During audit engagements, auditors perform various procedures. These procedures allow auditors to test these assertions made by the management. There are several types of audit procedures that auditors may use. The effectiveness and usage of these procedures may differ according to the audit’s requirements and the assertion in question.
The primary objective of audit procedures is for auditors to collect audit evidence. Audit evidence includes information collected by auditors to support their conclusion about the subject matter. This evidence may come in various forms. However, it is crucial that auditors document the procedures they use and the evidence they collect. This documentation occurs in the form of audit working papers.
What is Audit Working Papers?
Audit working papers refer to the documents prepared by auditors when collecting evidence. It includes a record of various audit procedures that auditors perform, the evidence they collect, the audit team members involved in the process, etc. Audit working papers form a basis for auditors to reach a reasonable conclusion. It also serves as evidence regarding the auditor’s work.
Audit working papers are crucial in supporting the work that auditors perform. It is mandatory for auditors to perform audit procedures and document them. This requirement comes from ISA 230 Audit Documentation. Auditors also need to ensure the quality of the audit documentation they prepare. Once finalized, audit working papers become a part of an audit file.
What is an Audit File?
An audit file is a collection of audit working papers in a folder or other storage media. Similarly, some audit firms may use physical audit files, while others may keep them electronically. Auditing standards do not have specific requirements for physical or electronic storage. However, they do require auditors to keep an audit file regarding their clients.
Audit files contain records that comprise the audit documentation for a specific client. Therefore, it is critical for auditors to have a separate audit file for each engagement. It contains a collection of all the evidence and documentation for a specific service. However, some information may be common across various engagements for the same client. In that case, auditors may keep a permanent audit file along with a current audit file.
What is a Permanent Audit File?
A permanent audit file is an audit file that auditors keep for continuing audit engagements. This file usually includes documents that auditors use continuously. The information within this file rarely changes. Permanent audit files may include engagement letters, memorandums, long-term contracts, board meeting minutes, etc.
For auditors, it is crucial to keep permanent information about clients. It not only aids them with understanding the client but can also help them in future engagements. Usually, these files do not change a lot. However, auditors may add new information about the client that is long-term to these. These files do not include a record of the client’s current audits.
What are Current Audit Files?
A current audit file is a file that stores information related to a specific engagement. In most external audits, it includes information regarding every period’s audit. For example, auditors will have a separate audit file for every quarterly audit they perform for a specific client. Current audit files usually include information that varies from one year to another. Therefore, it may contain general ledgers, management accounts, supporting documents, financial statements, etc.
The current audit file for a client will include information about any specific engagement for that client. This information does not involve permanent or long-term information about the client. It also consists of records related to audit planning and audit programs for each year. On top of that, it will also consist of internal control documents for the client.
What is the Difference between Permanent Audit Files and Current Audit Files?
There are several differences between permanent and current audit files. These differences are apparent from the definition of both files as above. As mentioned, permanent audit files contain long-term information about the client. In contrast, current audit files include the latest information that is usually short-term. The information contained in current audit files usually changes from one period to another.
Current audit files contain information that relates to a specific audit engagement. Therefore, they will include information, such as current year adjustments, working papers, significant audit findings, audit evidence, etc. Permanent files do not relate to a specific period or engagement. Therefore, its content will usually include engagement letters, client questionnaires, memorandum and articles, long-term contracts, shareholder agreements, board meeting minutes, etc.
Permanent audit files include information that concerns the organizational and legal structure of a client. Current files consist of information relating to correspondences, planning process, audit programmers, accounting records, etc. Some information from current files may also end up on the permanent file, like changes in significant accounting policies or significant audit observations during the engagement.
Conclusion
Audit working papers include records prepared by auditors that document their work. These papers form audit files. Audit files contain records that comprise the audit documentation for a specific engagement or client. Usually, permanent audit files include information about a client’s legal and organizational structure. Current audit files contain documents relating to a particular engagement or period about a client.
