Auditing - Modification of Audit Program
The Audit Program for last year acts as guide to next year’s Audit Program and changes in this Program in the current year is called modification in audit Program. There is no difficulty to make changes in flexible audit Program but modification in fixed audit Program is very difficult.
A diary or register maintained by the audit staff to note difficulties, queries, errors or other important points with their clarifications is known to be audit note book. Following are the main contents of an audit note book.
· Date of commencement and completion of audit.
· List of books of accounts as maintained by the company.
· Organization chart with responsibilities of principal officers.
· Quarries calling for clarification and explanation and import points on which attention of Auditor require.
· Any other point Auditor’s staff feels important for discussion with management or Auditor.
Working papers are supporting documents prepared by Auditors in course of their audit. Working papers may be in form of data on papers, electronic media, film or other media and designate the files of summaries, comments, correspondence and analysis. Other working papers are Trial Balance, accounts analysis, schedule of fixed assets, depreciation chart, schedule for debtors and creditors, schedule for liabilities, advances, bank reconciliation, stock valuation, previous audit reports, audit Program, audit evidence and important quarries with their explanation etc.
Working papers can also be used by Auditor in his defense if require in any court case of negligent audit.
Audit evidence papers must be well indexed, clear, complete and informative as these papers highlight the quality of audit. Audit evidence obtained during audit and the decisions made on it form the main content of audit evidence papers.
Audit working papers serve the following purposes −
· These papers contain basic material from which audit report is prepared.
· Evidence papers assist in planning and performance of the audit work.
· They are permanent records of objectives and the scope of audit.
· Working papers contain backup material in support of audit observations.
· To assist and coordinate with the Auditor in organizing work of the Auditing staff.
· With the help of working papers, the Auditor gets to know the weaknesses of the accounting operations and internal control of an organization.
There are two categories of working papers − Permanent Papers and Administrative Papers.
There are files that contain papers of the same client; these papers can be made use of over the years and normally include −
· Partnership deed or memorandum and articles of association or other statutory papers like copy of PAN, VAT/Central Sales Tax/Excise/Service Tax registration papers.
· Documents having continuing importance.
· Policy documents like inventory valuation and charge of depreciation.
· Copies of Balance Sheet and audit reports for earlier years.
It may contain the following audit working papers −