions are arrived at within the context of their report. That
report relates to the financial statements taken as a whole, and not to the individual
assertions embodied in the financial statements.
10
The form and content of working papers are affected by matters such as:
●
●
●
●
●
●
the nature of the engagement;
the form of the auditors’ report;
the nature and complexity of the entity’s business;
the nature and condition of the entity’s accounting and internal control systems;
the needs in the particular circumstances for direction, supervision and review
of the work of members of the audit team; and
the specific methodology and technology the auditors use.
11
Working papers are designed and organised to meet the circumstances and the
auditors’ needs for each individual audit. The use of standardised working papers
(for example checklists, specimen letters, standard organisation of working papers)
may improve the efficiency with which such working papers are prepared and
reviewed. While they facilitate the delegation of work and provide a means to
control its quality, it is never appropriate to follow mechanically a standard
approach to the conduct and documentation of the audit without regard to the need
to exercise professional judgment.
12
To improve audit efficiency, auditors may utilise schedules, analyses and other
documentation prepared by the entity. In such circumstances, auditors require
evidence that such information is properly prepared.
13
Working papers include where relevant:
●
●
●
●
●
●
●
●
●
●
138
information concerning the legal and organisational structure of the entity;
extracts or copies of important legal documents, agreements and minutes;
information concerning the industry, economic environment and legislative
environment within which the entity operates;
evidence of the planning process and any changes thereto;
evidence of the auditors’ understanding of the accounting and internal control
systems;
evidence of inherent and control risk assessments and any revisions thereof;
evidence of the auditors’ consideration of the work of internal audit and their
conclusions thereon;
analyses of transactions and balances;
analyses of significant ratios and trends;
a record of the nature, timing and extent of auditing procedures undertaken and
the results of such procedures;
Working papers SAS 230
●
●
●
●
●
●
details of procedures regarding components whose financial statements are
audited by other auditors;
copies of communications with other auditors, experts and other third parties;
copies of correspondence with the entity, reports to directors or management
and notes of discussions with the entity’s directors or management concerning
audit matters;
letters of representation from the entity’s directors or management;
a summary of the significant aspects of the audit including details of the
information available, the amounts involved, management’s views, the conclusions reached and how these matters are resolved or treated; and
copies of the approved financial statements and auditors’ reports.
Working papers typically record when and by whom audit procedures are undertaken and when and by whom they are reviewed. A written record of points raised
during the review of working papers need not be retained providing the working
papers demonstrate evidence of the extent of the review process and are updated to
record the resolution of any significant matters noted.
14
In the case of recurring audits, some working paper files may be classified as
‘permanent’ audit files which are updated with new information of continuing
importance, as distinct from ‘current’ audit files which contain information relating
primarily to the audit of a single period.
15
Confidentiality, safe custody and ownership of working papers
Auditors should adopt appropriate procedures for maintaining the confidentiality
and safe custody of their working papers. (SAS 230.4)
16
There are no specific statutory requirements regarding the period of retention of
audit working papers. Auditors exercise judgment to determine the appropriate
period of retention bearing in mind possible needs of their client, for example that
audited information may need to be included in a prospectus at some future date,
and their own needs, including any regulatory requirements. Prior to their destruction, auditors consider whether there is likely to be a need to refer to them again.
17
Working papers are the property of the auditors. They are not a substitute for, nor
part of, the entity’s accounting records.
18
Auditors comply with ethical guidance as to the confidentiality of working papers.
Portions of, or extracts from, the working papers may be made available to the entity
at the discretion of the auditors, provided such disclosure does not undermine the
independence or the validity of the audit process. Information is generally not made
available to other third parties (including parent companies or subsidiary undertakings or their auditors) without the permission of the entity.
19
Compliance with International Standards on Auditing
Compliance with this SAS ensures compliance in all material respects with International Standard on Auditing 230 ‘Documentation’.
139
20
APB Statements of Auditing Standards
Effective date
21
Auditors are required to comply with the Auditing Standards contained in this SAS
in respect of audits of financial statements for periods ending on or after 23
December 1995.
140
NOTICE TO READERS
© The Accountancy Foundation Limited
This document has been obtained from the website of The Accountancy Foundation Limited
and its subsidiary companies (The Review Board Limited, The Auditing Practices Board
Limited, The Ethics Standards Board Limited, The Investigation and Discipline Board
Limited). Use of the website is subject to the WEBSITE TERMS OF USE, which may be
viewed at http://www.accountancyfoundation.com/terms.
Readers should be aware
that, although The Accountancy Foundation Limited and its subsidiary companies seek to
ensure the accuracy of information on the website, no guarantee or warranty is given or
implied that such information is free from error or suitable for any given purpose: the
published hard copy of the document alone constitutes the definitive text.